1. Identify the intended audience(s) and relevant content to include in the report.

The core purpose of an ESG report is to communicate your organization’s ESG performance, goals, and initiatives to interested parties (stakeholders). So, the first part of creating a report is to establish who the stakeholders are.

Stakeholders can include (but aren’t limited to):

• Financial investors,
• Customers,
• Employees,
• Suppliers,
• Regulating authorities, and
• The communities in which the organization operates.

Once you identify who you’re reporting to, engage with stakeholders to determine the information that’s most helpful to them. Ask them:

• How they view your company’s ESG performance and any concerns they have,
• The ESG factors that matter most to them, and
• How they prefer to communicate with the company.

The New York Stock Exchange’s (NYSE’s) ESG guidance lists several ways organizations can engage stakeholders, including:

• Surveys (internal and external),
• Interviews,
• Regular investor outreach,
• Public relations and social media monitoring,
• Focus groups, and
• Town halls.

According to the NYSE’s ESG guidance, stakeholder input will help your organization determine the most helpful information to report and the most relevant ways to provide it to each type of stakeholder.

2. Determine which topics and metrics to report.

When choosing the topics to include in the report, focus on ESG factors that:

• Hold the most significance both for the company and stakeholders,
• Impact the company’s long-term operational and financial performance,
• Pose the most risks (including regulatory requirements), and
• Present the greatest opportunities.

Tip: Please note that this is an ongoing process. The content included in the ESG report will likely transform over time. Changes in operations, policies, regulations, and stakeholder demands can alter each topic’s significance (or applicability), so monitor them regularly to keep your organization’s ESG reports relevant.

In the Global Report Initiative Standards (a voluntary reporting framework), topics are included based solely on the significance of impact. With this approach, define the levels of significance and the corresponding thresholds that topics must meet for reporting. Then, rank ESG topics from highest to lowest priority based on the significance of each factor. Report on those topics that meet the reporting criteria.

Once you establish which ESG topics to cover, establish your targets (quantifiable numbers that reflect ESG goals) and the metrics that measure progress toward the targets.

Your organization must determine which metrics to use, such as:

• Amount of air emissions (environmental),
• Percentage of waste recycled (environmental),
• Energy usage (environmental),
• Employee turnover rate (social),
• Workplace injury rate (social),
• Percentage of materials from certified sources (social),
• Total number of board members (governance),
• Percentage of revenue paid in taxes (governance), and
• Yes/no to having an anti-corruption policy (governance).

The metrics reported should enable your organization and stakeholders to analyze them and determine:

• Progress toward the company’s ESG goals,
• The impact of ESG initiatives on social and financial performance,
• Compliance with applicable regulations, and
• Potential risks and/or opportunities related to ESG factors.

3. Coordinate across departments and functions to verify information accuracy.

Establish internal processes and controls for gathering the ESG metrics. Determine:

• What metrics are tracked per department,
• Who gathers the data for each department,
• How the metrics are tracked,
• Where the data is reported,
• When the data is reported, and
• How the results are verified (e.g., internal auditing).

Consider these best practices:

• Identify the data that each department must collect and how it must be gathered. Use repeatable data-gathering processes for consistency across departments.
• Assign data-gathering responsibilities to individuals within each department. Assign other individuals the responsibility to confirm the data’s accuracy (preferably from a different department for objectivity).
• Gather and maintain all ESG data on a centralized platform that allows your organization to keep all measurements in one place and compare results over time.
• Ensure data-gathering processes comply with any applicable regulations. If possible, leverage and integrate existing data-gathering processes required by regulations.

4. Develop the ESG report.

Begin by outlining the various sections of the report. If you’re utilizing an ESG framework, follow the structure it requires or recommends. For example, the Task Force on Climate-Related Financial Disclosures recommends focusing on four areas: governance, strategy, risk management, and metrics and targets. If you’re developing a report from scratch, build a template that’s used for every report for consistency and easy comparison.

Focus the ESG report on the company’s risks and opportunities that can impact its long-term operational and financial performance. The report should:

• Mention any applicable reporting frameworks or standards the organization uses,
• List the organization’s ESG goals and topics and explain why they’re included,
• Present an overview of the organization’s risk management process,
• Identify the risks and opportunities to organizational success that each topic presents,
• Explain how the organization manages and gathers data on the topics,
• Clarify the targets set for each ESG goal, and
• Report the metrics for each topic.

A credible report is an objective report, so ensure your reports include all relevant information, both positive and negative.

Tip: When compiling the report, keep this question at the forefront: What’s the most effective way to present the information to stakeholders? The best ESG reports account for both the content and visual presentation of the report. For example, incorporating section summaries and visual elements (like graphs, charts, and tables) throughout can make the report easier to understand and analyze.

5. Define all technical terms used in the report.

Technical terms are, by definition, industry-specific. To avoid miscommunication and provide ultimate clarity in your ESG report, define all technical terms used in the report.

Consider adding a glossary and a list of common industry acronyms to the report.

6. Include internal review and audit processes or external verification of the information.

As stated previously, a credible report is an objective report. Transparency in data verification helps bolster credibility, so explain the internal processes used to ensure data accuracy and quality. If applicable, also mention third-party verification processes and findings.