As organizations face increasing regulation, and as more consumers prioritize brands with ethical practices, it’s never been more important to prove your sustainable credentials.
Tech companies are subject to extra scrutiny as they try to overcome negative public attitudes. According to a 2021 CNN poll, two-thirds of Americans trust Big Tech only a little, or not at all, to do what is best for their users.
ESG sustainability reports are a great way to demonstrate your commitment to improving society, but it’s not just a box to be checked. Setting sustainability goals and analyzing performance can bring real value to the business.
What is ESG sustainability reporting?
ESG sustainability reporting is a means by which organizations can explain what they’re doing to make a positive impact on society, and share it with stakeholders and the public. ESG stands for Environmental, Social, and Governance, so a report should describe the organization’s objectives and performance in each category.
As you might expect, the Environmental aspect focuses on a company’s ecological impact, while Social relates to human rights, social equity, diversity and inclusion. Governance covers the ethics of internal business practices including risk management and data protection.
In short, we’re talking about social, human, and environmental capital, which includes employees, customers, suppliers, communities, and the natural world. Sustainability reporting can also include an economic aspect, detailing how you create long-term profitability while being socially responsible.
Although sustainability reporting and ESG reporting can be standalone practices, it makes sense to combine them into one report. The document isn’t only about sharing your good intentions. You should also include specific plans and detail your progress toward sustainability initiatives.
1. Sustainability reporting frameworks
Growing interest in organizations’ sustainability practices has led to an increase in guidelines and even mandates for reporting, but regulations differ across states, countries, and industries. So, which companies have to report ESG?
Certain organizations (such as listed companies and those with more than 500 employees) are required to deliver ESG reports in the UK and EU, with further regulations expected to become law in the near future. The US is proposing mandatory climate disclosures at the federal and state level.
Currently, there is no universal standard for corporate sustainability reporting, but there are several frameworks you can use. These make sure the data is standardized and comparable, as it’s presented in relative terms. Frameworks also help you to streamline the process and avoid omissions.
- Global Reporting Initiative (GRI): This is the most established and well-known framework. Its flexibility makes it suitable for small businesses and large companies with a diverse range of stakeholders.
- International Integrated Reporting Committee (IIRC): This guides companies toward concise reports that integrate financial and non-financial information for global investors and lenders.
- Sustainability Accounting Standards Board (SASB): This US-based framework includes more than 70 industry-specific sustainability standards, focusing on potential financial impacts.
- Dow Jones Sustainability Index (DJSI): This provides a benchmark for sustainability performance across various industries.
- Carbon Disclosure Project (CDP): Also called the Online Response System, this global online system can help you complete sustainability disclosure requests.
2. What are the benefits of ESG sustainability reporting?
ESG sustainability reporting brings many advantages for tech companies, as well as the rewarding feeling of playing your part in a better society.
Improves performance
Tracking and measuring progress toward sustainability goals can actually improve your company’s performance. By looking more closely at your business practices and operations, you’ll be able to act on problems and spot new opportunities. You’ll be better equipped to implement positive changes and analyze the results, giving you a competitive advantage.
Reduces risk
Similarly, in the process of evaluating your operations for sustainability, you can assess the organization’s resilience level. With climate change (and our responses to it) having a huge impact on the way we do business, it’s good practice to plan for future challenges and develop risk management strategies to mitigate environmental and societal shifts.
Ensures compliance
As we mentioned, the next couple of years will bring more stringent regulations around ESG and sustainability. Even if it’s not yet mandatory for your company, putting together a report gets you into the right habit. You’ll find that implementing responsible business practices or help you comply with other regulations such as data privacy.
Reporting also helps you create an audit trail for your sustainable activities. What is an audit trail? It’s a chronological record that traces your financial data such as accounts and transactions, and is often a regulatory requirement.
Enhances reputation
ESG reporting is a great way to demonstrate your environmental and social credentials to external stakeholders, customers, and employees. The very act of reporting on your activities helps build a reputation for transparency and trustworthiness—which can encourage investors even in a time of economic uncertainty.
With eight out of 10 consumers willing to pay up to 5% more for sustainably produced goods, it’s well worth making your initiatives clear. Corporate responsibility is also a factor in employee motivation, retention, and recruitment, instilling a sense of pride in working for your brand.
Saves money
Green initiatives have the associated benefits of minimizing inefficiency, saving money, and future-proofing the business. For example, storing customer data in a CRM rather than on paper is better for the environment, but also enhances call center operational efficiency. And the data gathered for ESG reports can be used to help you develop more sustainable products or services.
3. Challenges of ESG sustainability reporting
This type of reporting can be complex and time-consuming, especially for larger organizations or those without analytical resources. With the sheer amount of data generated across business functions and stored on disparate systems (or by partners), it can be hard to narrow down the relevant information.
