How to Form a Strong Cross-Functional ESG Reporting Team: Steps, Roles & Responsibilities

As the Corporate Sustainability Reporting Directive (CSRD) and EU Taxonomy take root, companies are initiating their reporting strategy. A crucial aspect of this process is to create a strong cross-functional ESG reporting team to ensure efficiency in reaching seamless compliance.

Regardless of whether your organisation can afford a dedicated team solely focused on ESG reporting, assembling a diverse set of profiles and departments within your ESG reporting team is indispensable. But what specific profiles should compose your team? And how to proceed?

This article dives into what characterises a strong cross-functional ESG reporting team, provides you with a step-by-step guide to creating your team, and outlines the essential roles and responsibilities required for successful implementation.

Why the Need for a Cross-Functional ESG Reporting Team?

The CSRD and the EU Taxonomy are part of a regulatory package of sustainable finance legislation introduced by the European Union designed to standardise ESG reporting. The CSRD is an EU directive that mandates companies, banks, and insurance companies to disclose their sustainability information. On the other hand, the EU Taxonomy is a classification system that defines criteria for economic activities aligned with a net zero trajectory by 2050 and other environmental goals. It aims to direct investments to activities needed for the transition to a green economy.

Collectively, these standards require the reporting of more than 3,000 data points encompassing diverse areas across the business. This comes from the fact that these frameworks introduce important concepts such as, on the EU Taxonomy side, the eligibility and alignment of economic activitie. On the CSRD side, notable new concepts are the European Sustainability Reporting Standards (ESRS), covering reporting on material environmental, social, and governance issues, such as climate change, biodiversity, and human rights. Double Materiality, which requires companies to report on sustainability risks affecting the company and the company's impact on society and the environment. Forward-looking information, such as targets and progress, to be included in reports. And mandatory assurance for all reported sustainability information, contributing to more reliable data and increased trust among stakeholders.

While the CSRD and EU Taxonomy are designed to provide investors with reliable, transparent, auditable, and comparable data to comprehend the sustainability impact of the companies in which they invest, they are still a challenge. Thus, a strong ESG reporting team is crucial to fulfil regulatory requirements and to provide adequate transparency, meet investor demands, manage risks, foster accountability and collaboration, and also attract investment and financing

Essential Characteristics of a Robust ESG Reporting Team

Despite the growing significance of ESG reporting, most organisations lack the additional resources to hire people to exclusively focus on Sustainability reporting. Whether there is at least one part-time employee dedicated to ESG reporting or not, successful compliance can only be reached if they are surrounded by a relevant team, equipped with well-defined roles and responsibilities.

But what criteria to consider when assembling this team? Here are the skills that a good ESG reporting team should collectively present.

Interdisciplinary Expertise

ESG covers a large array of topics, ranging from GHG emissions to gender equity. Building a robust team thus requires individuals from diverse backgrounds and departments, each contributing their own expertise. This collective input ensures a thorough understanding of the various facets inherent in ESG reporting.

Data Proficiency and Analytical Skills

Effective compliance with frameworks like the CSRD and EU Taxonomy heavily relies on comprehensive data collection and integration. With thousands of data points to report, the team must possess sound data management capabilities, and be able to translate intricate information into actionable insights that can be seamlessly incorporated into a report.

Communication and Transparency

In addition to the essential requirement for close collaboration, effective communication skills are essential to convey complex ESG information in a clear, concise, and compelling manner. The team must be able to craft reports that are easily understandable by stakeholders, balancing technical details with accessibility. Additionally, a commitment to transparency is essential for an ESG reporting team, prioritising accurate and honest reporting, and highlighting both achievements and improvement opportunities.

Steps to Create a Strong and Efficient ESG Reporting Team

Now that we know the importance of a cohesive team and the key characteristics of its members, we can delve into the steps to form this group. Typically, the management of this team falls on an ESG Reporting Lead, or a designated title, prior to the formal establishment of the team structure. This individual holds responsibility for overseeing the following steps.

