How can businesses prepare for better sustainability reporting?

Everyone shares a responsibility in meeting Net Zero targets. For businesses, this means complying with emerging regulations around Environmental, Social, and Governance (ESG) reporting requirements.

In the UK, for instance, the Streamlined Energy and Carbon Reporting (SECR) framework mandates large organisations to include details of their energy consumption, greenhouse gas (GHG) emissions, and carbon footprint in their annual financial reports. Additionally, many more companies will soon need to align with the Corporate Sustainability Reporting Directive (CSRD) and Sustainability Disclosure Requirements (SDR), designed in part to combat issues like greenwashing.

The push for greater transparency is coming from various sources, including international governments, shareholders, and consumers. Failing to report accurately can have serious consequences – both financially and for a company’s reputation, as highlighted by Aldermore's Head of ESG & Sustainability in our latest webinar.

However, rather than seeing these changes as a challenge, businesses should embrace them as an opportunity. They offer the chance to gain better insights into supply chains, pinpoint areas for improvement, and enhance sustainability, ethics, and competitiveness.

People, processes, and reporting platforms

Effective compliance requires organisations to collect data across the business and its supply chain – a task that is often complex. This process frequently involves establishing an ESG reporting team that understands the necessary data points and their sources. Gathering this information can be particularly challenging when it comes to Scope 3 emissions, which depend on contributions from diverse sources.

This raises a fundamental question: where within the organisation should ESG responsibilities sit, and who will take the lead? Successful reporting hinges on having the right people and processes in place, as well as deciding which elements of an ESG reporting platform to manage internally and which to outsource.

Businesses can follow these seven practical steps to lay the groundwork:

1. Establish clear objectives
Set clear goals for measuring carbon emissions, ensuring alignment with regulatory requirements and commercial priorities. A high-level approach is crucial for tracking and reducing emissions effectively.

2. Define requirements and scope
Determine the data needed to calculate Scope 1, 2, and 3 emissions. This may include data from energy usage in offices and data centres, corporate travel, vehicles, and emissions linked to supply chains and financed activities.

3. Create an operating model and governance structure
Develop a process for calculating and reporting emissions and tracking progress on corrective measures. Establish governance structures with clearly defined roles and responsibilities across different business units.

4. Appoint the right team
Ensure the right team is in place, adequately trained, and motivated to undertake ESG reporting. It’s equally important to allocate sufficient funding for this process.

5. Take an incremental approach
Don't try to solve all issues at once. Focus on gradual improvements and adopt an iterative approach. Understand obligations and timelines to ensure that project goals align with critical regulatory targets.

6. Engage with industry peers
Encourage your reporting teams to share knowledge and experiences with others in similar roles. Learning from peers can foster better practices and improve reporting processes.

7. Address skills or capability gaps
Identify gaps in your team’s expertise and consider bringing in external consultants or technology partners to bolster capabilities.

The path to better reporting

As the journey toward Net Zero progresses, ESG reporting will become increasingly vital for businesses. Companies should start preparing now, treating it as a strategic priority.

There are undoubtedly challenges and pain points to address when creating an ESG reporting framework. With no universal standards in place, businesses must define what good reporting looks like for their unique operations.

No matter the approach, cross-departmental collaboration is crucial, as ESG reporting can influence and benefit every area of an organisation. Leaders tasked with ESG responsibilities require proper training and resources, and where internal expertise is lacking, external partnerships can provide the necessary support.

Ultimately, ESG reporting should not be seen as a burden but as an opportunity to review and enhance internal and partner processes. It has the potential to drive positive change for the business, its stakeholders, and, most importantly, the planet. Download our whitepaper to understand what your organisation needs to know to prepare for a new era of sustainability reporting - and how to build a strategy to get there.