The final section of CohnReznick’s ESG Maturity Model, Data and reporting, emphasizes the actual collection, reporting on, and sharing of the data, once key infrastructure is in place. 

ESG data must be accurate, reliable, complete, and accessible in order to be useful. It underpins informed decision-making, enabling companies to identify areas for improvement and develop effective sustainability strategies. 

Critically, robust data and transparent reporting help build trust with investors, regulators, customers, and other stakeholders. They showcase the organization’s commitment to ESG principles, which also helps attract the kind of investors who are seeking sustainability investments – thus boosting the company’s access to growth capital.  

The auditability and traceability of ESG data also comes into play here. Regulators, investors, and stakeholders want reasonable assurance that the numbers they’re looking at are accurate and reliable. To meet this requirement, companies must be able to validate their data sources, and trace any calculations back to the original source data. 

The final step, reporting, is how companies are communicating all this information to their stakeholders: What they’re posting to their websites, for example, or what they’re including in their financial disclosures.

Novices tend to lack defined key performance indicators (KPIs), reporting standards, or tools that they can use to share ESG progress. They track metrics sporadically, as opposed to having formalized frameworks in place. Novices generally aren’t doing much reporting as it relates to ESG; and on the whole, they aren’t sharing ESG metrics with their shareholders at any predictable frequency, nor are they sharing their “improvement” metrics. They may be doing the minimum required by regulators and/or investors, on an “as-needed” basis.

At the Supporter stage, companies are collecting a wide range of ESG data that’s auditable, consistent, and accurate. They comply with and likely are aligned to various regulatory standards or frameworks, but have also moved beyond basic ESG compliance and are starting to take a more proactive approach, versus just responding to requests for data and reports. Supporter companies have formal reporting processes in place, and generally have begun to use some type of distinct ESG reporting instead of just using a website to report their data. However, ESG data isn’t leveraged in strategic planning, budgeting, or decision-making, and can often be a task-driven approach versus a process-oriented approach.

Gamechangers set the standard for ESG data collection and reporting. They’re the ones who develop the best practices in data management, and they use analytics to dig deeper. They provide year-over-year comparisons of ESG progress, and develop and share future ESG roadmaps. In most cases, these presentations are integrated into – and presented with a look and feel similar to – any broader operational and financial reports, versus being relegated as “stand-alone” ESG reports. Most of the Gamechanger’s ESG disclosures are completed on a regular basis; for example, they would have put out an ESG report aligned to their ESG frameworks with data every year for the past five years. Finally, the Gamechanger’s ESG data is always verified to make sure that it’s both accountable and auditable.

Novice stage: Starting the conversation

Transparent data reporting is an effective way to demonstrate commitment to ESG principles, allowing investors, customers, and regulators to hold companies accountable. Data also helps organizations track their progress toward ESG goals, identify potential areas of improvement, and compare their own performance against industry standards.

Knowing this, Novices can accelerate their ESG progress by beginning to formally document their ESG efforts and develop an agreed-upon communication strategy related to ESG. Even if they don’t issue a formal ESG report, Novices can begin by sharing materiality assessment reports – analyses of what ESG topics are most important to their stakeholders – or even simply reporting ESG-related initiatives on their website.

Novices can also begin aligning their data collection to frameworks like the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB). GRI has three sets of disclosures – universal reporting, sector reporting, and material reporting – whereas SASB focuses on industry-specific sustainability issues most relevant to investor decision-making in 77 sectors.

As they progress toward the Supporter stage, Novices that have historically shied away from reporting quantitative data will want to rethink that approach. While they can continue with qualitative communications, such as stories around their corporate volunteerism, donations, and philanthropy efforts, they should also pursue quantitative metrics and report on efforts such as Scope 1 and Scope 2 carbon emissions or diversity, equity, and inclusion (DEI) data.

Supporter stage: Gaining credibility and trust

At the Supporter stage, organizations likely already have goals in place related to environmental factors such as waste, water, and energy management, and social factors like employee engagement. With this foundation in place, Supporters can now begin to gather more data and metrics to report against. They can offer insights and roadmaps into where they’re headed, and the plans they’ve put in place for hitting specific KPIs and ESG targets.

For example, Supporters can begin defining and measuring the KPIs that align with their ESG objectives and broader industry goals. They should set KPIs, develop plans for reaching those targets, and determine the best approach for communicating those efforts to their stakeholders. Those reports should be shared on a regular communication cycle, which can happen quarterly or annually.

The goal here is to set a regular cadence for reporting, versus sending out sporadic communications on an ad hoc basis. This paints the full picture and really demonstrates that the organization is focused and committed to ESG. It also shows that ESG is not just the domain of one or two departments, but rather a holistic effort that’s been embedded and ingrained into the whole organization. Through this exercise, divisions of the business can begin to see how efforts could intersect toward ESG goals, though they may lack the governance processes to drive transformative change.

Gamechanger stage: More sophisticated reporting

Once they reach the Gamechanger stage, companies are using data and reporting to support their organizational efforts, drive progress, and demonstrate impact. They’re using data analysis to develop even more ambitious and achievable ESG goals; collecting and reporting on data that tracks progress toward these goals; and using dashboards to make the data more accessible to internal decision-makers. They are cognizant of the global landscape of reporting and prepared to provide streamlined information for all operations.

Next, Gamechangers should focus on getting their data assured, if they don’t already, and conducting internal audits to confirm that the data they’re reporting is both accurate and complete. They can also start integrating their ESG data with the organization’s overall performance data – taking ESG data out of its “silos” and integrating more of it into financial, operational, and/or performance reports – to attain a holistic view of exactly what’s happening on the ESG front and how it’s impacting the business as a whole.

If they’re not already doing so, Gamechangers should also be setting science-based targets for net-zero or emissions reduction targets. This in turn will require more quantitative reporting and a more rigorous infrastructure that should mimic any existing financial reporting processes.

Finally, at the Gamechanger level, the CFO or controller should be closely involved in ESG efforts, versus having the chief sustainability officer or investor relations/legal departments “double” as in-house ESG experts. As CFOs and controllers take on more ESG responsibility, these executives can help ensure that their ESG goals align with the organization’s financial strategy, maximize value creation, and support long-term financial sustainability.

Where do you stand on the ESG Maturity Model?

One of the best ways to kickstart or ramp up an ESG strategy is to figure out exactly where your company stands.

Our hope is that using our ESG Maturity Model and this article series, you’ll now be able to quickly determine where you stand, and the steps you can take to advance your ESG goals. Regardless of your current status, we’re here to help you figure out exactly what you must do to not only comply with evolving ESG regulations, but also turn ESG into a competitive advantage for your organization.

A proven, integrated ESG methodology

Whether you are taking the first steps on your ESG journey or your existing program needs structural transformation, CohnReznick can help. Using a proven, integrated methodology that combines our own ESG experience with industry insights, we will help you effectively advance your ESG initiative at each step of its lifecycle.

Our four-phase approach is built on value creation and impact throughout the journey, and includes:

• Phase 1: Assess ESG current state, identify ESG priorities
• Phase 2: Design ESG strategy, roadmap, and KPIs
• Phase 3: Implement ESG initiatives with governance, technology, and training
• Phase 4: Validate process and data and report progress against KPIs

With a 35-year track record in community investment and shaping governance strategy, CohnReznick tailors ESG programs to meet your specific requirements. Using a process rooted in advanced data analytics and exclusive primary research, we leverage a cross-functional team that delivers seamless execution and enables fast, integrated results for companies of all sizes and across all sectors.