Our ability to live on this planet peacefully and equitably has never felt more fragile. A brief skim of any news source is enough to exacerbate our fears about the increasing onslaught of social and environmental crises every year, and the data more than backs up these fears. Last year, the Social Progress Initiative shared the sobering news that we will not achieve the United Nations Sustainable Development Goals until 2073 - 40 years behind target.

The global economy is the single biggest contributor to the environmental and social inequalities that we are experiencing, according to earth.org. As a report from Bloomberg explained, “Capitalism Caused Climate Change; It Must Also Be the Solution”. We cannot manage and mitigate what we do not measure, and until we can report on ESG factors, we do not have the ability to force progress towards the SDGs.

According to Stuart R. Levine’s 2021 Forbes article, Don’t Get Left Behind On ESG, “Numerous reports have shown that attention to climate change, environmental sustainability, and social responsibility have been, and are becoming even more, important to customers, employees, and shareholders. There is a heightened level of awareness of these ESG (environmental, social, and governance) issues in the companies that people buy from, work for, and invest in. Importantly, people are willing to put their money where their mouth is when it comes to these critical factors.”

Indeed, research from global consulting firm Protiviti found that “90% of S&P500 companies issued some form of ESG related reports in 2020, up from 75% five years earlier.” One of the world’s biggest accounting and advisory firms, PwC, also issued a report in 2020 that found that 72% of publicly traded companies now mention the United Nations Sustainable Development Goals in their reports.

Important ESG Terms & Definitions

Corporate social responsibility and sustainability work is mired in jargon and acronyms that are still evolving. Here are some important phrases to know, and how we’ll define them in the context of this report:

• ESG: Environmental, social, and governance factors that a company reports on.
• CSR: Corporate social responsibility, which also includes Corporate Citizenship and Corporate Social Impact functions.
• Greenhouse Gas Emissions (GHG): Emissions, including carbon, methane, and other gasses, that contribute to global warming.
• Scope of emissions: Every company produces emissions that fall into Scope 1, Scope 2, or Scope 3 classifications. According to Greenhouse Gas Protocol, “Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.”
• Materiality: How relevant something is to the conversation at hand. Investors and business leaders use this term to explain if a specific metric or data point will pose any financial and/or operational risk (or opportunity) to a business.
• Reporting: The act of disclosing company information to important stakeholders. If the company is publicly traded, this means disclosing this information publicly.

It's worth pointing out that different stakeholders have different priorities when it comes to how ESG is used. Part of the confusion around ESG is the lack of a shared language, but in general, stakeholders tend to fall into one or more of the following categories in terms of what they want out of the movement: ESG for Assurance, ESG for Impact, or ESG for Regulation.

The Business Case for ESG

The Harvard Business Review, popular amidst corporate executives, provides the following guidance in the article How to Lead in the Stakeholder Era:

“The world is clearly facing multifaceted crises: a health crisis, an economic crisis, a societal crisis, a racial crisis, an environmental crisis, and rising geopolitical tensions. In the face of these challenges, there is a growing realization that business and society cannot thrive if employees, customers, and communities are not healthy; if our planet is on fire; and if our society is fractured. More and more leaders believe that creating a better and sustainable future requires corporations to serve all their stakeholders — not just their investors — in a harmonious fashion.

To make this transition, leaders need to evolve how they think about their mission and how they lead. According to Hubert Joly, the former chairman and CEO of Best Buy, we need leaders who, in both good times and bad, are keen to pursue a noble purpose, are ready to put people at the center of it, and are dedicated to creating an environment where every employee can blossom. In short, we need leaders who will embrace a declaration of interdependence. This is how we can create a more sustainable future. This is how business can be a force for good and do well by doing good.”

Indeed, the case for ESG is rising across all levels of organizational hierarchies, including the Board of Directors. A report from the Enacting Purpose Initiative states that “the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems.” In order for companies to live up to their purpose, they must be able to measure their ability to solve problems and not create harm.

What is ESG Reporting?

We interviewed some really smart people over the course of developing this guide. One of them, experienced ESG consultant Kari Hayden Pendoley, shared the helpful analogy that “ESG is like CSR with teeth.”

The Global Reporting Initiative (GRI) defines sustainability reporting as “the practice of companies disclosing the most significant economic, environmental and social impacts that arise from their corporate activities, and thereby being held accountable for these impacts and responsible for managing them.”

ESG reporting has exploded in popularity, but despite it’s critical importance, it remains complex and challenging to understand. There are a lot of frameworks, tools, consultancies, and individuals that all contribute to a company’s ESG efforts, but according to Kevin Wilhelm, author of Making Sustainability Stick and CEO of Sustainable Business Consulting, “as I’ve spoken to business leaders and sustainability directors across the country, many are struggling with both the implementation and behavior change elements that are essential to long-term value creation.”

A quick Google search for ESG reporting will show you different entities that provide guidance on reporting, including ISO (International Standards Organizations), SASB (Sustainability Accounting Standards Board), GRI (Global Reporting Initiative), CDP (Carbon Disclosure Project)UNGC (United Nations Global Compact), and more… In this guide, we’ll explain how these are complementary tools that each solve a specific need and help a company advance its environmental and social mission. In general, these frameworks do the following:

1. Provide guidance on what to report on, and how to report on it
2. Evaluate and compare companies against each other
3. Aggregate and audit ESG reports for consumers, investors, and other stakeholders

In the coming years, we can expect financial reports to include more and more mentions of ESG standards, especially as we move towards Integrated Reporting (but that’s another guide for another time.)

