This article was updated in November 2022.
The Science and Art of Developing Your ESG Report or Sustainability Report
We outline the science and art of their 7-step ESG reporting process for developing ESG Reports and Sustainability Reports.
It is important to respect the process when producing an Environmental, Social, and Governance (ESG) report, whether it’s your first or one of many.
Depending upon the goals of your company or organization, that process may range from somewhat complicated to extremely complex.
No matter where your organization is on its ESG adoption journey, the process starts with an evaluation. It ends with a report showing the collective efforts of those supporting you and your commitment to ESG.
What is ESG?
Environmental, Social, and Governance reporting is a voluntary process. Companies commit to making a difference through sustainability measures that positively impact the environment. They also use ethical standards and guidelines to treat their employees, shareholders, and the communities in which they operate.
ESG reports typically convey non-financial information. This includes both qualitative disclosures about topics, and quantitative metrics.
Why should a company care about developing and sharing the non-financial measures communicated within an ESG report?
Because in today’s business world, ESG matters to all your stakeholders — including investors. Doing so demonstrates company management’s commitment to transparency about the risks and opportunities your company faces. In fact, a recent analysis on sustainability reporting by The Conference Board recognized that “transparency can help strengthen relationships with employees, customers, suppliers, and local communities.”
Not to mention that more and more companies are including sustainability data within their annual reports because it appears to have a positive impact on the bottom line. According to a 2021 report from the NYU Stern Center for Sustainable Business, “the exponential growth is due in large part to increasing evidence that business strategy focused on material ESG issues is synonymous with high-quality management teams and improved returns.”
This appears to hold true for both public and private companies. For publicly traded companies, it would appear that if you’re currently not reporting on ESG matters, you’re behind the curve. In 2020, G&A Institute reported 9 out of 10 companies in the S&P 500 were publishing a sustainability report.
For privately held companies, while the information is a bit more difficult to discern, evidence suggests that public companies are leaning on private companies – typically suppliers to their organization – to get their ship in order. “Sustainability reporting is becoming widespread across both public and private sectors…. However, standardizing key elements of sustainability reporting across the public and private sectors is undoubtedly difficult.” (The International Institute for Sustainable Development (IISD))
The bottom line: developing an ESG report or sustainability report is good business.
The 7-Step ESG Report Process
To begin the process, it’s important to focus on the science of the ESG report or sustainability report. The Science behind any report includes a few key components that must be addressed before the Art of the ESG report takes over.
Phase 1: The Science of ESG Reports
The Science of ESG reports is rooted in defining the criteria to measure, and then gathering the data behind your company’s competitive advantage — an advantage born of the efforts to make a difference.
STEP 1: ESG Benchmarking
First, it’s critical to determine what a successful ESG report will look like for your company. This includes identifying how that success will be measured, when it will be shared, and how it will be communicated. Outlining the key constituents who will receive the information in the ESG report is an important part of this step.
- TIP: It is helpful to identify several key competitors. Then conduct a review of their ESG efforts and ESG topics, particularly if this report is your inaugural sustainability report or ESG report.
STEP 2: Select a Disclosure Framework or Frameworks
Next, select a reporting framework or set of frameworks that makes sense for your organization as well as disclosures associated with them. According to a recent report by the Government & Accountability Institute, some of the most commonly used frameworks and disclosure standards include:
- Global Reporting Initiative (GRI)
- Carbon Disclosure Project (CDP)
- Value Reporting Foundation/Sustainability Accounting Standards Board (SASB)*
- Task Force on Climate-Related Financial Disclosures (TCFD)
- United Nations Sustainable Development Goals (SDG)
Other reporting frameworks include the Climate Disclosure Standards Board (CDSB), and the International Integrated Reporting Council (IIRC).
GRI currently remains the most widely accepted framework (KPMG, The Time Has Come, Survey of Sustainability Reporting 2020). Yet, in 2020, a number of our clients at Obata reported on their ESG disclosure across multiple frameworks.
Over the coming years, there may well be a different single accepted framework or combination of frameworks that emerge as the predominant framework of choice.
- TIP: It is important to research and evaluate each ESG framework to best represent your company and its ESG efforts.
- TIP: Choose a framework, then identify KPIs to measure the success of your ESG efforts.
