With regulators beginning to align their requirements for corporate reporters in the ESG space, getting started with the right data – and approach – is crucial for telling a strong and consistent corporate story.
This was the throughline of a recent IR Magazine Webinar, held in partnership with Morrow Sodali, titled ‘How anchoring your approach to ESG reporting in business strategy can drive investor and stakeholder engagement’.
Harry Etra, managing director at HXE Partners, a Morrow Sodali Company, and a panelist on the webinar, told an audience of IROs, ESG heads and in-house legal experts that the key to driving stakeholder engagement was to start in the right place.
Choosing the right data points to tell your company’s story is of pivotal importance, he added. A good starting point can be to look at your immediate competitors and peers, which may be further along with their reporting practices, to see what they choose to disclose, while engaging with your investors to identify any other areas of focus.
‘They will tell you what they want to see and where those gaps are in your program, and help you form a multi-year commitment,’ Etra said.
Melanie Plante, sustainability performance and engagement manager at Agnico Eagle Mines and another a panelist on the webinar, agreed, noting that investors had increasingly complex demands in terms of the raw data they wanted to see – particularly on biodiversity matters, following the unveiling of the Taskforce on Nature-related Financial Disclosures’ framework.
‘We’re keeping an eye on it and seeing where it goes in the coming years, but there is a lot of demand from investors and other stakeholders to report on this information,’ Plante said. ‘You’re going to have to do the work, even if there is some uncertainty’.
Plante said her board was another key audience for her ESG reporting and disclosures. Keeping it abreast of the risks and opportunities involved in corporate strategy is a key part of her engagement plan, as is keeping her board educated on a regular basis around any changes to ESG factors or requirements. ‘We want [board directors] to keep making informed decisions as this landscape changes really rapidly,’ she explained.
Etra added that companies were increasingly introducing some element of linking ESG targets to executive pay in order to maintain a ‘feedback mechanism’ between the market and corporate performance.
To provide context for the discussions taking place, members of the audience were asked to reveal who was responsible for leading ESG reporting at their organization. The majority – 62 percent – said they had a dedicated ESG or sustainability specialist, while 13 percent said IR took the reins.
Attendees were also asked to describe their current ESG reporting workload. More than half (56 percent) said they found their current obligations ‘hard to manage’, while 13 percent said it was ‘impossible to manage’.
Both panelists sympathized with this finding and spoke to the broad range of stakeholders reporters had to bear in mind at any point. Working with service providers could help here, they said, as does being selective and targeted about the metrics you choose to report – or the ratings surveys you choose to fill out.
‘It’s about thinking about what’s relevant to your company, thinking about how you can tie ESG data into broader financial reporting,’ Etra summarized.
Plante, meanwhile, spoke to the need to build flexibility and adaptability into your processes to allow for new reporting frameworks or standards being introduced. ‘There’s a certain amount of groundwork you want to lay before embarking on your ESG strategy, such as a materiality assessment if you want to go for the double-materiality framework coming out of Europe,’ she said.
‘But this strategy is something you can revise. You can look at it every three years, say, make modifications and explain those changes to your stakeholders.’
‘The regulatory landscape has of course driven change, but in some ways it has also slowed down that rate of change,’ Etra noted. ‘But your reporting should always be tied to your strategy. That groundwork – knowing your greenhouse gas emissions or understanding your stakeholders – is always going to be important.’
One of those changes emerging from Europe – via the requirements of the EU’s Corporate Sustainability Reporting Directive – is a desire for double-materiality in ESG assessments. This means companies need to report not just on what ESG factors are financially material to them, but also how companies themselves are impacting the environment.
Almost four in 10 (38 percent) of the audience agreed that demand for double-materiality assessments were growing, with 19 percent saying there was currently demand for it but that it was inconsistent so far.
‘There’s a lot of value for businesses to look at both perspectives,’ said Plante, explaining that many existing frameworks would have already taken companies some of the way. Etra added that it was a matter of ‘additional rigor in terms of process’ that required additional controls for communicating with stakeholders.