10 Steps to Create your ESG Reporting Strategy

Why Develop an ESG Reporting Strategy?

An ESG reporting strategy is crucial due to the complexity and scope of current and emerging standards such as the CSRD, EU Taxonomy, and SFDR. These frameworks require the collection and integration of thousands of data points and the involvement of numerous stakeholders, both internal and external. Without a clear strategy, the process can become overwhelming and fragmented.

A well-defined strategy provides guidance, ensuring that organisations know precisely where they are heading. This clarity helps set priorities, align efforts, and maintain consistency across reporting. A robust ESG reporting strategy ultimately enhances transparency, accountability, and stakeholder trust, driving sustainable business practices and long-term value creation.

Characteristics of a Good ESG Reporting Strategy

Aligned with Business Objectives

A solid ESG reporting strategy should align with the company's overall business and ESG objectives, ensuring that the company's sustainability efforts are integrated into its core strategic goals.

For example, if your organisation aims to reduce Greenhouse Gas (GHG) emissions by 30% within three years, ESG frameworks such as CSRD and EU Taxonomy provide valuable insights and tools to identify and act on low-hanging fruits. By leveraging these reports, companies can pinpoint specific areas for improvement, streamline their sustainability initiatives, and achieve their emissions reduction targets more efficiently.

Aligning ESG reporting with business objectives ensures that sustainability metrics are considered alongside financial performance, enhancing overall strategic planning. This integration helps prioritise initiatives that offer both environmental and economic benefits, fostering a culture of sustainability within the organisation. Ultimately, an ESG reporting strategy aligned with business objectives drives meaningful progress and contributes to long-term value creation for the company.

What if your organisation does not have any ESG objectives yet?
Conducting the Double Materiality Assessment (DMA), which is the first step of the CSRD, involves evaluating the Impacts, Risks, and Opportunities (IROs) of your organisation. This process, along with generating your EU Taxonomy report, effectively highlights the business areas requiring attention. These standards provide a solid foundation for identifying the ESG targets that your organisation should prioritise.

Robust Governance and Accountability

An effective ESG reporting strategy serves as a compass, including a clear timeline, milestones, and designated owners. This structure ensures that all stakeholders understand their roles and responsibilities, promoting accountability. By setting defined checkpoints and responsibilities, the strategy maintains progress and clarity throughout the reporting process.

Additionally, securing support from management is crucial. If the board or management does not actively engage with this issue, it is unlikely that ESG reporting will be a priority for the rest of the organisation. Given that the work related to the CSRD/EU Taxonomy must be completed within a specified timeframe, making the management accountable will help drive progress. Consequently, keeping the board or management informed throughout the different stages, will significantly improve stakeholder engagement.

Realistic and Feasible

Reporting on standards such as the CSRD and EU Taxonomy goes beyond merely populating a report. It involves months of identifying the right information, engaging relevant stakeholders, addressing process and data gaps, and improving data quality.

Significant time can be lost without realistic milestones, scheduled alignment meetings, and dedicated data collection periods, representing an important risk particularly since these frameworks come with strict deadlines. Therefore, a good ESG reporting strategy must account for all these factors, establishing a realistic and feasible timeline to build a solid foundation for future reporting.

How to Create Your ESG Reporting Strategy?

Although every company has unique characteristics and industry-specific requirements, here are ten common key steps to create a robust ESG reporting strategy:

Identify Relevant Reporting Frameworks
Define your ESG Reporting Goals
Assess your ESG Maturity
Plan your Internal and External Communications
Create your ESG Reporting Team
Assess the Need for External Assistance
Plan your ESG Data Management
Set up a Budget
Summarise Everything in a Roadmap
Learn and Refine the ESG Reporting Strategy

Let’s explore them now!

1. Identify Relevant Reporting Frameworks

The first step should always be to conduct preliminary research to identify the sustainability reporting frameworks that might apply to your organisation and roughly outline the various data categories that will be included. The rest of your strategy will greatly differ depending on the number of ESG standards to comply with and the scope of information to report, including specific reporting deadlines and whether it should cover other subsidiaries.