*The Value Reporting Foundation was formed through a merger of the Sustainability Accounting Standards Board (“SASB”) and the International Integrated Reporting Council (“IIRC”)
STEP 3: Gather Your Data
This step involves implementing the disclosures chosen from the selected framework and collecting and organizing the data associated with them. Often, companies will work with a consulting firm to achieve this, depending upon the level of complexity and number of disclosures involved (ex: the GRI framework offers numerous standards and disclosures).
In many cases, the level of complexity is dependent upon a company’s goals or industry regulations.
- TIP: It is important to remember that data for environmental, social, and governance reporting can come from multiple sources. These sources may include your own company, an outside consultant, or suppliers and partners.
Phase 2: The Art of the ESG Report
Once the Science is established, the Art of the ESG report shares the data, weaving a story of how it all impacts your stakeholders — your employees, shareholders, prospective and current customers, suppliers, governments, industry regulators, media, and communities.
- TIP: It is often ideal to utilize an outside professional firm for these next steps to ensure clarity and minimize bias in how the information is presented to the intended audiences.
STEP 4: ESG Messaging & Content Development
This step involves writing the narratives, top-level messages, and letter from the CEO, as well as background on how your organization is approaching ESG. Often, it involves interviewing internal audiences or subject matter experts (ex: employees, management, suppliers) as well as those involved in collecting and organizing the data that will be shared in the report.
From these interviews, an outline will be constructed, and content written, edited and reviewed. This narrative makes up a great deal of the report and provides the opportunity to personalize the efforts being made by your company toward sustainable best practices.
- TIP: It’s a good idea to have one person handle the writing for your ESG report, to keep the tone consistent throughout.
STEP 5: ESG Report Design
Visually conveying the content in an impactful and engaging manner is critical to the overall success of your ESG report. It is helpful to develop multiple design approaches and work with a respected and experienced ESG report design firm to ensure that your report is professional, not overly complex, and easy to read.
A good ESG report design will include integration of your company brand standards and plan for the use of infographics, images, tables and charts that visually tell your ESG story in an impactful and interesting way.
- TIP: Use draft text so you have designs that are representative of the actual content.
- TIP: The report should have a clear structure and include interactive navigation.
STEP 6: Report Production
Once the design and content are finalized, it is time to lay out the report in a user-friendly manner. This is where data is visualized as charts or infographics, and key messages and stories bring the report to life.
Once the final product is approved, printed copies may be produced, electronic PDF documents are created, and if desired, a microsite or website content page is created.
For PDF reports, it’s recommended that your report be interactive. Reports are usually designed to be printed in landscape or portrait format on regular copiers.
An interactive PDF report is a great way to engage your website visitors. These reports deliver interactive components that are similar to a website.
For online formats, it is highly recommended that a landing page, separate microsite, or method of integrating the report into a company’s website be developed. This will help harness the power of your website’s search engine optimization (SEO) efforts. Either of these formats will lead to more readers finding your ESG report and could lead to additional traffic to your website.
- TIP: Avoid tired visual clichés – such as the all-too-often-used “seedling in hands” image. These types of photos won’t add value or distinction to your report.
STEP 7: Sharing Your ESG Report
Once produced, letting the world know about your ESG report and sustainability report is the final step. It is often useful to employ an outside communications firm, or marketing or advertising agency, to help spread the word.
Digital marketing considerations include email campaigns, social media, SEO and PPC (pay per click) initiatives. It is also important to leverage more traditional means such as press releases and media pitches to complement your digital efforts and provide a fully integrated marketing communications program.
Finally, once you’ve created and shared your ESG report or sustainability report, it is helpful to begin planning for subsequent reports. Many companies add to their ESG reports every year as their ESG or sustainability reporting needs or requirements increase over time.
- TIP: Don’t limit yourself to one way of communicating your progress. While interactive PDFs are the most common, consider a microsite, social sharing of content, or updating on a quarterly or semi-annual basis.
Choosing an ESG Reporting Partner
Working with a ESG reporting partner who can help guide you through the ESG reporting process can help improve the outcome and ultimate success of your report. A good ESG report partner will offer the following services:
- Messaging, copywriting and editing
- Design development
- Typesetting and proofreading
- Data visualization and infographics
- Photography and art direction
- Photo editing, retouching and optimization
- Digital or interactive PDF
- Website or microsite solutions
- Printing coordination and supervision
As outlined here, the process of developing a successful ESG or sustainability report hinges on the science and art of solid, professional experience. It is critical to understand the detailed process behind the ESG report and just as critical to work with the right partners to make it a reality.