ESG reporting is the process of reporting an organisation’s environmental, social and governance impact. This can be done voluntarily by any organisation. In most countries, it is now mandatory for publicly listed larger organisations (usually measured by market cap) to declare their ESG report.
Environmental, Social and Governance are the factors used by any socially conscious customer or an investor to screen the organisation. For decades, the performance of businesses was measured using KPIs for financial parameters. Organisations that were able to grow profits every year were considered good companies. Now that more and more climate change-related incidents are having an impact on various value chains, these businesses are affected the most and now looking at non-financial parameters to make businesses more resilient. The environmental standards in ESG include the company’s usage of energy resources, policies on waste management, and its impact and efforts towards net-zero emission and climate change. Social criteria cover social relationships focusing on management and employee relationships. This includes human rights, worker’s rights, workplace policies, employee wellness and training, DEI (diversity, equity, and inclusivity), and wages. Governance criteria encapsulate issues and efforts involving decision-making, and corporate cultures of transparency, accountability, inclusivity, and compliance. This also includes the relationship with stakeholders, such as shareholders, investors, and customers.