For non-financial organisations operating in Europe, the primary standard to verify is the CSRD. If a company falls under the CSRD reporting scope, it will also have to report under the EU Taxonomy framework. Financial institutions, on the other hand, need to determine their eligibility under the SFDR.

2. Define your ESG Reporting Goals

Once you have an idea of what regulatory framework may apply to your company, establish a clear set of objectives for your ESG reporting in alignment with the organisation's mission and values.

ESG reporting can address several issues:

Ensuring regulatory compliance
Guiding the company’s ESG strategy and performance
Serving as a basis for performance evaluation by investors and banks, notably for loans
Communicating sustainability goals and achievements to customers, communities and other affected stakeholders
Serving as a basis for transparency towards NGOs who may scrutinise reports to identify greenwashing

Setting clear goals will streamline team efforts and enhance the effectiveness and impact of your ESG reporting.

3. Plan your Internal and External Communications

In addition to the overall goals of your ESG reporting strategy, it is important to determine what will be communicated both internally and externally, and how this will be conducted.

Internally, clear communication ensures that all stakeholders, including employees, management, and board members, understand the company's ESG goals, data collection processes, and reporting obligations. Regular updates and training sessions can help embed ESG principles into the organisational culture, fostering a sense of ownership and accountability.

Externally, effective communication with investors, customers, regulators, and the public is essential for building trust and transparency. Integrating the final communication channels into the ESG reporting strategy—such as annual reports, press releases, social media, and the company website—ensures that data collection is aligned with the intended outcomes, making the final report more effective and coherent.

For instance, if diversity is a key focus for the company, the data collected on this aspect should be meticulously documented and organised in a dedicated table or document. This approach allows the PR and marketing teams to easily access and utilise the information, contributing to a well-structured and impactful final report.

4. Assess your ESG Maturity

Now that you have identified the key pillars of your ESG reporting strategy, it is time to concretely address the reporting needs of your organisation. Start by assessing your organisation’s ESG maturity.

This step is an initial evaluation; there is no need to delve into the details of each data point to report yet. Instead, focus on a general assessment of what work has already been done and what still needs to be accomplished.

For example, if your company has published any sustainability reports in the past, you can use these as starting points. This will allow you to build your strategy on pre-existing processes and roadmaps, comparing predictions with reality to save valuable time.

5. Create your ESG Reporting Team

Now is the time to create a dedicated ESG reporting team leveraging your internal resources. Start by assessing which departments need to be involved and the human resources necessary to achieve compliance. Identify the key roles required within the reporting team and cross-reference these with the profiles available at your company.

ESG reporting team: key departments to involve

Note that it may be necessary to open new positions to fill any gaps for specific roles, such as ESG, legal, or tech profiles.

6. Assess the Need for External Assistance

Creating your ESG reporting team is also the perfect opportunity to assess the need to outsource parts of the project that require specific expertise. For instance, if your internal team lacks experience in ESG data management, engaging an external consultant with specialised skills can be invaluable. Such a consultant can implement or guide the establishment of an automated reporting tool, bringing in technical skills that your team may lack.

Engaging external assistance to kick-start the ESG compliance journey can be particularly advantageous, as it will accelerate the project's progress. Additionally, advisory services like Greenomy not only streamline the process but also train your team, ensuring your organisation achieves reporting autonomy for years to come.

Ultimately, whether driven by resource constraints or a focus on cost-effectiveness, leveraging external expertise with practical experience can significantly enhance both efficiency and accuracy.

7. Plan your ESG Data Management

Managing the volume and diversity of ESG data poses one of the biggest challenges of ESG reporting. Before data collection begins, plan how to gather, verify, and report ESG metrics. Start by reviewing the types of information you need to report and consider the processes and resources required for data collection and storage.

