Recent market developments show us that the market of ESG reporting is consolidating and that the topic of ESG is utterly important for the creation of long-term business resilience. This does not only become prevalent from an investor point of view, with 50% of individual investors and 80% of institutional investors applying sustainable investment strategies, also sustainability experts believe that integration of ESG integration in business operations is key, as revealed in a recent WBCSD study. 

As further detailed out in the research, one of the direct consequences of the increased stakeholder interest and stronger links between ESG performance and overall business performance is the expectation for transparent and complete ESG disclosure. Most recent data show that 90% of S&P 500 Index companies published a sustainability report in 2019, whereas this was only 20% back in 2011.

Additionally, a growing number of companies also submit data to third-party ESG ratings agencies such as DJSI, MSCI, Sustainalytics, and CDP. For example, the number of companies actively participating in the Corporate Sustainability Assessment, the basis for selecting companies into the Dow Jones Sustainability Indices, increased by 18% in 2019. For the other ESG raters, these data are not publicly communicated.

Consolidation of ESG disclosures

With the quest for more ESG information to be publicly available, companies are challenged to focus on what matters most in order to accelerate their sustainability performance. Examples of those requirements come from the regulatory sphere with the EU Taxonomy and (soon to be updated) non-financial reporting directive.

Moreover, the recent news about KPMG, PwC, Deloitte, and EY joining forces on setting a global ESG standard is also shedding light on this matter. This last collaboration is initiated by the World Economic Forum and functions as a recommendation to help companies demonstrate long-term performance, as well to showcase value creation to the UN Sustainable Development Goals.

To overcome the ESG challenge, companies are recommended to develop a more strategic approach to reporting on ESG information. Ideally, this will allow them to maximize the value of their ESG efforts and to successfully communicate this to all their stakeholders.

Streamlining your ESG benchmarking efforts

A useful exercise to obtain a 360-degree view on your company’s ESG performance across the ESG ratings that are relevant for you, is the ESG Benchmarking Streamliner. This helps you identifying on which ESG topics you are already on top of your game, but it also gives insights on your gaps, as well as a perspective on how your competitors are performing. Taking all this information together, it enables you to draft your short, mid-, and long-term actions for improvement.

To connect the dots between in the labyrinth of ESG information, and come up with a more efficient approach to ESG benchmarks, the following steps are recommended for companies to take :

• Be selective and focus. Determine which hotspots are material for your business considering your organization’s vision, strategy, business principles and most recent materiality matrix;
• Identify overlapping and different topics by conducting a deep dive into the individual benchmark methodologies of for instance DJSI, Sustainalytics, MSCI, ISS ESG Corporate Ratings and Vigeo Eiris;
• Compare how the different topics of the benchmark are weighted and translated into a score;
• Review your own performance for every individual benchmark by analyzing the details of your own performance report. For adding a layer of context, this can be complemented by an analysis of your competitors’ performance;
• Mobilize and engage topic owners to jointly define short, mid,- and long-term actions on maintaining and increasing performance on specific topics;
• Be Good and Tell It. Communicate your ESG efforts in an inspiring and transparent way, both internally and externally, building a consistent ESG Equity Story. Provide your stakeholders with fact-based insights into your ESG profile.

Interested in increasing your focus through streamlining your ESG efforts?

Finch & Beak has over 20 years of experience helping companies accelerate their sustainability performance by focusing on ESG topics that matter most. Use Finch & Beak’s assessment model for ESG performance to self-assess your company's position, or contact Johana Schlotter, at johana@finchandbeak.com to start streamlining your ESG benchmarking resulting in an improved performance on ESG issues that matter most to your organization and business model.

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