Future of ESG Reporting

Today, we stand at a critical time for ESG. In the SSIR article, Reorienting the Business Case for Corporate Sustainability, the authors explain that “Corporate sustainability programs have grown dramatically, but biases have crippled their effectiveness”. Indeed, if ESG is taken advantage of for publicity rather than real progress, it will not be taken seriously and the prior 50 years of history will be wasted.

This need for ESG reporting has become so salient that even CEOs are now asking for regulation. In new research from Fortune, titled CEOs are calling for more regulation—of ESG standards, the majority of CEOs surveyed express a desire for the SEC in the USA to impose ESG reporting requirements – if they do, they will almost certainly mirror the GRI and SASB explained below.

In November 2021, major progress towards a global convergence of ESG reporting standards was made at the COP26 climate conference in Glasgow with the establishment of the International Sustainability Standards Board (ISSB): a new effort to merge many ESG disclosure standards into one, and to encourage the uptake of these standards globally. We can expect to know more about these standards in 2022 after a thorough public consultation.

Contextualizing ESG Reporting

In this guide, and in the workplace, it is important to remember that ESG reporting is not the solution to making a business socially and environmentally responsible – that is a separate guide. However, in recent years, ESG reporting has become central to corporate strategy, investing, and regulatory conversations. As such, this guide was developed to help you understand the specifics of ESG reporting, and to help establish truly impactful controls as part of the ESG reporting process to use ESG reporting as a lever to lead more responsible and equitable business practices.

The difference between ESG and CSR can be confusing because of the inconsistent way that the terms are applied. In some companies, the Corporate Social Responsibility leader is responsible for the company’s ESG reporting. In other companies, these are separate roles, and sometimes, they do not even work together at all. In general, we see that the most progressive companies report on Environmental, Social, and Governance (ESG) factors as well Corporate Social Responsibility (CSR) factors.

CSR encompasses all self-imposed and self-regulated activities to make a company more responsible, from setting targets to be carbon neutral, engaging in philanthropy, imposing ethical standards, to reporting on ESG targets. ESG is an effort heavily influenced by governments and investors to have companies report on specific and material environmental, social, and governance factors.

The most progressive companies will have both ESG and CSR leaders, where the CSR leader will set the strategy for all corporate social responsibility efforts, and the ESG leader will specifically look at reporting on ESG factors. CSR leaders that are focused on volunteering and giving without prioritizing how to help innovate and grow their businesses with an ESG focus are missing the opportunity of a generation for their career and impact potential.

In the HBR article The Difference Between Purpose and Sustainability (aka ESG), the authors explain that “the purpose of a company ‘is to produce profitable solutions to problems of people and planet,’ while at the same time ‘not profiting from producing problems for people or planet’—a failure in sustainability. Companies that are making investments in sustainability while failing to produce profitable solutions to people and planet are also failing in their purpose. Companies that are profitable while degrading the environment and society are focused on profits, not purpose.” You can think of CSR as the initiative to create purpose and an all-around purposeful and responsible company, while ESG is specifically related to the reporting of ESG factors. Both are needed.

As an example, Microsoft has both an “ESG” report, which it calls its “Environmental Sustainability Report”, as well as a more general “Corporate Social Responsibility Report” which includes things like giving, volunteering, and future-looking investments for other social responsibility factors beyond what is recommended by SASB and GRI.

In order for sustainability reporting to work, there needs to be a shared understanding of concepts and terms between companies, regulators, and investors. This is where frameworks come in: ESG frameworks provide the shared language to all stakeholders so that companies can report on ESG standards in a way that can be verified, understood, and compared. However, as this field is rapidly growing and evolving, so have the number of frameworks. (Editor's note: In November 2021, major progress was made towards a global convergence of ESG reporting standards with the establishment of the International Sustainability Standards Board (ISSB): a new effort to merge many ESG disclosure standards into one, and to encourage the uptake of these standards globally. We can expect to know more about these standards in 2022 after a thorough public consultation.)

Keep in mind that the most mature companies that are strategically prioritizing ESG will measure and submit reports to multiple reporting and measurement bodies. The company will then compile the most compelling achievements from across different reporting frameworks into its own custom CSR report that tells the desired brand story it wants to communicate to investors, partners, governments, and consumers. In addition to including data from the accepted frameworks, these reports will also include financial data, pictures, stories of impact, and other social good programs, like its volunteering programs.

To see how these frameworks apply in the real world, we are going to reference the example of Unilever’s CSR report. Specifically, we will focus on how it reports on water. Below is an example of Unilever’s ESG report summary, and in the middle, you can see how it highlights water. In the following sections, we will provide more background as to why Unilever reports on water, what water-related metrics it reports on, and how to report on those metrics.

