Sustainability Reporting vs ESG Reporting

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Sustainability reporting means different things to different businesses - it is a broad term, widely used, without a clear definition. ESG reporting, on the other hand, is increasingly being used to describe a specific framework of environmental, social and governance measures.

The two terms overlap: for example, measures relating to the carbon emissions of businesses are both relevant to sustainability and environmental objectives. In this case, the terms sustainability reporting and ESG reporting are interchangeable.

Another example of the interchangeable nature of these terms is the EU’s Corporate Sustainability Reporting Directive, which is coming into force in 2024. This will set out clear ESG reporting requirements, specifically:

Environmental measures focused on environmental protection, including the move to net zero and reduction in emissions
Social measures covering social responsibility, treatment of employees and human rights
Governance measures relating to anti-corruption and anti-bribery, transparency in management and the relationship with stakeholders.

From sustainability to ESG reporting

This evolution of sustainability reporting towards ESG reporting illustrates the maturity in the discussion on businesses' impact on the wider environment.

In the built environment, for example, the pioneers of smart buildings have been assessing their environmental impact for years. The inception of smart buildings was by early mavericks who were inspired to think about making buildings more efficient and effective - not only in terms of energy consumption but in how people lived and worked in those spaces.

More recently the growth in smart buildings has been driven by engineering solutions that measure and automate systems within buildings, particularly HVAC devices. Now, IoT allows for even more sophisticated data collection that can analyse how space is used across a whole estate to make recommendations to improve efficiency.

Many businesses and organisations see this as central to their mission and vision. Driven by their stakeholders, they are moving from undefined but worthy sustainability reporting, towards ESG measures and frameworks with objective measures and goals against them.

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For smart buildings - very much like corporate governance, wellbeing and digitalisation - there has been a clear evolution from the mavericks and visionaries, via the fringes of the mainstream and onward into the regulatory environment, which at some point in the future will lead to mainstream adoption.

In the coming years with EU and US regulation being enforced internationally, including UK subsidiaries and international investors, we can expect a maturing framework of ESG measures, as international standards bodies and governments turn their attention to it. In the past, sustainability reporting might have been in the remit of the estates team, reporting on those elements that made most sense to their business but increasingly it will be driven by the data and financial functions sitting firmly in the remit of CEOs and CFOs.

The biggest challenge is data

The greatest challenge for business leaders to meet the legal ESG and Sustainability regulations imposed on them is data, its trustworthiness and how it is gathered accurately. As with all corporate governance, ESG requires the collaboration between legacy and state-of-the-art new systems from finance to HR but with the additional support of experts in energy management, decarbonisation and sustainability regulations. Failure leads to penalties, negative brand exposure and inefficiency in managing the occupants of an organisation's buildings.

Digitalisation and IoT provide hugely exciting opportunities to transform the way sustainability reporting data is collected and presented beyond the regulatory requirements.

The hope is that this evolution from sustainability reporting towards a data defined framework of ESG measures will inform and guide organisational change and investment decisions so that businesses are better suited for our planet and people.

Find out how the SMARTR can transform the way you measure your estates’ performance.