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The Ground-Up Approach to ESG Reporting

The Ground-Up Approach to ESG Reporting

Posted on: 03.03.2014

In Asia, it’s all About a Brand you can Trust

ESG, Environmental, Social, Governance, is a common element of contemporary business administration in most parts of the world but companies in Asia have been slow to adopt comprehensive systems for ESG reporting to the standard seen elsewhere.

That doesn’t mean there has been no active ESG agenda, there has, but the imperative in Asia has been driven by a practical approach aimed at meeting formal standards and accreditations to stay competitive in the supply chain, improve environmental systems, address workplace safety or make-good negative community impacts, the result of poor production and emissions practices.

Clean, safe and efficient operations, and a growing commitment to brand appear to be the major drivers of ESG activity in Asia. Investment indexes might raise the competitive spirit amongst many of the larger companies and sectors such as Banking and Property, but until the pension fund community buys-in, these financial mechanisms will do little to improve genuine environmental change.

For some companies, PR has been used as a quick fix, without full understanding or commitment to the benefits of using ESG as a risk management tool; they have tried to fake it, that is, to prepare fancy ESG reports that carry no substance. These companies frequently succumb to bad practices and suffer public humiliation and damaged reputation. Their PR approach has ultimately been their undoing because they failed to focus on real solutions.

The real solutions approach where companies build practical solutions to reduce negative impacts, and in turn, use these to build credible ESG reports appears to be growing. With the exception of a handful of global corporations headquartered in Asia, some of which are globally recognised for their ESG practices and reporting, many local companies are starting to understand the benefits of using an ESG based approach to general governance and management, often stimulated by practical solutions to improve efficiency and build environmentally sound operations.

They have learned that the best place to start building an ESG profile is not with PR but with management and operations. Once operations are functioning well and managed efficiently, there is a sound reputation and a good story to report.

It is surprisingly simple to build an ESG reporting system when positive principles and management frameworks are in place. ESG is nothing more than a comprehensive risk management framework, indeed, companies that have faced environmental, workplace, social and governance challenges are more likely to have strong ESG management systems in place.

It is our experience in working with companies that most have significant amounts of information about their policies and practices that they don’t think to make public. The simple act of providing public access to policy documents and reports reflects a company’s genuine commitment to transparency and honesty. Companies that have been forced to address environmental problems understand the benefits of reporting on their improvements over time. Likewise, governance, social and workplace breaches can in the longer-term, bring about improved practices and an opportunity to present a stronger ESG profile – backed up by practical change.

So how does a company adopt simple effective systems for ESG reporting and accreditation?

1. Understand the gaps in performance

Most companies have little awareness of the range of issues that are part of their ESG profile. RepuTex researchers have a comprehensive rating checklist of factors and criteria that a company can use to understand more about its performance gaps and high risk areas for priority attention.

2. Learn more about your competitors’ strengths and weaknesses
Benchmark your performance and risks against those of your competitors and best practice companies. This simple exercise allows your company to understand more about its competitive position and efficiencies related to environmental systems, workplace safety, community impact protection systems and governance. Benchmarking can also include a comparison against global best practice companies in any given sector.

3. Use operational improvements as a starting point
If there has been work to build environmental or workplace safety, use this information to build your company’s ESG profile by reporting on these improvements in the public domain. This is then a starting point for further development of reporting on related activities that demonstrate responsible and sustainable business practices. Community support programs are of great value but these are a much easier path and can be seen as a way to buy into goodwill without changing more serious negative impacts caused by production mishaps, corrupt practices etc.

4. Learn more about which international accreditations and standards might be of value
There are increasing numbers of standards and guidelines being developed by statutory authorities and global reporting bodies. Some of these relate to specialist operating and policy areas, others relate to reporting frameworks. An accreditation process, guided by an expert adviser can significantly add to a company’s operating performance and be reported as a positive example of its ESG practices.

About ESG-Connect
RepuTex ESG-Connect provides advisory and support services to companies seeking to understand how to use ESG as a management tool for improvement. Our online support systems provide low cost mapping of a company’s strengths and weaknesses. RepuTex also offers specialist consultancy services for companies wishing to build a trusted brand and reputation in Asia.

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