Below, we cover the following frameworks in greater detail:

1. ISO 26000
2. GRI
3. SASB
4. CDP
5. UN Global Compact
6. B Impact Assessment

The table below provides a short summary of each:

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What is ISO 26000?

Highlights:

• Usefulness: minimal
• Used by: CEO, CFO, Head of Corporate Social Responsibility
• Used for: Directional guidance on making your company more socially responsible

ISO 2600 explained The International Organization for Standardization (ISO) created the 26000:2010 standard to provide guidance to organizations on how to become more socially responsible. It is a set of guiding principles for businesses and organizations to use to steer them in a more socially responsible direction. Compliance with these principles is voluntary, and as such can not be certified. In summary, ISO 26000 suggests that all organizations work to improve the following 7 core subjects:

1. Governance (6.2)
2. Human Rights (6.3)
3. Labor Practices (6.4)
4. The Environment (6.5)
5. Fair operating practices (6.6)
6. Consumer issues (6.7)
7. Community involvement and development (6.8)

A company can achieve ISO 26000 compliance by doing the following 7 steps:

1. Understanding the organization’s social responsibility
2. Integrating social responsibility throughout the organization
3. Communicating their social responsibility
4. Improving organizational credibility
5. Managing a process for reviewing progress towards social responsibility
6. Improving performance of social responsibility initiatives
7. Evaluating voluntary initiatives for social responsibility

It is important to note that ISO does not provide any required documentation of verification or audit, nor does it establish a bar for achievement. To achieve ISO 26000:2010 is as simple as paying ISO money and confirming that your company is following the 7 principles for each of the 7 core subjects.

ISO 26000 does not help with ESG reporting, but rather, provides high-level guidance on what your corporate social responsibility function should prioritize.

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What is SASB?

Highlights:

• Usefulness: High
• Used by: CEO, CFO, Head of Legal, Procurement, Product, Supply Chain, Operations, Corporate Social Responsibility, and more
• Used for: Determining what ESG factors should be measured and reported on to investors.

SASB Explained According to a joint statement from SASB and GRI, SASB provides “industry-specific standards identify the subset of sustainability-related risks and opportunities most likely to affect a company’s financial condition (i.e., its balance sheet), operating performance (i.e., its income statement) or risk profile (i.e., its market valuation and cost of capital). SASB metrics cover 77 standards that are divided into five broad “sustainability dimensions”:

1. Environment: Addresses the environmental impact of a company, either through the use of nonrenewable natural resources or through harmful emissions into the environment.
2. Social Capital: Relates to how a business will contribute to society and maintain relationships with key outside parties like customers, local communities, the public, and the government.
3. Human Capital: Addresses the management of a company’s human resources (e.g., employees and individual contractors.)
4. Business Model and Innovation: Includes the integration of environmental, human, and social issues into a company’s value-creation process.
5. Leadership and Governance: Involves the management of issues inherent to the business model or common practice in the industry and that are in potential conflict with the interest of broader stakeholder groups (e.g., regulatory compliance, risk management, safety management, supply-chain and materials sourcing, and corruption.)

For more help understanding SASB, GRI, and how they work together, make sure to check out the “Combining ESG Frameworks and Using Them Together” section after you finish this section.

Example: For companies in Consumer Goods (CG) that make Household & Personal Products (HP), SASB provides the following guidance:

1. CG-HP-140a.1: (1) Total water withdrawn, (2) total water consumed, percentage of each in regions with High or Extremely High Baseline Water Stress
2. CG-HP-140a.2: Description of water management risks and discussion of strategies and practices to mitigate those risks.

Using SASB guidance, Unilever prepared a materiality assessment to decide what it should report on:

Unilever, using the SASB materiality matrix, then got more specific by connecting each topic to a particular SASB Metric. Here is an example from Unilever showing the SASB metrics it has decided to report on, and how it reports on each:

Unilever knows to do this because SASB provides the following guidance in its HOUSEHOLD & PERSONAL PRODUCTS Sustainability Accounting Standard guide.

Try SASB yourself Check out the materiality matrix here to see its guidance for companies in your industry.

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What is GRI?

Highlights:

• Usefulness: High
• Used by: CEO, CFO, Head of Legal, Procurement, Product, Supply Chain, Operations, Corporate Social Responsibility, and more
• Used for: Specific guidance on how to measure and report on chosen metrics

GRI Explained The Global Reporting Initiative (GRI) is the independent international organization that helps businesses, governments, and other organizations understand and communicate their impacts. The GRI Standards are the world’s most widely used for sustainability reporting. According to GRI, “organizations can either use the GRI Standards to prepare a sustainability report in accordance with the Standards, or they can use selected Standards, or parts of their content, to report information for specific users or purposes, such as reporting their climate change impacts for their investors and consumers.”

If you want to feature the fact that you used GRI in your sustainability report, you’ll have to register your report with GRI first following their GRI Standards Report Registration System. Once registered, your report will become publicly available. In fact, you can browse reports here for examples.

For more help understanding SASB, GRI, and how they work together, make sure to check out the “Combining ESG Frameworks and Using Them Together” section after you finish this section.

Example Unilever, in its ESG report, references water interactions. It then prepares a GRI report to document the mapping of its reporting to GRI standards. In this screenshot below of Unilever’s GRI report, you can see that in section 303-3 it reports on water withdrawal.

