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BDO’s guide to delivering an ESG report

27 September 2022

Organisations are increasingly seeing the need to develop ESG reports to meet the expectations of their stakeholders and the public.

BDO in Australia notes the importance of an ESG report to demonstrate a company’s commitment to sustainability to its stakeholders. The organisation calls on companies to consider the opportunities that come with delivering an ESG report. Or more concerningly, risk having their own ‘Kodak moment’ if they choose to not make the appropriate commitments and investments to ongoing sustainability. But pulling together a sustainability report is no mean feat, so here’s a brief guide to help clear this critical hurdle in your business:

Where to report sustainability information?

Organisations can choose how and where to deliver an ESG report. Not surprisingly, the days of printed, glossy brochures are shifting, and most companies will conscientiously think of the carbon footprint and opt to publish sustainability reports digitally.

Many businesses provide the information in one of three ways:

As part of the audited financial statements
As part of the broader financial report, like the operating and financial report (OFR)
As an independent sustainability report outside the financial report.

Each of these options has its own pros and cons, so companies should carefully consider which option most effectively meets their needs, now and into the future.

What content should a sustainability report include

What each organisation will include in a sustainability report differs, just as every business is different. Even within an industry, there are nuances in business maturity, culture, mission, location, customer base, supplier relationships and technology that impact the sustainability landscape. However, we see that most reports include initiatives that could fall into the three buckets of environment, social and governance matters.

When considering what should be included in a sustainability report, it is crucial to ask stakeholders what is important to them and asking stakeholders to rank issues in order of importance can provide valuable insight. Recognising that not all stakeholders will have the same influence over your sustainability journey, the intersection where the identified issues overlap can help to guide what goes into the report. You can request they rank what is important - which also enables you to gain valuable insight for structuring your report.

Alternately, pulling all this information into a diagram can create a powerful visual to reveal the importance of each issue to the business. A graph like this can provides direction on which matters are of the highest importance for a sustainability strategy, and therefore the report.

What format should a sustainability report take?

While there is some latitude on how to format the information included in a sustainability report, there are frameworks to follow, with many overlapping with accounting standards:

The International Sustainability Standards Board (ISSB)
The United Nations’ Sustainable Development Goals
The World Economic Forum's Four Pillars
The Task Force on Climate-Related Financial Disclosures
Global Reporting Initiative Standards.

Organisations should use the framework most relevant to their stakeholders and business. However, it’s good to avoid the pitfalls of vague and nonspecific statements by marrying sustainability goals with transparent and measurable plans and aligned to the company strategy.

BDO typically sees sustainability reports:

Review progress made in the previous period, including qualitative metrics and quantitative commentary, and
Make sustainability commitments for the coming period
Include case studies and examples of initiatives that help to bring their sustainability story to life.

Who should be involved in sustainability reporting?

Producing a sustainability report includes data and process owners in several departments, communications specialists, stakeholders, and the executive leadership team. They require information around relevant issues like workplace culture and diversity from HR. For an organisation’s environmental impacts, data will be required from several areas such as IT, operations and the procurement team. In all of these departments, it’s useful to have an ESG champion or champions who are responsible for driving these initiatives and the data collection. Naturally, your marketing team will own the creation and distribution of the report.

Ultimately, for genuine progress and success in this space, the sustainability strategy and reporting process must be supported and led by senior management and the board.

Takeaways for delivering an ESG report stakeholders will appreciate

Include the ESG report with your company’s annual financials to ensure the information is verifiable and accurate.
Align your report closely with your business.
Provide quantitative and qualitative information, backed up by a case study.

Source: BDO Australia