In today's business landscape, the significance of environmental, social, and corporate governance (ESG) has grown immensely. With new regulations taking effect across the EU (and anticipated in the US), your business must integrate ESG (and ESG reporting) into its practices.
In our recent webinar, The Finance Team’s Role in ESG: How to prepare your business, Payhawk's CFO Konstantin Dzhengozov and Director of Product Engineering Robbie Hadfield joined experts Veroniki Zerva from Accounting for Sustainability (A4S) and David Wray from the International CFO Alliance. Together, they provided critical insights on simplifying ESG reporting for finance teams, emphasising:
This article distils some of the most critical insights and offers some tips for kickstarting your reporting journey.
ESG reports will help your company offer more transparency over advancements towards environmental sustainability and corporate governance objectives. Like an annual report or other corporate disclosures, the ESG report functions as a communication medium, letting you disseminate information to employees, investors, and regulatory bodies.
As ESG credentials have become increasingly important to employees, consumers, and investors (82% of investors aged 18-34 say they’re willing to “take a hit” to support ethical investments), organisations have begun formalising the way they score, report, and communicate around it.
The introduction of CSRD means investors and other stakeholders can now access relevant information more easily, letting them better assess investment risks related to ESG and sustainability. Of course, the reporting also means that as a business, you can assess your company’s impact and prioritise new initiatives to reduce things like environmental damage, improve ethical decision-making, and more.
Before we dig into some of the finer details of ESG reporting, here are some of Veroniki Zerva’s top recommendations:
Watch our on-demand webinar to find out more.
There are several different bodies, councils, and other organisations involved in setting and rolling out regulations around ESG. Here are some of the key facts, people, and figures to remember:
When developing a comprehensive ESG strategy, you should craft a business case that involves prioritising sustainability as one of your company's driving forces. This involves creating a materiality matrix that addresses key topics and indicators reflecting your significant ESG impacts, including Scope 3. Ensure your strategy encompasses areas significantly influencing stakeholders' assessments and decisions and aligning them with sustainable practices.
Eighty-five percent of SMBs want to better understand and control the emissions from their spending, according to carbon-accounting and offsetting company Lune. Of course, Scope 3 emissions play a necessary (but complicated) part here.
Erik Stadigh, co-founder at Lune, says:
"Scope 3 emissions are undoubtedly more complicated than scopes 1 and 2. However, dealing with these emissions is vital as they can help you collaborate with suppliers and peers to create an even bigger, more positive impact. If you're aiming for net zero, then minimising these emissions is essential to your journey."
The ESG reporting requires companies in the EEA to publish data collected from 2024 in 2025. It affects companies with +500 employees, which is approximately 50,000 companies in the EEA. But it also impacts companies outside the EEA if they have EEA-based entities; in the US, for example, it's expected to affect +2000 businesses.
Reporting requirements begin imminently in the 2024/25 financial year.
Here are six steps you can take to help you meet the reporting standards for ESG (Environmental, Social, and Governance):
David Wray adds:
"When we think about CSRD, where we're going, and the influence we have... It's not always beneficial to say 'just pull out from working with a supplier' who's not meeting your standards, but rather to help them transition to more sustainable models."
As Veroniki Zerva details:
“Gap analysis will help you determine what you have in place and what you need to do to close the gaps.”
The analysis will help you compare your current performance with your expectations and desires. It will allow you to pinpoint discrepancies between your reporting and expectations and create an action plan to close them.
When faced with new reporting requirements, there might be a tendency to rush into them without a thorough assessment. Your organisation should take a step back and understand your supply and value chains better first.
Need more info on gap analysis, material assurances, and more? Watch our eye-opening on-demand webinar to get crucial insights and strategies from industry experts and get set to navigate the complexities of ESG reporting.
Trish Toovey works across the UK and US markets to craft content at Payhawk. Covering anything from ad copy to video scripting, Trish leans on a super varied background in copy and content creation for the finance, fashion, and travel industries.