Unilever then points to more specific metrics on water usage:

Unilever knows to report on these metrics because GRI 303-3 provides the following guidance:

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What is the CDP?

Highlights:

• Usefulness: Medium (but only for companies that are publicly traded)
• Used by: Chief Financial Officer, Head of ESG
• Used for: Measuring performance against other companies on ESG factors specific to water and greenhouse gases

CDP Explained Over 6,800 companies use CDP to verify their carbon emissions. CDP is a nonprofit that surveys respondents, verifies results, and then issues ratings for companies that do the best job reporting on greenhouse gas emissions and water usage. It does not provide specific guidance on what to report on or how to measure it, but taking their survey can help ESG leaders think about aspects of their business they can measure and improve upon.

Example Looking at Unilever, you can see its CDP report here. The report shows the CDP requirement, and then Unilever explains how it achieves it.

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What is the Dow Jones Sustainability Index?

Highlights:

• Usefulness: Low (but only for companies in the S&P Global system)
• Used by: CEO, CFO, Head of HR, Corporate Social Responsibility, and/or Supply Chain
• Used for: Measuring performance against other publicly traded companies included in S&P Global system on ESG factors

DJSI/CSA Explained: Once known as the Dow Jones Sustainability Index, the tool now known as the Dow Jones Sustainability Index and Corporate Sustainability Assessment looks across 7,000 companies and compares them on ESG scores as submitted to S&P Global. It does not provide guidance on what to measure or how, but it enables companies to enter information that they acquire via SASB and GRI processes.

Recently, the DJSI has been under pressure on account of its questionable rankings. On one hand, it does recognize companies like SAP which have a robust and well-rounded CSR and ESG strategy. On the other hand, this last year, the DJSI recognized the global cigarette maker PhilipsMorris as being a sustainable company. If this continues, according to Stanford Social Innovation Review, “the world may be better off without ESG investing” – after all, what can be sustainable about selling cancer-causing products? This is a great example of the risk we pointed out earlier in the guide - if ESG reporting gets diluted to the point that it loses its original intent, it’s value as a tool for positive change plummets.

Example: Looking at Unilever again, we can see it was recognized as the Industry Leader in the personal products category. You can see the full Unilever DJSI report here.

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What is the United Nations Global Compact?

Highlights

• Usefulness: High
• Used by: CEO, CFO, Head of Legal, Procurement, Product, Supply Chain, Corporate Social Responsibility, and more
• Used for: Specific guidance on how to measure and report on chosen metrics

United Nations Global Compact Explained According to the UNGC, its mission is to “mobilize a global movement of sustainable companies and stakeholders to create the world we want. To end extreme poverty, fight inequality and tackle climate change, we need your company to join our global movement.” In other words, you can think of the UNGC as a network for companies, and leaders within them, who are committed to helping achieve the SDGs. As part of this, UNGC does ask companies to report on progress towards the SDGs, and provides the use of its Value Driver Model to help companies show the financial benefits of helping achieve the SDGs. This is a useful tool for CSR leaders who are trying to build the business case for increasing sustainability efforts. The UNGC also provides specific guidance as to how companies can support specific SDGs via events, forums, and even challenges (like the Zero Hunger Challenge.) It also operates the SDG Ambition Accelerator to help CSR leaders build the skills and know-how they need to lead meaningful sustainability initiatives at their companies.

In terms of reporting, the UNGC asks companies to report progress along the following 10 principles:

• Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights.
• Principle 2: Businesses should make sure that they are not complicit in human rights abuses.
• Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
• Principle 4: Businesses should uphold the elimination of all forms of forced and compulsory labour.
• Principle 5: Businesses should uphold the effective abolition of child labour.
• Principle 6: Businesses should uphold the elimination of discrimination in respect of employment and occupation.
• Principle 7: Businesses should support a precautionary approach to environmental challenges.
• Principle 8: Businesses should undertake initiatives to promote greater environmental responsibility.
• Principle 9: Businesses should encourage the development and diffusion of environmentally friendly technologies.
• Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

By using GRI reporting, companies can demonstrate their actions, policies, and proof of impact along all of these principles, and will provide a report to UNGC showing GRI metrics categorized for these principles.

Example: Continuing with the Unilever example, we can see that its UNGC report highlights water usage as part of its efforts to achieve UNGC principles 7, 8, and 9. Unilever can show this progress because GRI provides guidance as to which GRI standards align to the UNGC criteria.

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What is a Benefit Corporation / the B Impact Assessment?

Highlights:

• Usefulness: High, for all companies
• Used by: Anybody within the company. The C-Suite positions, Board, and Head of CSR should use this as their compass for ongoing CSR and ESG strategy.
• Used for: Identifying all the ways a company can improve its CSR performance (not just ESG)

B Impact Assessment Explained: According to B Lab, the nonprofit that started the Benefit Corporation movement, “A benefit corporation is a legal tool to create a solid foundation for long term mission alignment and value creation. It protects a company's mission through capital raises and leadership changes, creates more flexibility when evaluating potential sale and liquidity options, and prepares businesses to lead a mission-driven life post-IPO.

