quotes The future of ESG reporting in business

20 March 2024
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Updated 19 March 2024

The future of ESG reporting in business

Across the corporate world, environmental, social, and governance (ESG) reporting is essential, showcasing a company’s commitment to integrating sustainable practices into its core business. Originating from broader responsibility beyond finance, ESG reporting has garnered significant attention since milestones like the Brundtland Report in 1987, the Global Reporting Initiative formation in 1997, and the UN Global Compact launch in 2000. Today, numerous companies across industries demonstrate ambitious targets and tangible progress in enhancing their sustainable practices, reflecting a notable revolution in the ESG field.

ESG reporting serves as a crucial tool for businesses, demonstrating their commitment to ethical, environmental, and social responsibility. Its recognition provides a strategic advantage in expanding the customer base. Investors are increasingly incorporating ESG metrics into decision-making, emphasizing the importance of transparent and standardized reporting for organizations.

Investors’ increasing demand for transparency, alongside strategic technology integration, is evident in today’s ESG landscape. Many companies have pledged ambitious science-based targets aligned with the Paris Climate Agreement, aiming to reduce their carbon footprint. For example, AbbVie, a global biopharmaceutical company, has committed to reducing its absolute CO2 emissions by 42 percent from the 2021 baseline and transitioning to 100 percent renewable energy by 2030. This enhances the proactive approach toward advancing environmental sustainability.

ESG reporting is poised to undergo major revolutions in the reporting criteria and frameworks. Entities like the International Sustainability Standards Board and the Task Force on Climate-Related Financial Disclosures are gaining prominence, shaping the trajectory of ESG reporting. Forecasts suggest a move toward a harmonized global reporting network, indicating a growing need for standardized, comparable, and globally accepted models. Moreover, there is a notable focus on social issues, particularly diversity and inclusion, which will greatly influence the future prospects of ESG reporting.

ESG reporting serves as a crucial tool for businesses, demonstrating their commitment to ethical, environmental, and social responsibility.

ESG reporting plays a crucial role in expanding the opportunities for companies committed to sustainability. Beyond compliance, it enhances company and brand image, strengthens investor relations, and improves operational efficiencies. Effective integration of ESG reporting in companies leads to the achievement of short-term goals and ensures long-term success and resilience.

While ESG reporting offers various benefits and opportunities, businesses face several implementation challenges. Data collection remains a significant constraint, necessitating a standardized approach for meaningful comparisons across industries and sectors. Stakeholder engagement presents another challenge, as companies must balance diverse expectations. Overcoming these hurdles requires strategic planning, enhanced stakeholder collaboration, and leveraging technology for improved data management.

Academy Sports + Outdoors, a retail apparel company, has demonstrated resilience in its ESG reporting by emphasizing environmental sustainability, community empowerment, and ethical governance in its disclosures. This three-pillar approach highlights the successful integration of responsibility into corporate strategies. Moreover, JP Morgan Chase & Co., the world’s largest bank by market capitalization, has pledged to align its financed emissions — the carbon emissions of its portfolio clients — to net zero by 2050. The bank has disclosed its net-zero aligned targets for multiple sectors, emphasizing its commitment to sustainability.

The future of ESG reporting hinges on understanding current trends, anticipated developments, challenges, and opportunities. It is expected that more companies across various industries will commit to advancing their ESG reporting, which transparently communicates their ESG journeys, providing a blueprint for various companies across the globe. ESG data points and methodologies will gradually unify, becoming more consistent and comparable, providing much-needed standardization and harmonization in this evolving field. Ultimately, the ESG revolution will foster a sustainable and responsible business environment by driving innovation, encouraging transparency in reporting environmental and social impact, and integrating ESG into core strategies across more companies.

Majed Nezar Al-Qatari is a sustainability leader, ecological engineer and UN youth ambassador with experience in advancing environmental, social and corporate governance and sustainability goals in corporate businesses, nonprofit organizations and financial institutions.