In today's world, where organizations are increasingly being held accountable for issues related to their environmental and social impacts, comprehensive tracking and reporting on key metrics and initiatives has become more vital.
Organizations need to make a concerted effort to run their operations in a way that adheres to the best industry practices associated with the environment and social impact, as well as diversity and inclusion. Leveraging impact reports can further equip organizations to improve their brand reputation among key stakeholders.
It is difficult to weigh an organization's environmental and social impact when they do not understand the differences in types of reporting. This article offers a critical framework for Environmental, Social, and Governance (ESG) along with Diversity, Equity, and inclusion (DEI) reporting.
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Navigating the Critical Components of ESG Reporting
Fueled by major upheavals in environmental issues as well as racial, equity, and social matters, there is a sustained focus on every aspect of an organization concerning ESG and DEI reporting. This anecdotal evidence is supported by data.
Research has highlighted that more than 80% of organizations implement DEI programs. Additional research further demonstrates that 90% publish an annual CSR report, and 90% report ESG metrics, as well. This push toward ESG reporting specifically comes as governments across the globe are proposing and adopting a new set of rules around climate-related data disclosures.
While the key to excelling at ESG and DEI reporting is to build organizational alignment by integrating these pillars into the business operations, it is equally important to understand them at an individual level. This helps in creating a roadmap to connect ESG and DEI into one mission.
ESG Reporting
An ESG report is a yearly report that summarizes and discloses information regarding an organization's operations and performance in environmental, social, and corporate governance. A proper ESG report utilizes a strong reporting framework, giving investors a view into the organization's inner workings and helping them screen investment opportunities. A meaningful analysis of an organization's ESG commitment requires further digging, and ultimately, it requires meaningful oversight from outside the ESG community on what should be disclosed along with the accuracy of the reports. The report is also valued by consumers concerned about environmental and social issues and want to support enterprises that have the same shared values.
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ESG reports are:
- ESG reports are data-driven and built to better inform key stakeholders and investors.
- ESG disclosures are becoming increasingly standardized and regulated.
- ESG metrics help collect and disclose specific statistics based on accepted frameworks.
- ESG reports are designed with a focus on risks and opportunities.
DEI Reports
Diversity, equity, and inclusion (DEI) affect every aspect of an organization's operations—from the top down, internally, and externally. A DEI report is often included as a subsection in ESG and CSR reports or can also be presented as a standalone report. DEI aims to conceptualize a framework to foster and promote fair treatment and full participation of all employees, irrespective of their background, disability, or identity. A DEI report represents the real action taken by an organization in service to an all-inclusive workplace.
Today, DEI reports have become common and have taken on a greater significance. However, simply publishing a DEI report does not guarantee that an organization is more diverse or creates a greater sense of belonging. For data reporting goals to be effective, organizations must provide detailed insights to create transparency and accountability, along with action plans to promote change. When an organization follows these principles, they are perceived as notable. The bottom line is that today, more and more firms recognize the value of publishing DEI reports, but most neglect to provide detailed analyses that will further equip them to achieve their stated goals.
DEI reports are:
- Diversity is driven by its sense of belonging to all people.
- Ethically motivated to promote a strong sense of value and community.
- A modern development and a relatively new addition to annual reporting.
- It is meant to attract diverse applicants to cast a wider and more worldly net for new talent.
Read more: ESG Metrics: What Consultants Measure and Why It Matters
ESG and DEI: Establishing a Link
Environmental, social, and governance (ESG) investing has become increasingly important and widespread. Today, more than three-quarters of consumers report that they care about a sustainable lifestyle. Consumers and investors rely on an organization's claim about their diversity and inclusivity practices, which raises questions about how to evaluate their accuracy.
Diversity washing is emerging as a concern as it creates a disconnect between companies’ external commitments to diversity, equity, and inclusion along with their actual employee diversity. While diversity-washing firms claim that their language is aspirational, there is little substantive change in subsequent hiring practices. There is also a positive relationship between the firms identified as diversity washers also having an EEOC violation. Moreover, these firms are also more likely to have a questionable ESG policy.
While the frequency of terms such as pay equity did not change much, terms like ethnic diversity, racial, and board diversity often paint a misleading picture. Research has highlighted an increase in the frequency of DEI keywords. With the discussions related to corporate governance and inclusive workplaces growing, organizations are exploring new ways to tackle these roadblocks and create a positive brand image.
Read more: Decoding ESG: Why is it Critical for Business and the Planet
Final Thoughts
While differences exist between ESG and DEI reporting, each one paints a different picture. Each type of reporting works together to display transparency to consumers and investors, along with current and future team members. Cutting any of these out of annual reporting can leave a gap in the organization's overall story.
Today's increasing number of consumers and investors demand more transparency from the business community. By developing a compelling narrative, organizations can clarify their message, amplify their mission, and empower customers, investors, and talent to better engage with the brand.
A leader in ESG Services, SG Analytics offers bespoke sustainability consulting services and research support for informed decision-making. Contact us today if you are in search of an efficient ESG (Environmental, Social, and Governance) integration and management solution provider to boost your sustainable performance.
About SG Analytics
SG Analytics (SGA) is an industry-leading global data solutions firm providing data-centric research and contextual analytics services to its clients, including Fortune 500 companies across BFSI, Technology, Media & Entertainment, and Healthcare sectors. Established in 2007, SG Analytics is a Great Place to Work® (GPTW) certified company with a team of over 1200 employees and a presence across the U.S.A., the UK, Switzerland, Poland, and India.
Apart from being recognized by reputed firms such as Gartner, Everest Group, and ISG, SGA has been featured in the elite Deloitte Technology Fast 50 India 2023 and APAC 2024 High Growth Companies by the Financial Times & Statista.