1. Assess your ESG goals: Before assembling a team, your organisation should seek to establish general goals such as growing EU Taxonomy alignment year on year, lowering GHG emissions, or improving CSRD compliance (through any or all of the KPIs). Doing so is a matter of identifying key priorities for the company. Note that the organisation’s internal priorities are important but regulatory compliance may need to come first.
2. Define the needs for reaching these goals: Define the time and resources that you need in order to achieve these goals. This includes designing a timeline with realistic time horizons for each goal, evaluating if there are tools that could speed up the tasks at hand or help the company organise its data and any additional resource that the company could provide to allow you to complete the reporting.
3. Define the roles & responsibilities for the ESG projects: For each identified ESG goal and need, draw the roles and responsibilities and link the company profile that is the closest.
4. Identify the potential candidates: At this stage, identify internal stakeholders who match previously described roles and responsibilities. Present the map of the cross-ESG team to the board to ensure alignment and create empowerment amongst the team.
5. Train qualified candidates: Train the new members of the cross-functional ESG team, making sure to cover all the relevant skills they will need. Comprehensive ESG reporting training should include an onboarding on your newly-defined goals, knowledge about the CSRD and EU Taxonomy, Data Management & Analytics skills, as well as soft skills improving their team and communication competencies.
6. Provide ongoing support and guidance: As ESG regulations constantly evolve, so will your reporting team. Ensure that relevant training, support, and guidance are always available for your employees.
   

Building Your ESG Reporting Team: Key Departments, Roles, and Responsibilities to Consider

In addition to a person dedicated specifically to reporting who collects and processes data from the various departments, regardless of the size of the ESG reporting team, the following departments should be involved in the CSRD/EU Taxonomy reporting process:

Corporate reporting

The role of the corporate reporting department in ESG reporting includes preparing and publishing reports that shed light on the company's activities, improving investor transparency, and inspiring other organisations to do the same. This department is responsible for disclosing information covering the organisation's operations and risks in the areas of environmental stewardship, social impact, and corporate governance.

Additionally, the corporate reporting department is involved in upholding ESG initiatives within the organisation and plays a key role in adapting to the reallocation of resources, financial reporting, and data that come with ESG disclosures.

Sustainability

If the reporting team is not found directly within it, the sustainability department is a necessary ally of the reporting team. This department is responsible for overseeing and managing the organisation's sustainability initiatives and ensuring that the company's ESG activities are accurately reported.

The role of the sustainability department is diverse and varies across companies. In an ideal situation, its role in ESG reporting would include: collecting and analysing data related to the ESG aspects of the organisation's operations; setting ESG goals and targets, which are then reported to stakeholders and the public; engaging with stakeholders to understand their ESG-related concerns and interests, which informs the content of the ESG reports; It ensures that the organisation complies with ESG-related regulations and standards, and identifies and manages ESG-related risks; and most importantly, ensuring that ESG data is accurate, comprehensive, and aligned with relevant reporting standards and frameworks, for the preparation of ESG reports.

Internal Audit

The internal audit department provides support by assessing the organisation's ESG maturity, as well as ensuring robust governance structure and oversight. Internal auditors are also in charge of validating the ESG risk management goals, performing risk assessments and evaluating the ESG risk management framework. Additionally, they evaluate the design and operating effectiveness of control activities and review both ESG financial and non-financial reporting metrics. Collaboration with legal and compliance departments is routine for internal auditors in ensuring ESG reporting aligns with regulations.

Supply Chain Management

The CSRD explicitly calls for upstream and downstream information to be included when disclosing information about the company’s operations, partnerships, policies, strategies, and more. Thus, the supply chain management department affects how a company can gather, calculate, and disclose data related to GHG emissions, waste, affected communities, adequate wages, business relations, regulatory compliance with external legislation, etc.

In other words, now that legislation like the CSRD and EU Taxonomy are pushing to understand the impact of a company to an unprecedented extent, the supply chain management department is at the forefront of the ESG reporting process. This department is also responsible for ensuring that these ESG regulations are understood and implemented across the chain, which has a direct impact on the company and its reputation.

Legal and Compliance

This department is mainly responsible for ensuring that ESG disclosures in public statements, such as sustainability reports, press releases, marketing materials, and company websites, are accurate, consistent, and compliant with regulations. In addition, and specifically related to the CSRD and EU Taxonomy, the compliance department should take an inventory of all ESG disclosures, evaluate the disclosure controls and procedures, and develop mechanisms for evaluating and tracking the company’s ESG performance.