• Purpose: Benefit corporations commit to creating public benefit and sustainable value in addition to generating profit. This sustainability is an integral part of their value proposition.
• Accountability: Benefit corporations are committed to considering the company’s impact on society and the environment in order to create long-term sustainable value for all stakeholders.
• Transparency: In most regions, benefit corporations are required to report annually and using a third-party standard, to show their progress towards achieving social and environmental impact to their shareholders and in most cases the wider public.”

B Labs has popularized the idea of the Benefit Corporation (see our article, What is a Benefit Corporation), which is a new type of legal entity that exists explicitly for and publicly reports on social and environmental impact. B Corporation status is earned upon completing, and scoring high enough, on the B Impact Assessment. However, the B Impact Assessment is NOT an ESG report or framework, but rather an overall approach to corporate social responsibility. In fact, it may be useful to think of the B Corporation structure as the only CSR framework that provides guidance, evaluation, and audit, all in one.

A Certified Benefit Corporation, if it was publicly traded, would likely still use SASB and GRI. A B Lab-certified company may also choose to participate in the UN Global Compact, and in fact, the B Impact Assessment has a link to the UNGC and encourages participation.

Example: Taking a look at water again, the B Impact Assessment does not provide specific guidance on how to measure and report on water usage like GRI and SASB, but it does check to see if it is reported on.

Chances are, if you are following SASB materiality and GRI guidance, you will likely score high on the B Impact Assessment. However, the B Impact Assessment tends to cover many more factors than what SASB and GRI cover. In fact, B Impact Assessment has 236 questions across 6 areas where GRI has 92 criteria across 4 areas, and SASB has 77 across 5 areas.

Tip for CSR Leaders and intrapreneurs: Even if your company will never consider becoming B Lab Certified, we STILL recommend that you take the assessment, which is open to the public, as it provides a plethora of ideas, suggestions, and real-live examples on more ways to make your company responsible beyond ESG factors.

In addition to the frameworks listed above, it is useful to know that there are other popular frameworks that may be a better choice for your organization. For example:

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Science Based Targets

The Science Based Targets initiative (SBTi) mobilizes companies to set science-based targets and boost their competitive advantage in the transition to the low-carbon economy. The initiative is a collaboration of CDP, WRI, WWF, and the UN Global Compact, and will likely be included in more of the frameworks above particularly in terms of setting targets (which, as we highlight later in this piece, is something that ESG leaders really need to move towards.)

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Integrated Reporting < IR >

Integrated reporting (also called IR, or < IR > in International Integrated Reporting Council publications) in corporate communication is a "process that results in communication, most visibly a periodic “integrated report,” about value creation over time. It is a guide to help report on ESG in any other financial and public reports. < IR >, by the Value Reporting Initiative, provides guidance on how to include ESG metrics in financial reports and in other reports to investors, which are increasingly becoming reports that integrate all data – people, planet, and profits – into a single report, as opposed to having different reports for different entities.

GRI vs. SASB

According to a joint statement from both organizations, “SASB’s industry-specific standards identify the sustainability-related risks and opportunities most likely to affect a company’s financial condition (i.e. its balance sheet), operating performance (i.e. its income statement), or risk profile (i.e. cost of capital). All of these factors impact a company’s current and future market valuation. The GRI Standards focus on the economic, environmental and social impacts of the activities of a company, and hence its contributions – positive or negative – towards sustainable development. It is the underlying assumption that if not already financially material at the time of reporting, these impacts may become financially material over time.“

According to rio ESG “Where SASB Standards focus more heavily on the impact of sustainability on the company itself (i.e., financial and operations impact), GRI focuses more on the external impact the business has on the world. This means that SASB is usually desirable for investors, while GRI is more relevant for consumers and the general public.”

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Using SASB, GRI, DJSI, and UN Global Compact Together

Building off the Unilever examples above, let’s see how one company used different ESG frameworks together.

As a refresher, Unilever’s 2020 ESG report also shows ten years of progress based on its 2010 commitments. Referencing back to the water example referenced throughout this guide, we can see how Unilever chose to report on water, and what related metrics it decided on:

While this is over-simplified, here is how the ESG team at Unilever decided to report on these metrics:

1. Using SASB it decided to report on water consumption
2. Using GRI, it got more specific about what metrics should be reported on, and received guidance on how to report on them.
3. Using Ecovadis and its own audit processes, it asks for its suppliers to report and share ESG metrics
4. It then used its data and policies to show how its efforts are contributing to the UNGC efforts to achieve the SDGs (and also make additional commitments to do more to reduce water consumption).
5. Likely, the individuals working to prepare these reports and lead these initiatives then looked at additional guidance from the UNGC, following its 10 principles and Value Driver Model, to set ideas and actions to improve next year.
6. It then took this data to compete in the DJSI, where it was ranked as a top company in the Personal Products industry
7. Unilever also provides its data to groups like MCSI which shares ESG metrics and comparisons with the investment community, which helps Unilever get listed in ESG funds

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Linking ESG Reporting to the SDGs

Most frameworks now connect to the Sustainable Development Goals, but the B Impact Assessment and GRI provide the most robust integrations.

