Corporate Sustainability Reporting: Trends and Tips for 2021
2020 was a year of changes, especially for businesses. Building occupancies have fluctuated wildly, energy usage patterns have shifted as people work from home, and the economy has faltered. However, one thing has remained the same: the battle against climate change remains, with countries racing against the clock to lower carbon emissions. In addition, the coronavirus pandemic has shown policymakers the importance of designing resilient, climate-friendly economies. Sustainability reporting, wherein companies, corporations, manufacturing plants, and farming operations report on their energy usage and emissions, plays a key role in both of those endeavors. Many countries and states are beginning to institute laws which set emissions caps on buildings (e.g. New York City’s Local Law 97). One important way sustainability reporting is used is to ensure buildings are not exceeding those caps.
So, what can you expect to see in terms of new corporate sustainability reporting requirements in 2021, and how can your company best prepare for and execute sustainability reporting? In this article, we will tackle those questions and more.
First Things First: Is Sustainability Reporting Mandatory?
That depends what country, state, or city your company resides in. Companies of all sizes and types are encouraged to produce sustainability reports in order to increase awareness of their environmental footprint and let investors and clients know where the company stands in terms of sustainability. A 2020 study by Carrots and Sticks revealed that there has been a substantial increase in sustainability reporting regulations around the world. A few of the countries that have mandatory sustainability reporting are:
- The United Kingdom:
In the United Kingdom, quoted companies are mandated to provide a report disclosing annual greenhouse gas emissions under the Companies Act of 2006.
- European Union:
The EC Directive on Disclosure of Non-Financial and Diversity Information (2013) is a major reporting instrument of the EU. Certain large companies and public-interest companies are required to disclose material environmental matters.
- United States:
According to regulations issued by the US Securities and Exchange Commission (SEC), all listed companies should disclose their environmental compliance expenses. Another sustainability reporting instrument, New York Stock Exchange (NYSE), mandates the listed companies to adopt and disclose a code of business conduct and ethics. Additionally, many cities require reporting to ENERGY STAR Portfolio Manager, a benchmarking platform with a strict set of emissions standards.
China has seven regulations that act as instruments of mandatory disclosure on sustainability matters. The Environmental Information Disclosure Act of 2008 mandates corporations to disclose environmental information according to the regulatory requirements. A separate report with an environmental disclosure is also requested from large companies listed on the Shanghai Stock Exchange.
Like China, India has seven instruments with a mandatory status that can be used for sustainability reporting. The Securities and Exchange Board of India requires the top 100 listed companies to produce annual Business Responsibility Reports.
Note that mandatory sustainability reporting is usually only applied to state-owned companies, large corporations, or listed companies. Additionally, some instruments have a “comply or explain” approach to sustainability reporting.
The Latest Reporting Trends
A new report by The Conference Board has revealed the latest trends in sustainability reporting, based on nearly 6,000 companies in 26 countries reporting on more than 90 environmental and social practices from greenhouse gas (GHG) emissions to leadership diversity to water use. Here are the biggest trends to keep your eye on:
1. Sustainability Reporting Is on the Rise
Almost one-fourth (23%) of companies report their GHG emissions, up from 21% last year. In the United States, 56% of companies report GHG emissions, up from 49% last year. Disclosure of water consumption is also on the rise, which is unsurprising since global water shortages are one of the major concerns surrounding climate change. Globally, one fifth of companies report how much water they consume, up from 18% last year. In the United States, more than one-third (34%) of companies report their water data, compared to 29% last year.
2. More Reporting Does Not Always Equal Change
While 2020 has seen increases in sustainability reporting among corporations, this greater transparency is not always spawning major changes. While more companies are acknowledging the risks posed by climate change, the median reported greenhouse gas (GHG) emissions by those same companies has risen over the last three years, proving that reporting does not always drive performance. It may also reflect that, due to stakeholder pressure and the requirements of various reporting frameworks and rating agencies, companies may be reporting on topics that are not essential to their businesses or performance, and thus they do not have an incentive to change their performance.
3. Expect Increased Pressure to Report on Gender Equity and Board Diversity
For the first time, over 50% of companies are reporting data on the gender makeup of their boards. And while gender pay gap details are not commonly reported as of now, that is changing: The number of companies doing so more than doubled since last year. If your company is not currently reporting on gender equity, you can expect increased pressure to do so.
4. There’s A Demand for More Accurate Data
As more companies report on sustainability-related issues, investors are demanding more reliable, high-quality, and comparable data sets. Business models are being increasingly exposed to social and environmental issues, and investors need information that allows them to assess how the companies they hold stock in are managing such issues and the impact they have on the company’s long-term success. If your company is compiling data manually or needs more accurate, minute-to-minute data, an energy reporting software platform with real-time data monitoring can allow you to gather all your data in one place and share dashboards with your investors featuring all your energy and emissions data as it rolls in.
5. Stock Exchanges and Banks Are Pushing for Sustainability Reporting
While most reporting provisions are issued by governmental bodies, engagement by financial market regulators including centrals banks has grown significantly. Clearly, the economic and market implications of sustainability reporting are becoming clearer. For example, the sustainability of a company influences consumer willingness to pay for its products. In 2019, CGS found that 47% of U.S. consumers were willing to pay more for a sustainable product. Meanwhile, from 2015-2019, sales of sustainability-marketed products grew 5.6 times faster than conventionally marketed products, according to NYU’s Center for Sustainable Business.
EnergyWatch’s Top Tips for Sustainability Reporting in 2021
- Determine your reporting audience – who will be reading the reports?
- Link activities to the UN’s Sustainable Development Goals
- Integrate sustainability across your organization, e.g.:
- Understanding global forces
- Scenario planning for the future
- Creating a five-year plan
- Streamline your sustainability data collection required for all reports
- Automate your reporting process as much as possible, while remaining adaptable to the changing landscape of reporting
How EnergyWatch Helps with Sustainability Reporting
EnergyWatch can help streamline, automate, and standardize your sustainability reporting process through our cloud-based energy management software, watchwire. The platform stores and analyzes all energy, water, waste, and emissions data, providing a single source of truth for your organization. With multiple integrations to LEED Arc, GRESB, and more, standardizing your sustainability reporting process is possible. Watchwire also provides real-time data monitoring, so you can see how well your sustainability measures are working and provide the most recent energy and emissions data to your investors.
The reporting landscape is still settling. By implementing best practices now, you can be ready to tackle any initiative. At EnergyWatch, we have seen increasing client interest in moving sustainability reporting to their financial filings. For instance, in 2019, EnergyWatch client Vornado Realty Trust obtained a Deloitte examination of their Sustainability Report data to be furnished with an SEC form 8-K, the first time an examination report of ESG topics has been made in an SEC filing.
If you are interested in seeing how EnergyWatch and our watchwire platform can make standardized reporting easier and help your company get a handle on material energy and sustainability issues, download the Watchwire Sustainability Brief here.