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Trust can’t wait: How to prepare for unfinished ESG reporting requirements

ESG
Driving ESG Results
trust can't wait ESG
4 min read
AUTHOR:

Andromeda Wood

Vice President of Regulatory Strategy
Published: 26 September 2022
Last Updated: 29 November 2022

Andie Wood will be speaking at Amplify EMEA 2022—find out more and register for free here

 

“Get ready”, “start now”, “it’s time to prepare”: when it comes to ESG reporting, organisations are constantly being told to act as quickly as possible. 

Putting this advice into practice, however, is considerably less straightforward. Upcoming standards such as the ISSB and the ESRS (the European Sustainability Reporting Standards, which are being structured in line with the new CSRD regulation) are still being finalised, leaving many companies in the dark about what they should actually do to prepare. 

Just as ESG mandates have been mounting gradually, stakeholder expectations have seen a sharp rise. Shareholders in particular are demanding transparency and rigour, and assurance that they can trust the data and insights provided to them. Needless to say, these expectations aren’t being ‘rolled out’ gradually, as with regulations—they are already in full swing. 

However high stakeholder standards may be, this doesn’t resolve the underlying question: how can companies prepare for something before knowing what it is? 

 

Remember—standards aren’t created in a vacuum  

It can be easy to look at an upcoming requirement and feel as though you are going to have to learn something entirely alien or completely overhaul your existing reporting process. When details aren’t yet announced, a fear of the unknown can easily take hold. 

It’s important to remember, though, that standards don’t simply appear out of thin air. New work generally builds upon, and adds more depth and detail to, existing requirements. ESG reporting is not a new concept, and while standards are becoming more stringent, the underlying principles remain the same. 

The CSRD is not simply replacing the NFRD: it is expanding on the regulations that have been in place across the EU since 2018. Meanwhile, 89 countries around the world have announced their support for TCFD recommendations, and are likely to incorporate these existing guidelines into official legislation in some manner. 

Organisations across the globe have been complying with local and ESG mandates for many years now. Fundamentally, the purpose of what is being asked will not be changing: the bar is simply being raised in terms of quality, detail and transparency.     

 

Create an agile reporting environment

With official reporting requirements still in flux, it’s important to establish a solid underlying process that can pivot, when needed, to accommodate any changes. Crucially, that means not tying yourself to one single framework. 

Having access to verifiable data that you can easily apply to different reporting frameworks, rather than starting from the framework then working backwards, is key to creating an agile environment. 

This flexibility can also be used to strengthen investor relations. Ask them which disclosures or frameworks they have a preference for—whether it be SASB, GRI, CDP, or another one altogether—and establish what it is they like about that particular one. Understanding what their priorities are in this area while demonstrating agility will help you create a model tailored to your organisation’s needs, rather than restricting yourself from the outset. 

 

Get your existing disclosures in order

Just as new standards are based on existing ones, the best way for you to prepare for the future of ESG reporting is to take stock of, then strengthen, what you already have in place. Looking at your process from start to finish, ask yourself, where is there room for improvement? Consider the following:

  • Do you have access to all your important data? 
  • How is that data being gathered and verified? 
  • Are you using consistent, widely-recognised metrics? 
  • What are your biggest roadblocks to efficiency? 
  • Do you have a cross-functional team working on your ESG reporting?  

Most important of all at this stage is maintaining an open, transparent dialogue with your stakeholders. Working together to identify what needs to change and then improving upon what you have is the key to being, and staying, prepared.     

 

Ramp up your materiality practices

With a global socio-economic landscape that is evolving more rapidly than ever, risks and opportunities need to be closely monitored at all times. Something that may have been immaterial to stakeholders six months ago could now be of the highest priority. As we move towards a dynamic materiality approach, polling stakeholders frequently is essential practice in order to stay in tune with their, and the company’s, needs.  

 

There’s more clarity than you think

A lack of absolute certainty shouldn’t get in the way of taking action. Have faith in the fact that the regulatory foundations are already in place, and work to strengthen your current process and strategy. Rather than waiting for new standards to be published, focus on what your stakeholders—from investors and the board of directors to creditors, customers and employees—are demanding from you right now. 

Ultimately, what everyone is asking for is greater trust and transparency; two things we can all start working on today. 


 
About the Author
andie wood headshot
Andromeda Wood

Vice President of Regulatory Strategy

Andromeda “Andie” Wood is vice president for regulatory strategy for Workiva and will be bringing her knowledge of the technology and regulation landscape in Europe to help inform the EMEA strategy and support the region's growth. She is an expert in data modeling, taxonomy design, and the role of technology in corporate reporting.

Andie is an experienced data and semantic modeler and also contributes to the XBRL standard at the international level. She brings a wealth of knowledge and a deep understanding of regulatory impacts to global firms emerging from the European Union's Transparency Directive and Corporate Sustainability Reporting Directive (CSRD). Andie also serves as a member of the XBRL International Inc. Best Practices Board and is co-chair of the XBRL Entity-Specific Disclosure Task Force.

Previously, she was a senior technical manager for the IFRS Foundation helping to develop the IFRS Taxonomy and Standards. She served as a technical expert at global audit and consulting firm, Ernst & Young.

Andie is a frequent speaker on trends in technology for corporate reporting and publishes various articles on XBRL, ESG, ESEF and digitally transforming corporate reporting. She has also written a column for Accountancy Today on technology and COVID impacts. She has a bachelor of arts in biological sciences from St Catherine’s College at Oxford University.

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