When you complete the B Impact Assessment, you will have the opportunity to use the B Lab SDG Action Manager, which, based on your score, will make suggestions on how to help achieve the SDGs.

The GRI has done a lot of work to map their reporting to the SDGs, and they offer some helpful guides to help practitioners do this. As an example, below is a screenshot from the GRI guide, “Linking the SDGs and the GRI Standards.” As you can see, it shows you that if you are already reporting on GRI disclosure 303-1-a, you can then also highlight that you are working in service of SDG #6, and specifically, target 6.3. Alternatively, if you want to show progress towards the SDGs this tool also helps you think about what additional GRI disclosures you should make.

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Assurance, Audit, and Comparisons

As highlighted in the introduction of this guide, 3rd party assurance is needed on ESG reports so that investors, partners, and other stakeholders can confidently trust the ESG numbers reported. Moreso, in order to report accurately on ESG figures, companies like Unilever will also need to get data from other companies. As an example, if Unilever is getting key ingredients for its Dove Shampoo from another company that also uses a lot of water, it needs to integrate that water usage from its suppliers into its overall calculation. To help with this, Unilever will employ Ecovadis (or another similar organization) to capture and audit the data.

This is often a challenge for organizations, so Ecovadis actually runs a “Jump Start” program in partnership with Unilever to help Unilever suppliers capture and feed data into Unilever's overall reporting.

US President Joe Biden recently said, “Today, sustainability is a competitive advantage. But tomorrow it will be business as usual. Don’t get left behind.” Indeed, while the EU and India already have some laws and requirements related to ESG reporting, many other countries are following.

As Elizabeth Meager reports in Capital Monitor, “One-fifth – and counting – of the world’s largest companies have committed to achieve net-zero carbon emissions, largely by 2050. But there is no legal or regulatory recourse if they don't, and seemingly little appetite for that to change.”

Here are a few of the regions leading the evolution of more robust ESG reporting:

ESG Reporting in the EU

The Sustainable Finance Disclosure Regulation is a suite of rules aimed at policing how the fund management industry in the EU deals with the climate emergency.

As Bloomberg explains:

1. The new rules basically create three classifications of European funds. One category — Article 9 in the taxonomy — is designed to encapsulate what are commonly called impact funds, where the objective is to proactively allocate capital to projects such as renewable energy or health care or clean water. Also dubbed “dark green” investments, these comprise the smallest and most intensive category of ESG products.
2. The second designation — Article 8 — covers the remaining “light green” ESG suite, or funds that have “environmental or social characteristics.” That would cover products that exclude some securities based on their environmental unfriendliness or other criteria deemed unacceptable.
3. The rest of the fund universe should fall into the Article 6 grade, designed to encompass investments that ignore any and all of the criteria that their ESG brethren take into account when deciding what to buy.

ESG Reporting in the USA

Currently, no laws exist. Many companies will include CSR and/or ESG reporting in their 10-K annual report, which is the requirement by the USA’s Securitized Exchange Commission (SEC) for an annual report of financials to all publicly traded companies, but it is done on a voluntary basis.

ESG Reporting in Brazil

No current laws.

ESG Reporting in China

No current laws.

ESG Reporting in India

In 2014, India enacted the first ever Corporate Social Responsibility law which requires companies over a certain size to commit a specific amount of funding to CSR initiatives.

ESG Reporting in France

In 2017, France implemented a duty of vigilance law, which requires companies that have more than 5,000 employees in France or more than 10,000 employees worldwide to develop, disclose, and implement a vigilance plan in order to identify risks and prevent severe human rights violations and environmental damage resulting directly or indirectly from the operations of the company or its subsidiaries, or subcontractors.

ESG Reporting in the UK

The Companies Act in the UK requires directors to have regard to community and environmental issues when considering their duty to promote the success of their company and by the disclosures to be included in the Business Review. The TFCD framework will be especially relevant for this audience.

ESG Reporting in the Denmark

In 2002, Denmark implemented its Danish Financial Statement Act (Accounting for CSR in Large Businesses) mandating that companies of a certain size must disclose their CSR practices in an annual report or disclose that they do not have a CSR policies.

ESG Reporting in South Africa

In 2008, South Africa enacted a law for Boards to have a CSR committee.

ESG Reporting in Singapore

The Singapore Exchange (SGX), which is Singapore's public market for stocks, proposes mandatory climate and board diversity disclosure for issuers.

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Tools for ESG Design and Reporting

We break tools into the following three categories:

1. Determining ESG metrics
2. Capturing and tracking data
3. Displaying data and creating reports

#1: Determining what metrics to report on To get started, use the SASB materials matrix. We also recommend that you review all the GRI standards to find the ones relevant to your company.

Microsoft’s ESG report is a great example of how one of the most ESG-progressive companies has implemented ESG. According to pg. 82 of its report, Microsoft implemented ESG reporting using the following steps:

1. Identified issues (using SASB and GRI)
2. Refined the list by looking through all available reporting suggestions and choosing the most relevant metrics
3. Worked with stakeholders to understand different perspectives and priorities
4. Scored all the issues (see screenshot below from page 83 of Microsoft’s ESG report)
5. Prioritized the metrics to report on and operationalized them
6. Validated the outcomes with tools and third parties

#2: Capturing and tracking data There are many tools available to capture and track ESG data. We consistently see tools like Navex, Workiva, and Novisto, though there are many others. Particularly when you’re first getting started, you don’t necessarily need anything fancy - a lot of companies do it with Excel templates from ESG navigator, or build their own.

