In this episode of Benevity's Social Impact Show, we learn best practices for ESG reporting. Together with Karl Yeh, we chat with our Head of ESG Strategy Stewart Rassier and Head of Communications Strategy Janna Irons to explore ESG reporting standards, how to tailor your report to different audiences, and how to improve reporting processes. We also discuss methods for improving data collection and analysis, and engaging stakeholders beyond a report.
Here's the transcription of the interview. We hope you enjoy!
I've got two special guests with me today: Janna Irons, the Head of Communication Strategy with thinkPARALLAX, and Stewart Rassier, who is the Head of ESG Strategy at thinkPARALLAX.
So today, we're going to be talking about ESG reporting. First of all, what is ESG reporting? I've heard about metrics. I've heard about standards. So can you enlighten us? What exactly is ESG reporting?
What is ESG reporting?
Karl, I think at the highest level it's both a disclosure document and a storytelling document. And what you're attempting to do through an ESG report is to communicate your environmental, social, and governance performance, and be transparent about what you're doing in your successes.
And if you're really good at this, or if we're pushing our clients and pushing the space, to also be transparent about where some of your gaps are and what you're not doing and your plan for progress in that space.
And so who is this for? Is it for your investors? Is it for your leadership? Or is it for employees? Who do you present your report to?
Who is the ESG report for?
Oh, Janna and I get this question all the time, and we ask this question all the time. And the answer may vary depending on who you are, what your objectives are and what you're trying to achieve.
I think historically the report was, if it was read in any depth, mostly for employees. That's who we saw reading it the most. And to some extent, nonprofit partners and the like. That's been changing a lot, and increasingly you are seeing the investor community pay a ton of attention to it.
That has been trending here maybe in the last three to five years. We're going to have even more eyes on it from investor community and regulators. In Europe we've seen regulators thinking about and looking at reporting as a tool for disclosure and the SEC is increasingly weighing in on that.
And then I think, anecdotally, we hear lots of stories about not just existing employees but potential employees. It's one of the documents that if someone's doing a job interview, a lot of HR people will say, "Hey, that's the one thing candidates generally are looking at and reviewing".
But yeah, that's a key question to always ask.
Some companies will try to create a report that does everything for everyone, and that in fact does nothing for anyone.
And so it's really understanding that investors, they want to see your data and your policies and your progress and that you're truly addressing all these issues. Whereas an employee or a potential employee might just want to see, "Give me the highlights. Tell me about the high level. What are you doing that's great? Why can I feel good about this company?".
And so those are really different objectives, and so we generally recommend companies moving toward creating pieces that are specific to those audiences. So perhaps you have a full report that is much more dedicated to investors, where you have a shorter summary piece that can be used more broadly for customers or the public or employees.
And I've heard a lot about what's called the reporting standards. What is that, and how many are there?
What are ESG reporting standards?
There are too many of them is the short answer. And a lot of efforts are being made to consolidate them. So it's a challenge, it's a hurdle.
Quite honestly it's very daunting, whether it's reporting frameworks, whether it's rankings and ratings. Often there are references to the alphabet soup of all of these that are out there. So it can be a challenge, but I like to kind of reframe that and see it as more of an opportunity. You can't realistically use all of them and do all of them, and so then it becomes more of an opportunity for you to be strategic about what you do and why you do it.
So there might be particular reasons to participate in a ranking and rating. There may be a particular reason you're going to use GRI instead of SASB, or you use them together. And again, I'm just I'm throwing out acronyms that people may or may not know. But yeah, there's a lot of them. The two that are trending in the space right now are SASB and TCFD.
In both cases, those are getting a lot of prominence and play because they're the focus of regulators, and referencing for regulators has also been referenced by institutional investors as frameworks that are important. They're trying to consolidate and focus what we report on and how. And then we would be remiss if we didn't speak to the GRI, the Global Reporting Initiative, which is the reporting framework that most companies use. And it's the one that's been around for the longest. And that very much complements the work that TCFD and SASB does.
SASB and TCFD focus on the financial materiality, topics that are financially material. And then GRI focuses on the topics that are material or important to your larger stakeholder community.
So I think as you're trying to navigate those, those would be where we would start a conversation around the Global Reporting Initiative, around the Sustainability Accounting Standards Board, and TCFD, the Task Force for Climate-Related Disclosure.
And I've always wondered, because I did another episode on this — the Sustainable Development Goals — ESG and the SDGs, how are they related to each other?
How is ESG related to the Sustainable Development Goals?
They are all interrelated. And in fact there are a lot of alignment documents out there that tie all of these different frameworks together. JRI has put those out, The United Nations has put those out. And there's more alignment than maybe you would think at a first glance.
Where the Sustainable Development Goals are unique or different, I think one is the target audience for the Sustainable Development Goals are mostly government organizations. And for context, there's 17 Sustainable Development Goals that can be really awesome for organizing your communications for a report and provides you with a really great framework for organizing and thinking about what you're doing.
They also can be really helpful from a strategy perspective.
But underneath each of those Sustainable Development Goals are very specific KPIs that are aligned with, or connected to, some of these other frameworks. But it is a little bit harder for a company to specifically connect their work and their impact to a lot of the specific KPIs, because the KPIs were generated with sort of a government, governmental agencies, government country-level expectations.
If we are running an ESG program, how would we go about improving our reporting?
How to improve ESG reporting?
As you're thinking about improvement for your reporting, I think there's generally kind of two paths and approaches that we consider at thinkPARALLAX. One is from a communications perspective, which Janna can speak to. And a second is from a disclosure perspective, which I can speak to.
