ESG is about environmental, social and governance data. For companies, these are the parameters on which annual reports, commonly known as ESG reports, must be produced. The aim is to examine the company's ethical issues, but also to assess its efforts to preserve the environment and combat climate change.
What is ESG reporting?
ESG reporting is a document produced by companies to report to the European Commission on their efforts on ethical issues. In short, it is an annual exercise in which all companies in the EU area must participate.
It is through ESG reporting that the members of the Corporate Sustainability Reporting Directive, CSRD, are able to assess and attest to the efforts made by each company to reduce energy consumption, preserve the environment by reducing gas emissions, and promote the development of biodiversity through the efficient and intelligent management of industrial waste and emissions.
These are some of the key factors mentioned in the ESG report, which in a broader approach takes into account a multitude of other parameters such as the health and well-being of employees or the question of gender approach in companies. Apart from financial data, ESG reporting should reveal all practices related to the environment and working processes.
Why is ESG reporting changing?
ESG reporting is changing due to the introduction by the European Commission of the Non-Financial Reporting Directive (NFRD). The aim is to make ESG reporting more than an assessment of sustainability and environmental protection.
With the introduction of the NFRD, ESG reporting will also have financial relevance. Until now, ESG reporting was an obligation of environmental and sustainability managers. From now on, financial directors will have to contribute to its drafting.
For companies, the new changes inherent in ESG reporting mean that new internal procedures must be adopted. Collaborative workflows will need to be put in place and new strategies for collecting and connecting information will need to be devised.