Climate change, degrading soil fertility, freshwater unavailability, and air pollution are the most critical and visible effects of the toxic waste from orgs, especially the greenhouse gases ( GHG) emitted by energy related orgs.<\/p>\n\n\n\n
\nESG reporting helps all the stakeholders of an organisation assess how resilient they are to manage any sustainability related challenges, and how well positioned they are to proactively tap into branching opportunities.<\/p>\n<\/blockquote>\n\n\n\n
Read & bookmark<\/span><\/strong> this insight to help yourself and the stakeholders at your org to thoroughly understand the ESG criteria\/factors, ESG framework\/standards<\/span>, and benefits.<\/p>\n\n\n\n
Why should startups care about ESG disclosures<\/span>?<\/strong><\/h2>\n\n\n\n
ESG reporting<\/span>:<\/strong><\/p>\n\n\n\n
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- Reflects transparent functioning of an org. Customers, investors, and employees appreciate organisational transparency. <\/li>\n\n\n\n
- Give better insights on how an org\u2019s internal practices could be improved to optimise the outcomes, and minimise the negative effect on whatsoever.<\/li>\n\n\n\n
- Help anticipate challenges as well as opportunities in early stages, and you get ample time to proactively respond and not just react.<\/li>\n\n\n\n
- Help your org become environmentally responsible and achieve its CSR (Corporate Social Responsibility) goals.<\/li>\n<\/ul>\n\n\n\n
More reasons to consider ESG disclosures\/reporting:<\/p>\n\n\n\n
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- A McKinsey study<\/a> reports that over 70% of consumers are ready to pay an additional 5% for eco-friendly products if they meet the same standards as the other products available.<\/li>\n\n\n\n
- A Harvard study<\/a> concluded that a good ESG Corporate Rating tends to impact a company\u2019s valuation and profitability positively.<\/li>\n<\/ul>\n\n\n\n
Why suddenly, ESG <\/span>is becoming mainstream?<\/strong><\/h2>\n\n\n\n
Were organisations not aware of sustainability issues before?<\/em><\/strong><\/p>\n\n\n\n
They were. <\/p>\n\n\n\n
But recently the issues and challenges are becoming more visible. Covid pandemic kind of shook the entire world and forced us to go for a reality check. <\/p>\n\n\n\n
Is there any month when we do not come across news of poor air\/water quality, rise in endangered aquatic species, and degrading climate?<\/p>\n\n\n\n
Consumers are at the receiving end, and so with every passing day they are becoming wary of their choices. They\u2019re selective about the products & services they consume, the brands they engage with.<\/p>\n\n\n\n
Investors too are cautious about the environmental & social effects of an organisation\u2019s business practices and products, more than ever. Of course, there is a responsibility factor, but there is also a financial angle as well which is promoting this investor cautiousness. First, organisations are vulnerable to these environmental\/social changes. In an age of open journalism and social media, customers today are aware of an organisation\u2019s practices and its impact, whatsoever. It gets reflected in their consumer behaviour. Second, sooner or later, to safeguard the environmental and societal interests, there will be new regulations\/laws\/taxes introduced by the government to keep the organisations in check, to make them accountable, and to motivate them to engage in sustainable business practices.<\/p>\n\n\n\n
Investors know how these factors can significantly influence an org\u2019s sales and overall business, and so more and more investors are inclined towards investing in companies who embrace sustainable business practices to keep any associated risks at bay.<\/p>\n\n\n\n
In short, investors & customers like & support companies who are responsible and accountable on all three fronts \u2013 environment, social, and governance (ESG). In fact, according to a survey, 67% of investors plan to invest in companies that focus on the ESG<\/strong> reporting.<\/p>\n\n\n\n
Now you know why companies feel compelled towards ESG reporting and disclosures<\/span>. And why should you be considering it as well. <\/p>\n\n\n\n
But ESG<\/strong> is not that straightforward. There are multiple ESG issues that need to be reported on and it varies from one industry to another. The list of ESG<\/strong> issues that needs to be reported is quite long (scroll here to check the list).<\/p>\n\n\n\n