Oftentimes, to accurately report on ESG, you will also need to capture data from suppliers and partners. For this need, Ecovadis provides a solution to do so.

#3: Displaying data and creating reports You can build a report, like the Tableau Foundation, that even has real-time data. Other useful tools include Microsoft PowerBI and Google Data Studio which are economical and easy-to-use visualization tools for data.

Useful Reading on ESG Reporting

Want to learn more? Check out these useful resources:

1. Kevin Whilhelm’s book, Making Sustainability Stick
2. The HBR Article, ESG Impact Is Hard to Measure — But It’s Not Impossible
3. This article from SF Magazine provides a simple summary of implementing ESG reporting.
4. The HBR Article, Most Executives Believe in the Business Case for CSR. So Why Don’t They Invest More in It?

Examples of Good ESG Reports

If you’re looking for some inspiration to model your own reports around, here are a few worth looking at:

1. Nike is considered a leader with its GRI reporting
2. Nestle’s TCFD report
3. Danone’s progress towards the SDGs and its overall report. Danone is also a great example of CDP reporting
4. SAP’s integrated report, and its industry-leading DJSI award

This section should arguably start with a facepalm. According to the Wall Street Journal, in a study of over 13,000 ESG scores from companies, the top ratings firms (Refinitiv, MSCI, and Sustainalytics) disagreed on scores 64% of the time. This is more proof that we do not yet have a shared language on what makes a good ESG score, and who does it best.

As a result, ESG leaders should look at multiple comparison tools for guidance.

Tools like MSCI and Sustainalytics are primarily for aggregation and comparison for investment reasons. Tools like the DJSI are for consumer and partnership development reasons.

In November 2021 at the COP26 climate conference, major progress was made towards a global convergence of ESG reporting standards with the establishment of the International Sustainability Standards Board (ISSB): a new effort to merge many ESG disclosure standards into one, and to encourage the uptake of these standards globally. We can expect to know more about these standards in 2022 after a thorough public consultation.

ESG Successes

A study from McKinsey & Company of over 2,000 investments in ESG showed that 63% of investments improved equity returns when compared to the average markets. Only 8% had a negative impact on financial performance.

ESG Failures

As of this writing, a company that sells cigarettes and vaping products is listed on some ESG funds. So are companies that sell drinks with chemicals and fake sugar. Other companies, like Blackrock, receive positive publicity for their bold claims to be carbon neutral, while still funding massive coal projects – something called “greenwashing”. In the FANTASTIC article, The World May Be Better Off Without ESG Investing, author Hans Taparia shared “Had it not been for the rise of the pandemic’s second wave or the post-election mayhem, Phillip Morris’ addition to a club of companies that are supposed to be doing well on environmental, social, and governance (ESG) factors might have gotten a bit more attention. After all, the company sells 700 billion cigarettes a year. How could it have joined the Dow Jones Sustainability Index (DJSI) North America, one of hundreds of recently created market indexes that track firms purporting to rate well on product safety, greenhouse gas emissions, board diversity, and other ESG factors?”

The former ESG leader at Blackrock was quoted in the Bloomberg article Former BlackRock Executive Blows the Whistle on Greenwashing saying, “In truth, sustainable investing boils down to little more than marketing hype, PR spin and disingenuous promises from the investment community. Existing mutual funds are cynically rebranded as ‘green’ — with no discernible change to the fund itself or its underlying strategies — simply for the sake of appearances and marketing purposes.”

Just last year, companies like Apple and Tesla publicly touted their sustainability practices, while reports were published highlighting that they were - knowingly - still sourcing minerals from violators of child labor laws.

At the time of publishing this, to quote Peter McKillop, Founder of Climate & Capital Media, “many of corporate America’s public affairs offices are lobbying against the $3 trillion-plus Democratic-led reconciliation bill (in the USA) that would bring a huge boost to climate-related projects… the bill calls for a higher tax on corporate profits, which in turn hurts short-term returns. ‘It’s hard to think of anything more irresponsible than torpedoing efforts to avoid a civilization-threatening crisis because you want to hold down your tax bill’ writes New York Times columnist Paul Krugman.

The Harvard Business Review published a great artile on this topic, "How Sustainability Efforts Fall Apart".

There are, sadly, many more examples. The important lesson from all of this is that most companies have very challenging and complicated supply chains, and as such, the work of ESG reporting and improvement is a long-term investment that may hurt in the short term, but does pay off.

ESG Reporting is Not Enough

According to the PwC SDG Challenge, “It's increasingly urgent for business to engage with the (the SDGs.) It's encouraging to see that many are already taking steps to integrate them. But we really need a step-change in the scale and depth of business engagement.”

Indeed, only a minority of companies include actual ESG targets on their reports. Meaning, while the majority of companies may report on ESG factors (i.e. tons of carbon emitted or water used), less than 15% publish goals to become carbon or water neutral. For ESG to truly make an impact, reporting is not enough and companies must set targets for their material ESG factors (and stay accountable to them.) To accomplish this, ESG must become more than a reporting function and should instead be integrated across the company.

