ESG and sustainability, you have heard it everywhere. The term ESG has been under the spotlight for the past years in the business and investment industry. It is clear that the stakeholders demand more accountability and transparency of the ESG factor from companies. So, how does the concept of ESG fit into the sustainability landscape?
In sustainability reporting, ESG is the three pillars of sustainable business standing together with the economic aspect. Referring to the environment, social, and governance, ESG is a criterion when measuring the company’s performance in sustainability, proven by data. On the other hand, sustainability also indicates the long-term views and strategy of the company to continue its operations and improve them continuously. In short, ESG is a set of criteria in shaping companies’ strategies and goals to be sustainable.
“You can only improve what you measure.” – Tom Peters
ESG matters to measure the company’s achievements and possible improvements, to move forward in defining sustainability targets, and to maintain reputation and engagement with stakeholders. In the investment world, investors use ESG data in determining which companies to put funds in. According to Morgan Stanley (2019), 85% of individual investors are interested in sustainable investing, which increased by 10% from 2017 to 2019. For this reason, ESG performance is critical to be communicated through sustainability reports.
Additionally, the global trend shows there are many actors in the ESG and sustainability reporting landscape. Among them are analysts and rating agencies, which use companies’ ESG data, primarily what is shown in the sustainability report. As an instance, Dow Jones Sustainability Indexes rate a company’s performance based on the ESG data in the public information and primarily in the sustainability report.
Providing further analysis on the data, the key players’ analytical results will also be used by stakeholders, including investors, in determining the company’s performance. For this reason, a sustainability report helps to build and strengthen the company’s reputation.
Given the importance of sustainability reports, companies need to go the extra mile in writing them. Companies can refer to various frameworks and standards. By definition, a reporting framework is a set of principles and guidance for “how” a report is structured. While standards are the specific, replicable, and detailed requirements for “what” should be reported for each topic.
Global Reporting Initiative (GRI) developed widely adopted standards in sustainability reporting. The set of standards is applied globally, making the sustainability reports comparable against each other regardless of the country domain and business sectors. Other standards that can be followed are those issued by Sustainability Accounting Standard Board (SASB), Climate Disclosure Standards Board (CDSB), as well as the standards as specified in Indonesia’s Regulation of Financial Services Authority (OJK) No.51/POJK.03/2017 concerning the application of sustainable finance.
The next question is, how to write sustainability report when there are many key players, regulations, and standards?
It is necessary those who write sustainability reports to possess comprehensive and strategic skills, and also understanding, so the ESG data presented is not as simple as “ticking the boxes” or even “copying and writing”. Hendri Yulius Wijaya, the Country Program Manager of Global Reporting initiative (GRI) explained several skill sets needed by reporting professionals.
First is conceptual and analytical thinking. The professionals must possess a robust understanding of the sustainability context and good practices of sustainability reporting, and the ability to align different regulations and frameworks. They also have to be familiar with industrial trends for benchmarking. Second, the professionals must understand the methodology in data collection. Besides, having management skills such as communications and also ethical values are no less important than the analytical writing skills itself.
“You are not a copywriter; be the game changer in the sustainability era” – Hendri Yulius Wijaya
This article is based on the presentation of Hendri Yulius Wijaya, Country Program Manager, Global Reporting Initiative (GRI) in Indonesia, in a webinar titled “The Future of Sustainability and Integrated Reporting Professionals” organized by SR Asia. SR Asia has been supporting the widely use of GRI principles and disclosures for corporate ESG reporting in Indonesia, and engaged in the translation of GRI Standards into Indonesian language. Access all the webinar materials here and YouTube replay here.