ESG Transition: Reporting is central to trust and sends the message ‘we are taking this for real!’
Developing a 12-month reporting strategy is now critical for both businesses and investors. Before the recent wave of ESG reporting, companies have been facing greater scrutiny and demand for information.
However, stakeholders want to see a clear plan around how a business is factoring in climate risk and how a company will decarbonise level one, two, and three carbon. The C-suite will need to be fluent on the points and be able to deliver the ESG work as part of the more comprehensive company strategy.
The depth of data and quality is more important than ever. Consistency and having a credible narrative are the keys to success. While having a successful strategy for engagement is critical to getting the message across. Demonstrating the capital allocation and expenditure of the ESG transition is vital as it will impact the valuation of a business.
Financial reporting, building a prospectus, or developing an investor presentation are opportunities for companies to show how they are progressing on their strategy and the steps they are taking to respond to the ESG transition.
Successful reporting only operates if there is a well thought-through and developed central narrative. The narrative needs to engage with multiple audiences. It needs to provide precise data from financial results, future projections, TCFD and TNFD data showing the material change in carbon and natural capital.
Investors, regulators, and stakeholders want to see more detail from the board. Therefore, providing data and metrics is critical because if there are gaps, analysts will use their peer data and create a benchmark that may not be accurate. In addition, providing evidence that the company is compliant and responding to the government and market regulations de-risks a strategy and or investment.
The reporting cycle and having a compelling narrative are all about building trust. It shows that you understand and are cognoscente of current and future threats, that you have a journey plan, and that you are responding to the system change of ESG.
Overall, it is a way for a company to send a message saying, this is real. I understand my responsibilities, know the ESG transition, and take the critical steps to respond to planetary, social and market demands.
Originally published at https://www.themartelloadvisory.com on May 14, 2022.