Three ESG Must-Dos for 2024
Given the transformative year for ESG in 2023 , many companies are heading into 2024 with complex and robust sustainability agendas. Focusing on materiality, regulatory compliance deadlines, and data management will help organizations structure their efforts and drive meaningful ESG progress in the new year.
It’s no secret that ESG expectations have changed more quickly and profoundly in the past two years than in the last 10 years combined. Countries around the world have proposed and passed ESG regulations, ESG frameworks have consolidated, and the US Securities and Exchange Commission (SEC) has continued to move the date for the climate disclosure rule (currently estimated April 2024, subject to change). Keeping up with the must-have disclosures affecting a company’s ESG priorities is challenging.
The key to staying focused is to anchor ESG strategy around a few overarching priorities. Here are the three we see as most critical to ensuring ESG success in 2024:
1. Use ESG materiality assessments as a data-driven guide for ESG programs.
Over the past two years, stakeholders, including investors and customers have started making bigger requests from companies. For example, stakeholders ask companies to submit CDP questionnaires or share their greenhouse gas (GHG) data individually. When such requests come from customers, they are usually tied to the customer’s own ESG commitments. In any case, companies should not expect these trends to taper off in the coming years but instead should anticipate additional requests from all stakeholder groups.
Conducting regular ESG materiality assessments is the best way to stay ahead of these requests. The results will help companies prioritize where and when to focus efforts to better meet stakeholders’ evolving needs and concerns. Any company that has not conducted a materiality assessment within the past 24 months should plan one as soon as possible, as customer, shareholder, and/or employee priorities have almost certainly shifted since then. Keep in mind that materiality assessments not only provide the company with valuable insights, but also send a clear message to stakeholders that the company is taking ESG seriously and is committed to aligning its efforts with the issues that stakeholders prioritize.
If the time is right for a new ESG materiality assessment, consider whether or not to double down. A double materiality assessment considers both the impact of climate on the company’s financials as well as the company’s environmental and social impact on the world in which it operates. For now, the European Union (EU) Corporate Sustainability Reporting Directive (CSRD) is the only major regulation requiring double materiality assessment reporting, but some companies are electing to voluntarily pursue this route for a more comprehensive analysis.
2. Know regulations, ESG reporting requirements, and deadlines and work backward to create an ESG roadmap and timeline.
The SEC may have introduced the concept of mandatory climate reporting disclosures to many companies in the United States, but it won’t be the first regulator to require climate reporting for many businesses. Due to multiple delays for this rule, other legislation has already passed, and compliance deadlines are approaching. Currently, both the California Climate Accountability Package and the CSRD will require companies to report climate disclosures in the coming years.
This means companies need a climate reporting readiness game plan for 2024 to ensure they are on the right trajectory to meet compliance standards when applicable. Start by making a list of the required disclosures and their deadlines, then evaluate where climate data currently stands to identify your gaps.
Companies that are confident in their current greenhouse gas (GHG) emissions, data collection processes, and the assurance-readiness of the resulting data are in a comfortable position to meet upcoming mandates. Other companies will have some work to do. Those already collecting data may be ready to upgrade processes by adding internal controls to help with assurance and efficiency.
Companies will also need to identify and assess material climate-related risks and develop a plan to manage those risks in order to meet these regulations.
Resolve to kick off the new year by identifying emissions sources and starting work on baseline GHG emissions calculations immediately.
3. Invest in ESG software solutions to streamline and accelerate climate reporting progress.
In most enterprises, sustainability data is spread across the organization. Relying on emails and spreadsheets to collect the information is inefficient and prone to errors that can compromise data integrity and any reporting based on that data.
With upcoming regulations requiring companies to report sustainability data, 2024 is the perfect year to put ESG software solutions into place. This gives companies plenty of time to identify the best fit ESG reporting software, get comfortable with the chosen solution, work out any bugs, and ensure confidence with processes and data by the time the first disclosures need to be filed.
Most companies are best served with a data collection tool that can act as a project management platform as well as a centralized ESG data and disclosure repository. Many of today’s next-generation ESG software solutions are designed to meet these needs and support the work of corporate sustainability teams, allowing companies to organize data and disclosures in alignment with regulations and reporting frameworks. Furthermore, most platforms offer an audit trail, so users or auditors can easily see when data is entered or edited and more easily confirm the validity of the data. Finally, data can be quickly transferred to multiple formats to support a range of reporting practices.
Resolve to set the right priorities for your ESG strategy in 2024
As the ESG landscape continues to change, staying focused on the right issues is no easy task. Companies can ensure timely, quality disclosures by focusing on ESG materiality assessments, regulatory deadlines, and ESG data management. And they can stay a step ahead of stakeholders’ increasingly heightened expectations.
Need help getting your ESG strategy in the right place heading into 2024? Talk to the ESG consulting experts at Riveron. We can help you devise a game plan for ESG reporting readiness that marries compliance requirements with stakeholder needs for a comprehensive and successful approach.