The noise around ESG seems to be rising to a crescendo in anticipation of the next development. In particular, the recently announced International Sustainability Standards Board (ISSB) reflects the latest in a long line of measures aimed at improving ESG reporting.

Movements towards standardisation, comparability and greater trust are expected to bring with them many benefits, although simultaneously businesses are dealing with added pressure from regulators, standards boards and investors.

There’s a lack of clarity around the future ESG expectations that might lie ahead. But despite ongoing uncertainty, there are steps businesses can take to streamline processes and to better prepare for incoming stakeholder and shareholder expectations.

Scrutinise materiality assessment practices

Materiality assessments can be a sticking point in the early stages of the ESG reporting process. Due to the ever-evolving nature of ESG reporting, these are becoming increasingly difficult to conduct. Changing deadlines means that it’s no longer possible to wait until a specific point of the year to assess what is considered material to stakeholders.

Businesses should think about developing new perspectives and approaches to completing materiality assessments, as well as the processes that surround them. It may seem a gargantuan task and there may be internal reluctance to make changes. However, time spent building up a materiality matrix, identifying key material areas for internal and external attention and ensuring clean, accurate data is only wasted if the process isn’t robust.

A proper assessment should take time and thought, where businesses assess what they consider material – financially or otherwise – and which metrics are best suited to track, measure and report. Using the right technology will enable businesses to streamline such processes and help demonstrate how they are meeting expectations and demands. For example, utilising connectors and services that simplify and automate data collection, reporting and reviews.

The key is to stay committed to regularly reassessing materiality as regulations, frameworks and stakeholders’ demands evolve. Then, you should ensure that the right tools are in place for teams to efficiently meet reporting expectations. Outlining goals and using research to inform materiality assessments sets a business up for success.

Easy access to ESG data

A lot of effort goes into gathering a business’s ESG data. To provide a clear picture for stakeholders and shareholders, this data is necessary, and it needs to be easily accessible. Although the Corporate Sustainability Reporting Directive (CSRD) will enforce the use of Inline XBRL for sustainability data — producing machine-readable and more easily discoverable information — it may not be best to leave everything buried in a PDF.

Investors tend to use artificial intelligence (AI) to sift through websites for ESG data which informs their ongoing strategies. If this data is not visible, or if it cannot be located from a webpage, then it’s easy for a company’s ESG efforts to either be unnoticed, or worse negated by a lack of communication. Businesses should not hesitate to position their results front and centre, making it easy for potential investors to view and assess.

Agility through flexibility

Seemingly indeterminate expectations from internal and external stakeholders can add complexity to the process. For example, one investor could demand for a business’s portfolio to report on its scope 1, 2 and 3 carbon emissions. Other investors may make completely different demands. So, whatever approach is chosen, it needs to be underpinned by agility.

For those working on an integrated report, it is critical to maintain a dialogue with key investors and ensure that their perspectives are understood. Businesses must gain a clear understanding of what they need to build stronger relationships with investors. With those elements fulfilled, businesses will be able to meet investor demands while maintaining compliance with regulatory standards – but agility will be key to following through.

All businesses need to demonstrate how they have put regulatory frameworks in place and incorporated insights on what is valuable to investors. The alternative approach is to assume a report can simply be filled in one way and then miraculously come out comparable to other reports, which is never the case.

Without the flexibility to adapt reports accordingly, businesses are unable to differentiate themselves from the competition or demonstrate how they are a leader in their sectors. With technology at the helm, maintaining flexibility within the standards and tools companies use is much more attainable. This will be instrumental in fostering an agile environment that builds trust through clear illustrations of the organisation’s ESG achievements.

Meeting the needs of today with long-term solutions

The creation of consistent global standards such as the ISSB will significantly reduce cross-framework mapping, which will ease some of the challenges associated with reporting processes. However, there is no such thing as an ‘easy win’ with ESG reporting, so the task remains a challenging one.

It can be very tempting to focus on fixed isolated problems within the reporting process. In other words, people try to solve the first painful thing that’s really standing out. This is not a helpful approach. Instead, it’s important to consider the entire process, as fixing individual incidents does not necessarily contribute to a more agile, longer-term solution.

Do what you can today before tomorrow arrives

Further change is all but inevitable. Businesses are aware that they need to think beyond existing and proposed ESG mandates. As such, they need technology that can not only enable them to embed trust, but to continue their efforts within a future-proofed environment.

Businesses need to adapt and develop the best approach to meeting both stakeholder demands as well as current and future standards. By providing easily accessible ESG data, fostering an agile environment and ensuring the entire reporting process is being considered from top to bottom, businesses will have a much better chance of keeping up with changing regulatory needs.

About the author

Andromeda Wood is vice president of regulatory strategy at Workiva.

She was previously a senior technical manager for the IFRS Foundation and served as a technical expert at global audit and consulting firm Ernst & Young.