The legal department is positioned at the intersection of legal, compliance, and risk management, and it needs to lead in ensuring that ESG factors are not overlooked in businesses, making them answerable to the board and other key stakeholders.

Finance

Despite the volume of non-financial information required by the CSRD and the EU Taxonomy, both frameworks recognise the importance of financial information to either track or back the non-financial information disclosed. Similar to other departments, it is set to collect, organise, oversee, and disclose data handled primarily by the department but it also possesses an important advantage. The Finance department has existing experience in compiling and reporting information, reconciling figures, ensuring traceability between figures, and driving company strategy after analysing what different numbers present. These skills are not only fundamental in order to assess ESG performance but they are also key in developing an ESG strategy that abides by these regulatory frameworks in the long-term.

Human Resources

The Human Resources department plays a vital role in reporting by offering information on the “S” (Social) and the “G” (Governance) in the ESG aspect of the report, demonstrating the company's commitment to a diverse, respectful & ethical organisation. This includes data about the key characteristics of employees, training program efficacy, compensation structures, and initiatives promoting employee well-being.

Environment, Health, & Safety Department

The EHS department will provide critical information by providing data and reporting activities focused on factors impacting climate change, emissions, waste management, energy consumption, environmental incidents, employee safety, accident rates, policy, documentation, and compliance. EHS records a baseline for ESG-related programs, and EHS professionals are increasingly expected to share data with a new set of stakeholders, including Finance, HR, Legal, and Communications, involved in ESG reporting. This data ensures a comprehensive assessment of the company's environmental impact and its commitment to sustainability, as well as further linking the departments involved in the reporting process.

IT and Data Teams

Managing the data from all these departments can be tedious, which is why it is useful to involve the teams responsible for collecting and processing the information. Their role is pivotal in aggregating diverse data sources and ensuring the accuracy and completeness of sustainability metrics and key performance indicators. At Greenomy, we propose 100+ API connectors to facilitate seamless data integration, enabling companies to produce comprehensive and reliable CSRD and EU Taxonomy reports.

Other departments

• Marketing: The marketing team can provide valuable insights into sustainability-related marketing campaigns and communication strategies. This data aids in showcasing a company's commitment to sustainable practices, fostering transparency, and effectively engaging with stakeholders and the public in ESG reporting. The Marketing team also holds responsibility for maintaining honest and transparent communications, ensuring the organisation avoids any instances of greenwashing.
• Investor relations: They can align sustainability efforts with investor expectations, and showcase dedication to responsible investments. This involvement not only strengthens the financial dimension of ESG reporting but also reinforces transparency and accountability to shareholders
  

Note that while this list of stakeholders for your ESG reporting team may not be exhaustive and may vary based on your specific circumstances, fostering collaboration among these departments will help you achieve a more comprehensive and insightful report.

Challenges of Creating an ESG Reporting Team

There are several challenges that can arise around creating an ESG reporting team but three of them particularly stand out.

The first common difficulty is resource constraints as securing adequate budget and resources to establish and maintain the ESG reporting team can be a hurdle. This especially happens if there is a lack of understanding or prioritisation of ESG initiatives at the executive level. This leads to the second challenge, which is aligning the ESG goals and the broader business strategies. This is crucial to foster internal collaboration and ensure unified efforts.

Finally, continuous education and skill development are necessary due to the evolving nature of ESG reporting frameworks. Providing ongoing training opportunities for the team can be resource-intensive and require a lot of planning, yet it remains indispensable.

A Robust ESG Reporting Team: the Cornerstone of a Successful CSRD/EU Taxonomy Reporting

This article emphasised that, to align with frameworks such as the CSRD and EU Taxonomy, organisations must cultivate cross-functional collaboration. This necessitates breaking down the silos between your different teams, each playing a vital role in the steps of the compliance journey. Only then can your organisation generate a thorough and informative report to use as a strategic opportunity to improve your overall sustainability.

At Greenomy, our mission is to help you reach that stage where all the necessary information lays at your fingertips to identify and implement impactful sustainability initiatives. Our solution streamlines the entire reporting process through AI-driven automations and step-by-step guides, while encouraging collaboration with an embedded task management system. Greenomy also offers supportive services including Advisory from ESG experts and team training with the Greenomy Academy for a seamless start on your reporting journey.

Learn more about Greenomy’s CSRD and EU Taxonomy solution.