ESG reporting: Disclosure
I think on the disclosure side, your first step is understanding: what is your baseline for present disclosures?
So what have you been disclosing in the past? How does this align, or how does it allow you to be in accordance with, the different frameworks that were talked about earlier? That's step one.
Step two is then to see where those gaps are, where those opportunities are for improvement.
Which could mean that there's other frameworks, other disclosures that are important to continue to report on. And you could put a plan together over the next two to three years to report out on that. So that would kind of be step two. And the third piece is we're moving in sort of the complexity and we're trying to be more sophisticated in how we disclose information. So there's kind of a move to financial-grade data.
So to improve the types of data that we provide in the ESG space, we have to build better processes, procedures, controls, and data management systems within our organizations to improve our reporting disclosure.
Because presently a lot of the disclosure work is done in Excel spreadsheets, it's done sort of back-of-the-napkin, tracking down emails, talking to subject matter experts. Which is not to say the information isn't valid, but that doesn't have the same rigor, it doesn't have the same quality and credibility as some of the other data that we measure and we report out within a corporation. So that's kind of a kind of the third opportunity for improvement from a disclosure perspective.
But then there's a whole other area of improvement around actually communicating which Janna can speak to.
ESG reporting: Communications
Yeah. I think the substance is really key, right? You can't really improve your reporting without improving your substance.
But on top of that, we think about making sure that it's really easy for your audiences to find what they're looking for. Most people are not sitting down and reading a report cover to cover. They're there to see what are you doing around DE&I? What are you doing around climate So we want to have just up front a very easy table contents, easy navigation to find what they're looking for.
And then thinking about making sure that it's clear that a senior leader is endorsing this work and behind this work and having that really clear letter up front and message up front. And then making sure that we visualize the data in the right way, make it easy to be able to see progress, be able to demonstrate where you're going.
And then transparency, right? So thinking about where can we share what our actual strategy is: how can we be more transparent around where we're making progress and where we're not and why? And so we're making sure that we're communicating those things well in the report.
There's the reporting side, but what should companies be doing beyond reporting to communicate their ESG strategy and engaging their stakeholders?
Going beyond reporting your ESG strategy to engaging your stakeholders
Yeah, and I think as we kind of mentioned, a report isn't a great communication tool, right? It's this big clunky thing full of information. It is a wealth of substance though that can be then translated to other channels and tactics and messages for different audiences in different ways.
So from everything from employee engagement to recruiting, we can think about how we can use these stories to differentiate the company or build reputation and really kind of position a company as one that's very forward looking.
We know that especially the next generation really cares about companies, and big corporations especially, making a positive impact and addressing these big macro challenges in the world. So if companies can effectively tell that story, they can attract top talent, and they can keep their employees. Especially with the Great Reshuffle.
And we can really kind of transform that substance, all those data points and stories into campaigns, or summary pieces, or activations, social media, you name it, thought leadership, to really help to kind of build reputation around what the company is doing.
Yeah. And it doesn't really stop, right? It doesn't stop there with the report.
There's an opportunity for increased engagement with your stakeholders, and to do it well... And most of us are not doing this well, but the opportunity here is to start building in feedback loops with your stakeholders. So I have this data, I have this information, all right I'm now going to go and share it with my investor community.
And then how do I share it? When do I share it? Putting a strategy together for that. And then also then what do I do with the information and feedback that I get from my investor community or from my employees and how do I incorporate that into my ESG strategy, into adapting and changing my policies, rolling out new programs. And ultimately you see all of that will then get reflected in the next report.
So do you have anything else to add in terms of ESG reporting or reporting just in general for those ESG programs, from both an employee side, the leadership side, and investor side?
1. Start early
Well I think top tips, just purely from a practical perspective, is start earlier than you think you want to. It takes longer than you think to do this. I think step two would be you can't do this by yourself.
2. Bring people together
So get that committee together, understand where this information exists and pull those resources, those subject matter experts, together. And empower them to find the information and pull the information together, and understand what their priorities are and how this is an opportunity to showcase it. I think those are two things are always encouraging.
3. Improve data collection
I think the third piece and kind of hit on this around sort of just improving data and data collection. That's something that is always an area for improvement.
4. Use visual aids
And the fourth thing, imagery and images and infographics are super important. And that's often where people look at and we don't spend enough time. We're focusing on pulling all the content together, and then you realize you don't have any decent images for the reports, or you don't have that really helpful infographic. So dedicating time on the front end to think about, all right how am I going to display this information in a visually pleasing way? How am I going to get images? Do I have stock photos, or do I have images? Have I done any photography of my employees in the last two to three years, and is it up to date? Those types of things are all top of mind as you're putting the report together.
Super practical, nuts and bolts, but I think we get tripped up by that a lot as we're moving through the process.
Now do you have any examples of reports that you've seen that our audience can take a look at just to see, just to get started?
Examples of ESG reports
What else, Stewart?
So these are all ones that we've worked on that we're very proud of. So I think those are all good examples. I'd referenced, I think it was in the last podcast, Starbucks is always doing really good stuff. I'm always interested in contrasts, just diving into it. Even just looking at two really good reports in the same industry, looking at GM and looking at Ford.
Both reports are very good, but they've approached reporting in very different ways. So I find that super fascinating to kind of contrast because it's the same industry, they're both really good but they've done it in a very different way.
McDonald's leverages video a lot and video clips, which is kind of an interesting way of going beyond the report to talk about issues that are important to them. So that's another great example.
One more came to mind is Neiman Marcus just launched their first report and did an excellent job with setting goals and having a really strong strategy. So that's a great one to look at too.