Another challenge is that the regulatory landscape is changing rapidly, as interest in sustainability continues to rise and the public calls for more regulations on tech companies in particular. It can be difficult to keep up with the necessary changes, especially if they’re likely to have an impact on financial performance.
Plus, it can feel as though your sustainability efforts are never going to be enough, when you’re constantly being asked or required to go further. It’s daunting when any misstep could see your company publicly accused of unethical behavior or greenwashing.
Finally, you may come under pressure from the C-suite or your investors to prove the ROI of sustainable practices. And non-financial effects, such as public perceptions of your brand, are harder to quantify.
4. Best practices for successful reporting
These tips will help you to overcome the challenges of ESG reporting and get ready for long-term sustainability.
Identify priorities
Much as you might want to make every inch of your company sustainable overnight, that’s not practical. It’s going to take a little time to adapt, so start by identifying the most relevant sustainability issues for your company and make the decision to prioritize those. It’s also worth asking key stakeholders (leaders, VIP customers, industry regulators) what their biggest priorities are.
Furthermore, as technology continues to play a pivotal role in driving sustainability initiatives, it becomes essential for tech companies to not only focus on environmental and social aspects but also to evaluate their internal technological capabilities. Assessing coding skills within the organization can provide valuable insights into the capacity for innovation and the development of sustainable solutions.
Define goals and set targets
Once you’ve identified and prioritized your initial objectives, choose a measurement method and set an attainable target for meeting each one. Making a deadline not only gives you something to aim for, but it also shows readers of the report that you’re serious. Include a roadmap for how you intend to achieve the targets, and assign clear internal responsibilities.
Remember, these objectives should be specific, measurable, achievable, relevant, and time-bound—commonly referred to as SMART goals.
Ensure buy-in at all levels
If you’re going to succeed at sustainable tech, you’ll need everyone to be on board—from the CEO downward. They’ll all be involved in providing data for the report, so it’s vital that they recognize its importance. And you’ll want to mention the high adoption levels in the report itself, or at least describe your objective of getting all employees and leaders involved.
Be honest and transparent
The journey to sustainability is ongoing, and there will be times when you don’t quite meet your targets. Instead of covering this up, or trying to get around it with clever wording, be completely transparent when you create the report.
For example, explain why you missed a deadline, say what you learned from the experience, and state how you’re planning to improve things. Regulators and the wider public will appreciate the honesty.
Let technology help you
There are plenty of tools you can use for the reporting process. These include the systems you already have in place for managing data. For example, you could use your accounting platform to track energy spending, or oversee ethical hiring practices with your HR software. The tech support team can deploy a virtual agent for efficient data collection.
You may also consider leveraging modern transcription software tools that can convert audio to text. By converting spoken conversations into written records, you ensure comprehensive documentation of your organization’s commitment to ESG principles and the actions taken to address them, thus enhancing transparency and accountability in your sustainability reporting efforts.
This not only ensures that important details are recorded accurately but also facilitates easier analysis and dissemination of information to stakeholders. Additionally, comprehensive documentation enhances transparency and accountability in sustainability reporting, which aligns with the principles of ESG and demonstrates a commitment to responsible business practices.
Moreover, you can use pentest tools (penetration testing tools) to ensure comprehensive security assessments of your systems, safeguarding sensitive data and minimizing cybersecurity risks, thereby fortifying your organization’s overall resilience against potential threats.
Technology plays an important role in facilitating sustainable product design. Incorporating software solutions for lifecycle assessment and design optimization enables companies to minimize environmental impact throughout the product development process.
These tools help in analyzing materials, energy consumption, and waste generation, ensuring that products are environmentally friendly from inception to disposal. By integrating sustainable product design practices into reporting frameworks, tech companies can demonstrate their dedication to holistic ESG initiatives while fostering innovation and competitiveness in the market.
It’s also a good idea to invest in data management tools, with automation to streamline reporting, advanced analytics to help you identify trends and inefficiencies, and modeling for future scenarios. Because you’re going to be sharing data within the company and with supply chain partners, a data clean room can help you do that securely.
Final thoughts
While ESG sustainability reporting is not yet a legal requirement for all organizations, it’s well worth doing on a voluntary basis. It shows stakeholders and the wider public that you’re committed to sustainable and ethical business practices, which bolsters your reputation. This is especially important for tech companies.
The process of producing these reports also helps you identify operational inefficiencies, giving you the opportunity to make cost-saving changes. You can reduce risk for your company and make sure you’re resilient in the face of climate change and increasing regulation.
Disclaimer: The author is completely responsible for the content of this article. The opinions expressed are their own and do not represent IEEE’s position nor that of the Computer Society nor its Leadership.