The CSRD and EU Taxonomy require information about both financial and non-financial impacts, divided into quantitative and qualitative metrics. Examples of ESG data points include

Environmental: carbon emissions, water usage, and energy consumption
Social: workforce diversity, employee wellbeing, and community engagement
Governance: board composition, business ethics, and compliance

To incorporate this extensive data, your organisation may need specialised IT systems. Typically, data collection can be accomplished using spreadsheets or an ESG reporting tool. While spreadsheets are readily available, they have limitations in capacity and can cause integration issues when handling data from various sources. In contrast, an ESG reporting tool like Greenomy is designed to address these challenges and streamline the compliance process.

Greenomy helps centralise your raw data into an ESG Data Library, enabling self-service ESG reporting and dashboarding. This organised data storage ensures reporting accuracy in a shifting regulatory environment, allowing for customisable and fully automated data flows for efficient and auditable compliance. Discover more about Greenomy’s data integrations.

8. Set up a Budget

Another difficulty of devising a reporting strategy is estimating the right budget however, forecasting costs for ESG-related activities is essential for effective financial planning and resource allocation. This involves estimating the necessary resources and investments and adjusting based on the company’s financial capacity.

At Greenomy, working with clients of different sizes across a variety of industries, we have identified five direct cost categories that need to be taken into account when budgeting for the CSRD and EU Taxonomy. The 5 categories include:

Expenses related to data collection and management
Reporting software
Consulting fees
Audit & assurance
Training & capacity building.

In addition to these, keep in mind that indirect or company-specific costs may also arise and should be accounted for. Once an initial estimate is created, it is crucial to validate it with the executive board. Note that this process will likely involve several iterations and discussions before agreeing on a final budget.

9. Summarise Everything in a Roadmap

Finally, leveraging everything identified in the previous steps, develop a realistic roadmap incorporating key milestones and deadlines. This step is crucial to ensure consistent progress and the timely completion of all reporting requirements.

Although it may appear simple, lack of proper planning is often a major hurdle in generating an ESG report. Compliance frequently adds to stakeholders' primary responsibilities, making regular objectives and follow-ups essential. Therefore, developing a roadmap that outlines periods for brainstorming, data collection, and alignment, along with pre-scheduled time slots for each activity, can significantly reduce the burden on all stakeholders and streamline the reporting process.

Keep in mind that roadmaps and priorities will differ from one company to another, mainly based on the sector, size & geographical implementation.

For example, a company in the construction or transport industry that has not calculated its Scope 3 GHG emissions yet will have to make this a priority as they are highly emitting sectors. On the other hand, a company in the defense & security sector will need to prioritise governance and IT security because of the nature of their work.

10. Learn and Refine the ESG Reporting Strategy

The steps outlined in this article are not linear; you will likely need to revisit earlier steps and refine your strategy. For instance, the list of resources you identified might exceed the budget allocated by the board, requiring you to find alternative solutions. Ultimately, this ESG reporting strategy is meant to be a dynamic document, subject to adjustments, and serving as a guiding framework throughout the process.

Additionally, as this is the first year of reporting, it is natural to expect some mistakes along the way. This underscores the importance of thorough documentation and having a robust strategy in place. By meticulously recording each step and outcome, you create a foundation that can be evaluated and refined in the upcoming years, ensuring continuous improvement year after year.

A Robust ESG Reporting Strategy as “North Star”

Developing a robust ESG reporting strategy is essential for companies to meet regulatory requirements and achieve sustainable growth. By proactively addressing these ten steps and incorporating them into a comprehensive roadmap, organisations can alleviate the reporting burden and enhance the accuracy of their ESG reports.

Solutions such as Greenomy streamline the ESG reporting process at every step. From the start, our teams of ESG data and sustainability experts assess your organisation's ESG maturity and help you set up an action plan. As you progress, Greenomy's flexible solution efficiently manages extensive data and ensures compliance with evolving regulatory requirements, ultimately facilitating the generation of your ESG report. Book a call for further details.