How to improve ESG reporting

Alex Kotsopoulos, a partner in RSM Canada’s environmental, social and governance advisory practice, discussed the importance of taking a structured approach to ESG reporting and integration. What follows is a conversation that has been edited for brevity and clarity.

Q: How has the conversation surrounding ESG changed recently?

A: Companies of all shapes and sizes have been thinking about sustainability for a long time now. It is not a new topic. Companies fundamentally understand that they need to think about their stakeholders and the communities where they operate. What’s changed are the expectations of these companies and that they are being held accountable. That’s where rigorous ESG reporting comes in. Stakeholders are demanding that companies report on these factors in a much more structured way and think about ESG at an operational level across the organization.

Q: How can a company improve its ESG reporting?

A: It’s important to take a structured approach. To begin with, companies have to be thoughtful about materiality, which is another way of saying how a company’s operations are affecting their community in a material way. It can vary widely from company to company and industry to industry. So figuring out what is material to a specific company and what comprises a risk is a substantial hurdle to clear. The good news is that organizations like the Sustainable Accounting Standards Board provide some guidance on what is relevant to companies within specific industries.

Q: So that’s a start. Where do companies go from there?

A: First, companies need to build on top of what they are already doing. A lot of companies think they are starting from scratch when it comes to an ESG program. But often, they are not. They have been thinking about it already. A mining company, for example, already tracks the health and safety of its workers. So they can build on that and expand the scope of how they are reporting on other ways they are having an impact on their workers and communities.

The second piece lies in technology. Companies need to start thinking about this early in the process. Capturing ESG data doesn’t have to be a significant burden—if the right technology is in place. The right systems can collect lots of data from various sources, all of which can be automated. While putting these systems in place takes resources and effort, it’s important not to lose sight of the goal: to collect data that helps a company make better decisions.

Q: What do you say to a smaller firm that says it will cost too much?

A: ESG is a marathon, not a sprint. People realize this will take time. The expectations of smaller companies in terms of disclosure are a lot lower than they would be for a larger company. But it’s important to start somewhere. There are ways to design a program that fits the goals of companies of any size. It is all very possible.