Wait.. first things first, what is ESG<\/em><\/strong> and what factors should one be reporting on, is there a checklist of ESG criteria, factors \u2026and relevant stuff?<\/p>\n\n\n\n
What the heck is ESG<\/span>? And what factors to report on?<\/strong><\/h2>\n\n\n\n
Technically, ESG is a framework to report on Environmental, Social & Governance aspects of your organisation<\/strong>. We shall soon dive into the detailed ESG standards for each of these. But there are no common standards.<\/p>\n\n\n\n
Generally, complying with ESG standards and embedding it deeply into your org\u2019s operations would help you continuously steer your org towards being more sustainable, green, and socially responsible. It helps build resilience and proactively tackle future risk exposures arising from environmental, social, and\/or government factors.<\/p>\n\n\n\n
Financially, companies in the good books of ESG benchmarking and rating organisations<\/strong> garner more interest from investors, and more engagement from customers.<\/p>\n\n\n\n
ESG criteria & factors to report about (in a nutshell)<\/span>:<\/p>\n\n\n\n
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- Environmental<\/strong>: Environmental factors under ESG may include compliance with environmental regulations at local\/global level, toxic waste management, natural resources conservation, green energy utilisation, dependency on non-renewable resources, influence on climate, and organisation\u2019s resilience against climate change and natural disasters. <\/li>\n\n\n\n
- Social<\/strong>: Social metrics to consider under ESG may include diversity and inclusion at the workplace, compliance with labour policies, ensuring employee safety against all sorts of threats, employee satisfaction index i.e., culture, growth opportunities, work-life balance, fair-wage, employee-employer relation, etc. Other social ESG factors could be organisation\u2019s accountability towards relevant local\/global communities, philanthropic initiatives to support good cause, community & volunteer work, and ethical behaviour towards all the stakeholders of an org.<\/li>\n\n\n\n
- Governance<\/strong>: These assess how healthy an organisation is in terms of internal policies, clean books, transparent management, accountable leadership, socio-economic responsibility discharging, stakeholder engagement & happiness score, and also, its ability to respond to external stimuli.<\/li>\n<\/ul>\n\n\n\n
How startups\/SMEs are scored for ESG factors<\/span>? <\/strong><\/h2>\n\n\n\n
The list of ESG factors is continuously evolving, new criteria and ESG factors are being added. The ESG rating agencies score an organisation by assessing the ESG disclosure report released by them, the books, the records; interviewing multiple stakeholders; and multiple other evaluation activities. These ESG disclosure reports must adhere to the guidelines of one of the many industry standard ESG reporting frameworks<\/strong>. If an organisation evades this, it is considered to be indulging themselves in what\u2019s called \u201cGreenwashing<\/em>\u201d i.e., misleading & false claims of practising and engaging in sustainable routes to business operations.<\/p>\n\n\n\n
Top ESG Frameworks<\/span> for ESG disclosures<\/span><\/strong><\/h2>\n\n\n\n
Here are 3 popular ESG reporting frameworks which you should be familiar with and may consider for ESG disclosures of your org:<\/p>\n\n\n\n
Global Reporting Initiative (GRI)<\/strong><\/h3>\n\n\n\n
GRI Standards<\/figcaption><\/figure>\n\n\n\n The Global Reporting Initiative (GRI) <\/strong>org provides companies with a comprehensive set of universal standards<\/a> to report how they impact the economy, environment, and people. It\u2019s one of the most widely used ESG disclosure standards \u2013 designed for credibility & comparability of the reports.<\/p>\n\n\n\n
Task Force on Climate-Related Financial Disclosures (TCFD)<\/strong><\/h3>\n\n\n\n
TCFD<\/figcaption><\/figure>\n\n\n\n The Task Force on Climate-related Financial Disclosures (TCFD)<\/strong> is an organisation that provides companies with a framework to report on climate-related issues & challenges, opportunities, risk management, and governance practices. It is easily integrable with the existing reporting mechanism. With this organisations disclose in detail<\/p>\n\n\n\n
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