ESG: the end of greenwashing and the feel-good sustainability report

Marketing tool

A lot of companies and industries have been publishing sustainability reports for quite some time. And even though most organizations really did work on qualitative reporting, there were also many companies that thought of such a report merely as a public relations tool or a marketing tool. The good scores were overemphasized, the bad scores underemphasized or not reported. And only the most feasible areas for improvement were translated into concrete goals. Companies that mostly wanted to benefit from the increased attention to the climate were guilty of greenwashing (a company pretending to be greener than it actually is). Even today, Moore’s ESG experts still see a lot of sustainability reports that do not comply with European legislation. However, they are sold as such by consultants claiming to be ESG experts. It is therefore important that you, as a company, do the necessary background checks before engaging with people who claim to have ESG expertise.

Next level

CSRD reporting goes much further, digs much deeper and has a greater impact than an old school sustainability report. Moore’s experts believe that for this reason, ESG is becoming the catalyst for embedding corporate sustainability at the core of companies' business processes and strategy. They note that ESG is already having a major impact on the valuation of companies and access to financial resources. Moreover, CSRD reporting will soon be mandatory for 2,500 Belgian and 50,000 European companies. They will also have to report the ESG efforts of their value chain in that process. Therefore, chances are extremely small that you, as a company, will not be asked to present your CSRD report to your customers, your suppliers, your financial institution or in tenders in 2024.

Monitoring sustainability claims

External monitoring of CSRD reporting in the form of an audit will be mandatory to companies that will soon be required to report. But all other companies also benefit from having the claims about their sustainability efforts investigated by a third party. An ESG audit does not only provide an external quality label, but also an in-depth analysis of what steps an organization needs to take to mitigate risks and seize opportunities.

What auditors focus on, depends on a range of factors. They do use some basic principles as a common thread throughout the audit:

• The balance. How balanced is your CSRD reporting? Does it accurately represent your ESG efforts? Do you report not only positive scores and evolutions, but also limitations and areas for improvement? What are your KPIs?
• Your stakeholders’ interests. Who are your key stakeholders? Do you include their perspective when you map your ESG impact? And do you go beyond investors, employees, customers, consumers and the local community?
• The sustainability context. Do you report all ESG parameters relevant to your company and industry? According to which ESG frame do you report if you are not covered by the CSRD directive? Is the frame within which you report the most logical frame for your company and your industry? And how do you score when your ESG efforts are assessed against the standards within that frame?
• The value chain. Do you also report, as detailed as possible, the ESG impact of the organizations in your value chain? What steps do you take to play a proactive role in this as well?
• Proper prioritization. Do you determine which themes and data points are most relevant to your organization by using the double materiality analysis? On the one hand, this analysis covers your organization's potential positive and negative material impact on the environment and society (inside-out perspective). On the other hand, you need to identify the potential impact of ESG risks and ESG-related opportunities for your organization (outside-in perspective). Based on that analysis, which ESG themes and data points are most important to your organization? How do you assess potential ESG risks? What opportunities do you see? And what impact do those insights have on your specific strategy and policies?

Surfing the right expertise

ESG is very complex. However, the standards not only focus on the risks, but also place a strong emphasis on the opportunities for companies. According to Moore, CSRD reporting does not have to be agonizing at all. By surfing along on existing expertise and knowledge around ESG, you can already save your company a lot of cost and effort. Moreover, there are more and more success stories of companies that, thanks to the right guidance and a strategic embedding of ESG, made a relaunch because they were able to tap into unexpected innovation potential.

We would like to give you some more hints from our experts to skip trial and error:

• ESG is more than just appointing an ESG officer to produce a report. ESG must be taken to heart company-wide.
• Surf the two dimensions of ESG: work on mitigating the risks, but don't forget to be open to the innovation potential that will surely become visible along the way.
• Make sure you have access to the right expertise. ESG is a complex matter, but if you're smart about it, with the right support, you won't lose too much time setting up your approach. Beware, there are a lot of companies on the market that were strong in making sustainability reports, but that are not ESG experts. If you look at what exactly the CSRD guideline stands for, you will immediately understand why you need to inform yourself thoroughly in advance.
• Make choices. Delineate and focus. You will need to report very broadly anyway, so it is important to make informed choices and set the right priorities.

Would you like more information about ESG? Feel free to contact us.