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We are pleased to announce the publication of IR Department’s foundational Environmental Social Governance (ESG) report.
The report provides a snapshot of our ESG performance and sets out the objectives of our ESG program to June 2024.
We produced the report off the back of the launch of our ESG practice earlier this year, to respond to the growing reporting needs of our micro and small cap clients. We know that ESG reporting can feel overwhelming, and confusing. We wanted to demonstrate a simple approach to producing high quality ESG information, and establishing a program with strong ties back to business objectives.
Here are 5 key take-aways for companies wanting to get started with their own reporting program:
Begin by getting clear on your ‘why’ for reporting, because it will help you determine everything else (such as your audience and how you’ll define your material topics)
We decided it was time for us to start reporting for three reasons:
- It aligns with our vision of supporting positive impact through the work that we do
- We wanted to ‘walk our talk’; we’ve been strongly encouraging our micro and small cap clients to begin reporting to meet their stakeholders’ needs
- It has become obvious to us, based on our knowledge of the ESG landscape, that to remain competitive we may soon need to provide our own stakeholders (clients, potential clients, suppliers and business partners) with data about our impacts as part of their decision-making process for working with us.
When we got really clear on our why, our audience became obvious, and we could then decide what framework to adopt for determining our material topics. Adopting a globally leading framework is the single most important thing companies can do to uplift the quality of their reporting.
Many companies don’t know that there are different frameworks for determining what topics to focus on, depending on their target audience.
This is why it’s important to define your audience.
The reporting frameworks have been developed based on extensive research about what different audiences seek when they look for information about a company’s ESG performance. When followed correctly, the frameworks help companies to determine what topics are ‘material’ to them, or what topics their intended audiences are likely to consider significant.
And this is where we most commonly see small companies fall short; they haven’t done the work to define their material topics according to a globally-recognised framework.
The Sustainability Accounting Standards Board (SASB) offers a key reporting framework for companies with investors as their primary audience. When adopted, the framework elicits from companies sustainability information linked to their financial performance. This is considered a very introspective way of determining ‘materiality’; it considers people and the environment as ‘assets’ with potential to impact a company’s bottom line.
Conversely, the Global Reporting Index (GRI) framework considers materiality in a more extrospective way; ‘material’ is defined as the topics that represent a company’s most significant impacts on people and the environment. This type of assessment cannot be undertaken by the company alone; companies need to engage stakeholders on their views as a key part of the assessment. Consumers and community interest groups tend to be the primary audience of this information.
When we considered that one of our primary reasons for reporting was to set an example for our clients, and they, as listed companies, would predominantly report to their investors, it became obvious to us that we should adopt the SASB standards even though we don’t have investors ourselves. We wanted to be able to ‘speak’ the same ESG reporting language that our clients need to adopt.
Recalling that we also wanted to report because it aligns with our vision of supporting positive global impact through our work, and that stakeholders might require information about our ESG performance to make decisions about working with us, it became clear that we would also need to define our material topics by examining our impacts.
Adopting both inward (like SASB) and outward-facing (per GRI) definitions of materiality is called a ‘double materiality’ assessment.
We didn’t wait to do a double materiality assessment to start reporting
While it is great to have undertaken a double materiality assessment, only some companies are required to do so. These include large companies that are reporting to meet mandatory or compliance requirements, such as those who need to comply with the European Union’s Corporate Sustainability Reporting Directive (CSRD).
For smaller companies reporting voluntarily, it’s okay to begin with the assessment that most immediately meets your reporting ‘why’, with a view to completing a double materiality assessment in subsequent reporting seasons.
We aim to incorporate GRI’s materiality assessment before the close of this current reporting period.
Further, we haven’t waited to have all the answers to start reporting.
Best practice ESG reporting isn’t so much about having all the information and demonstrating a ‘good’ performance, as it is about the quality of the disclosure. In practice, this means providing detail, and transparently, about how a topic is governed and managed, and associated metrics.
Once we had defined our material topics, we conducted a gap analysis to determine two things:
- What information we could disclose now according to the information requested of us by the SASB framework for a particular topic, and where we had to implement a new process for obtaining missing data or information
- Where we could generally uplift our performance on a topic, because the information we’re required to provide made it obvious that we could improve on that topic.
In disclosing, we’re transparent about our gaps, why they exist, and what we’re doing about them. This also makes our report forward-looking, which is another key feature of best practice disclosure.
The reporting process – including a materiality assessment and a gap analysis – has helped us establish a foundational ESG program and set our priorities for the next reporting period.
This might be the biggest take-away for small companies; if you think you need to have a solid ESG program in place before you start reporting, you might be pleasantly surprised to find that the process of best practice reporting actually helps you more quickly and effectively form an ESG program.
We encourage companies not to wait until annual reporting season to start their foundational ESG reporting activities. The best time to start is any time, and now.