If you’re looking to implement ESG reporting at your company, here are the suggested 12 steps to take:

Step 1: Set Clear Ownership & Support

Get clear on ownership for leading ESG reporting, and ensure there is support from three key bodies:

1. The Board
2. Investors
3. The executives

In addition, you will want to align with leaders of CSR, Citizenship, Government Relations, and Human Resources if this isn’t already in place.

Step 2: Build an ESG Team

Build a team that can help establish metrics and report on them. This will likely start as a volunteer group, and should include an Executive Sponsor, as well as a senior-level manager/operator that can help make connections across the enterprise.

Step 3: Decide on What to Measure

Find the metrics that matter most for your company at the intersection of:

• The SDGs that our organization can impact through ‘do more good’ & ‘do less harm’ activities
• Things our company is best in the world at doing, based on our core competencies and assets
• Future looking business priorities and initiatives, based on company priorities
• Things that investors, stakeholders, partners, and employees want us to prioritize, using the SASB materiality framework, UNGC principles, and GRI guidance

Step 4: Establish a Framework and Decide on ESG Factors to Report

These are different for every company based on industry and size. As such, you’ll need to decide on the framework you will use and report on publicly. If in doubt, start with the SASB Materiality matrix to decide on what is material, and then use the GRI framework to understand how to measure each factor. We also think it’s a good idea to take the B Impact Assessment, even partially, to decide on which of the factors you will be reporting on later, and to get the guidance on how to measure it later. With these in hand, look for alignment to the UN SDGs using the Global Compact.

At this point, you’ll also want to decide on which regions of the world you will need to report on, and look at if there are specific requirements for that region. In general, adopt the strictest requirements from a region for your entire reporting. What works in the EU will likely work everywhere, so most practitioners will try to be EU compliant.

Step 5: Establish Targets and a Baseline

Using guidance from your chosen frameworks, determine your baselines for the key metrics. Then, using guidance from the frameworks (GRI & UNGC), as well as public CSR and ESG reports from competitors, identify your target. Use the Science Based Targets (SBTi) to set ambitious targets.

Step 6: Align Executive and Board Compensation & Evaluation with ESG Targets

This is likely your hardest task and it may take a long time. However, use the growing trend of executives tying their compensation to ESG targets to get your company’s leadership to tie their evaluation and compensation to ESG targets. This should be in place for the Board, Chief positions, and all senior level leaders that report to C-level positions. The Enacting Purpose Initiative provides a very helpful framework here for aligning Board members. Competent Boards also has a certificate course for ESG Board Members.

Step 7: Integrate ESG Reporting and Achievement Across the Business

Using your Executive Sponsor and ESG team, find the business units that have the most authority over your metrics, and work to build alignment with them to capture needed data. From there, serve as a business partner to help them achieve targets. (Need more guidance? Check out our complete guide to intrapreneurship.)

Step 8: Build Systems to Automate Data Capture & Reporting

Once you know where and how to get the data, research the right tool (from the suggestions above) to help you do this in real-time.

Step 9: Get Audited and Improve Processes

With systems in place, partner with a verification firm that can audit your policies, procedures, and data, and then use their recommendations to improve. This will likely need some legal support from your side – here is a useful resource of Dos and Don'ts from Covington on voluntary ESG disclosure.

Step 10: Communicate Progress by Creating Real-Time Reports

Partner with PR, Marketing, Branding, Sales, and HR teams to identify how your captured metrics can produce benefits for others across the business. Then share with them key achievements to communicate your progress. In addition, make your data, targets, and progress as visible and transparent as possible to employees, customers, partners, investors, and all stakeholders.

In addition, use guidance from the International (IR) Reporting Framework to get ESG metrics listed in all other corporate and financial reports.

Step 11: Compare and Compete

Submit your data to evaluation bodies, like the DJSI and CDP, for verification and recognition. If investors are an important audience, also submit to CSRHub, GlobeScan, SustainAlytics, MSCI, etc. to see how you compare to others, and compete to be better.

Step 12: Influence and Lead Change

Alternatively, you could call this step “sell”. With the data in hand, work across your organization to highlight ESG wins, and also put pressure on those not prioritizing ESG to join your efforts.

Here are a few resources to find ongoing guidance on ESG reporting:

• GreenBiz (and its state of the industry report)
• CSR Hub
• Enacting Purpose Initiative
• Tim Mohin, former CEO of the GRI
• Resiliti ESG & Ethical Leadership Summit 2021
• Climate & Capital Media

Looking for additional support?

There are a lot of places you can go to find support, but don’t get too captivated by fancy tools and visualizations. You need real strategy support if you want to make a meaningful impact, and for that you might consider hiring a consultant.

There are also full service firms like Sustainable Business Consulting, Whole Works Simulations, Flag, and female-led firm Impact Savvy. We also recommend ongoing learning and networking with ESG professionals, which you can do by taking courses at places like the Boston College Center for Corporate Citizenship.

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Learn more about ESG Reporting

Express interest in our Certificate Course: What is ESG and How to Measure It.