Trends in sustainability reporting for 2024 (and beyond)
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Fuelled by investors’ need for a safer decision-making process and financial policies promoting market transparency, sustainability reporting is evolving towards environmental, social, and governance (ESG) reporting. This is a more specific approach based on environmental (e.g., carbon emissions), social (e.g., workers’ human rights), and governance (e.g., anti-corruption policy) criteria. Unlike the qualitative corporate social responsibility (CSR) framework, ESG reporting relies on measurable metrics that are more helpful for your company and more appealing for investors.
From voluntary to mandatory reporting
Be it CSR, sustainability, or ESG, one of the most widely accepted reporting trends is that governments around the world will introduce mandates for businesses to share more relevant and accurate information.
In April 2022, the UK led the way by compelling over 1,300 large companies to disclose their climate-related risks and opportunities in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. Meanwhile, starting from 2024, nearly 50,000 European companies will have to comply with the new EU Corporate Sustainability Reporting Directive (CSRD). This regulation will require firms to regularly report on their ESG impacts. In the US, the Securities and Exchange Commission (SEC) proposed two rules obliging publicly listed companies to disclose both climate and ESG-related insights.
Stakeholders demanding to be part of the conversation
It’s not only governments wanting to have a better understanding of companies’ ESG metrics. With awareness and demand for eco-friendly products, services and both living and working environments rising, consumers are driving companies to embrace transparency in their sustainability efforts.
Meanwhile, modern investors are increasingly considering sustainability as a core aspect of investment decisions. They demand clear, comprehensive ESG disclosures to assess risks and opportunities.
While some companies might bristle at this scrutiny, for those willing to embrace them, these stakeholders not only encourage better reporting practices but also help in building a framework that supports sustainable business growth. Engaging with them effectively can lead to improved sustainability outcomes and a stronger corporate reputation.
Which disclosure themes are getting hot?
It’s no surprise that climate change is on top of the ESG agenda when it comes to reporting. The International Sustainability Standards Board (ISSB) stated in their proposal last October that they want the disclosure of your supply chain carbon footprint, a.k.a. Scope 3 emissions, to become mandatory.
As for social and governance-related topics, in 2020 Carrot & Sticks assigned the highest score to human rights and anti-corruption respectively. According to S&P Global, the protection of human rights across the value chain will still be a key reporting matter in 2022 and beyond.
Joining the digital revolution
Like in any other aspect of our life, technology is gaining momentum in the sustainability arena as well. With a not-so-gentle push given by the pandemic, online meeting platforms have become essential for doing business, reducing significant amounts of travel-related GHG emissions. On top of that, companies can now harness a plethora of carbon accounting software to measure, reduce, and report the climate impact of their whole value chain.
Tapping into software seems to be one of the CSR reporting trends too, but collecting tons of high-quality data is useless if you don’t know what to do with it. Combining IoT sensors and AI can help curb the carbon footprint of your premises by turning meaningless digits into actionable insights.
For example, tapping into CO2 sensors, an AI-assisted building control will detect empty rooms and adjust your heating, ventilation, and air conditioning (HVAC) accordingly, thus saving you money and emissions. A better understanding of your data will help you define more representative key performance indicators (KPIs). These will then let you stay on track to achieve your sustainability goals.
Apart from mitigating your environmental impact, high-tech solutions could also improve the social component of your ESG disclosure. Based on the constant monitoring of volatile organic compounds (VOCs) and carbon monoxide (CO) concentrations in your building, an intelligent management system will flag poor air quality in a room and suggest people to move. This is crucial for your employees’ wellbeing as unhealthy indoor air could cause the so-called sick building syndrome.
Measuring social value: The importance of TOMs
As businesses strive to demonstrate their commitment to sustainable and socially responsible practices, the disclosure of themes, outcomes, and measures (TOMs) becomes indispensable. TOMs offer a structured framework, enabling organisations to quantify and communicate the social value they generate.
Embracing this framework not only aligns with the rising mandates around the ‘social’ dimension in ESG and CSR, but also demonstrates a company’s dedication to making a tangible impact on societal well-being. Reporting on TOMs can enhance stakeholder trust, underline progress towards social sustainability goals, and highlight a business’s role in encouraging community development and welfare.
Navigating the shift
Voluntary sustainability reporting is transitioning to mandatory ESG frameworks, with scope 3 emissions and other climate-related disclosures being the hottest topics.
Embracing new technologies such as carbon reporting software and smart buildings could help you navigate through this necessary yet challenging shift.