ESG reporting should not only be viewed as a compliance obligation but also as a key element in building trust and transparency in stakeholder relations. Unfortunately, developing an ESG reporting strategy comes with a series of challenges that companies must overcome to effectively and transparently communicate their actions and sustainability impacts.
CHALLENGES
COMPLEXITY
OF REQUIREMENTS
ESG reporting encompasses a broad range of data concerning a company's impact on the environment, society, and corporate governance. Establishing a strategy allows for a systematic approach to collecting and presenting this information in a comprehensible and compliant manner.
DATA COLLECTION
AND INTEGRATION
Collecting data from various departments and sources within the company and then integrating it to create a coherent ESG report is a complex process. It requires effective IT systems and data management tools.
DOUBLE MATERIALITY ANALYSIS
One of the primary challenges is conducting a double materiality analysis, which helps understand how a company's activities impact the environment and society and how changes in these areas affect the company. This requires a deep understanding of both internal and external factors influencing the company.
CALCULATING GREENHOUSE GAS EMISSIONS
Accurately calculating the company's carbon footprint, including Scope 1, 2, and 3 greenhouse gas emissions, is critical for assessing the company's impact on climate change. The challenge lies in gathering the relevant data and applying the appropriate methodology for its calculations.
COMPLIANCE WITH REGULATIONS AND STANDARDS
Ensuring compliance with dynamically changing regulations and reporting standards, such as the ESRS, presents a challenge. Companies must continually monitor regulatory changes and adjust their reporting strategies accordingly.
COMMUNICATION
WITH STAKEHOLDERS
Effectively communicating ESG reporting results to various stakeholder groups, including investors, customers, and employees, requires a clear and accessible message. The challenge is to present complex data in an understandable and engaging manner.
RISK MANAGEMENT
Identifying and managing ESG-related risks, including reputational, regulatory, and financial risks, is a crucial element of the reporting strategy. The challenge is to anticipate potential threats and develop strategies to mitigate them.
SETTING GOALS
AND MONITORING PROGRESS
Establishing realistic yet ambitious ESG goals and regularly monitoring progress requires advanced analytical tools and verification processes. Companies must also adapt their strategies in response to changing conditions and achieved results.
ADAPTING TO INDUSTRY SPECIFICITIES
Each company operates in a different industry context, meaning that the ESG reporting strategy must be tailored to its unique conditions and challenges. Specialized assistance enables the identification of key ESG areas that are most significant for
a given company.
