Can we consider ESG reports as a replacement for real sustainability?

ESG reporting means revealing environmental, social and corporate governance data. The purpose of ESG Reports is to throw focus on a company’s ESG activities and improving investor transparency while inspiring other organizations to do the same.

Of late, corporate leaders are facing conflicting signals with regard to environmental, social, and governance reporting, which has generated a counterattack against ESG investing.

There is a growing consensus that ESG issues are material to corporate resiliency and competitiveness today. In fact, our research on the return on sustainability investment (ROSI), has demonstrated that embedding sustainability core to business strategy can create a competitive moat for business leaders by driving operational efficiency, innovation, employee engagement, supply-chain resilience, risk mitigation, improved sales, and other strategic business benefits.

However, every company’s strategic planning and work plans are different, and therefore, we can suggest some useful tools to embed sustainability for competitive advantage.

The first thing is to identify material ESG issues. For this the companies can have a look at existing standards, such as those from the Sustainability Accounting Standards Board (SASB) or the Global Reporting Initiative (GRI) for preliminary insights. In the case of consumer-packaged goods (CPG) industry the business leaders can consider insights from critical stakeholders including employees, investors, customers, regulators and civil society for identifying priorities.

Secondly, the companies can undertake analysis using ESG lens and subsequently, they can do Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis before taking further steps. The Political, Economic, Social, Technological, Legal, and Environmental (PESTLE) analysis too can help arriving at a right decision. The business leaders can prudent decisions based on the changing legal framework regarding greenhouse gas emissions which can affect their business.

Thirdly, the ESG goals and strategies can help core business strategy in understanding the risks and opportunities based on key performance indicators.

Fourthly, building a governance structure focused on ESG is vital for successful transformational process. Sustainability is transformational and governance, and incentives must be aligned to be successful.

Fifthly, it is vital to understand and track the return on sustainability investment (ROSI).

B2C brands with sustainable offerings will be rewarded by consumers, and B2B brands can help companies deliver sustainable goods and services. Working with IRI, a market research firm that collects all bar-code data for consumer-packaged goods (CPG) sales found that sustainability marketed products delivered 32% of the growth in CPG.

Companies who want to win in their markets will be more likely to realize that dream if they embed sustainability core to business strategy, manage implementation and ESG KPIs well, implement good blockchain technologies and track the returns on their sustainability investment.