Environmental, Social, and Governance Programs and Reporting

Does my company need an ESG program?

Public companies have seen the need to implement Environmental, Social and Governance (ESG) programs to enhance stakeholder value through the company’s commitment to the future. Investors have been factoring into investment decisions the presence of an ESG program that focuses on sustainability. To help companies attract investors, Nasdaq launched an ESG Advisory Program in 2019. The program lays out ESG metrics that provide investors a clear understanding of the company’s sustainability objectives.

In 2020 Nasdaq rolled out an ESG platform for public companies that allows a portal to input ESG factors and the service generates meaningful ESG metrics and accommodate the different sustainability frameworks that rating agencies and stakeholders expect.

Why should I care about ESG programs and ESG reporting now?

It is important to act now as within the next 10 years it is highly likely that all companies will be required to have a form of an ESG program. ESG programs may be scaled to the size of the organization. The pressure to implement an ESG program is coming from regulators, investors, rating agencies and general public. Even without strict requirements, the benefits of going through an ESG assessment is worth the effort. Implementing aspects of an ESG program will help improve the viability of any organization.

Four Pillars of Metrics

Companies worldwide are all using a standard list of 21 metrics for ESG reporting. The ESG metrics are built around four pillars:

Governance

Planet

People

Prosperity

86%

of executives agree that reporting on a set of universal ESG disclosures is important and would be useful for financial markets and the economy, according to a survey by the World Economic Forum. Companies view the importance of social, climate, and other non-financial factors as crucial for long-term viability and success.

21 Core Metrics

  • Setting purpose

  • Governance body composition

  • Material issues impacting stakeholders

  • Anti-corruption

  • Protected ethics advise and reporting mechanisms

  • Integrating risk and opportunity into business process

  • Greenhouse gas emissions

  • Task force on climate control disclosures implementation

  • Land use and ecological sensitivity

  • Water consumption and withdrawal in water-stressed areas

  • Diversity and inclusion

  • Pay equality

  • Wage level

  • Risk for child, forced, or compulsory labor

  • Health and safety

  • Training provided (quantity and price)

  • Absolute number and rate of employment

  • Economic contribution

  • Financial investment contribution

  • Total R&D expenses

  • Total tax paid

Source: Measuring Stakeholder Capitalism Report — September 2020 — World Economic Forum

ESG Metrics

The following 30 ESG metrics can provide clarity and direction for internal audit departments getting involved with their organization’s ESG reporting.

Environmental (E)

E1. GHG Emissions
E2. Emissions Intensity
E3. Energy Usage
E4. Energy Intensity
E5. Energy Mix
E6. Water Usage
E7. Environmental Operations
E8. Climate Oversight/Board
E9. Climate Oversight/Management
E10. Climate Risk Mitigation

Social (S)

S1. CEO Pay Ratio
S2. Gender Pay Ratio
S3. Employee Turnover
S4. Gender Diversity
S5. Temporary Worker Ratio
S6. Nondiscrimination
S7. Injury Rate
S8. Global Health and Safety
S9. Child and Forced Labor
S10. Human Rights

Corporate Governance (G)

G1. Board Diversity
G2. Board Independence
G3. Incentivized Pay
G4. Collective Bargaining
G5. Supplier Code of Conduct
G6. Ethics and Anti-Corruption
G7. Data Privacy
G8. ESG Reporting
G9. Disclosure Practices
G10. External Assurance

Source: ESG Reporting Guide 2.0

How can Dean Dorton help?

Dean Dorton can help your organization with ESG program and ESG reporting in a variety of ways:

  1. Define and establish a company ESG program
  2. Create ESG goals and expectations with input from stakeholders
  3. Assist with determining which criteria are most relevant for your company
  4. Identify initiatives already in place that provide a foundation to your ESG program
  5. Create and provide a system to maintain key metrics and reporting timeline
  6. Audit the effectiveness and any risks of your ESG program

Whether you are in the very beginning stages of assessing the need for an ESG program or already have an ESG program established and want to make sure your ESG reporting and metrics are aligned, Dean Dorton’s assurance team has the expertise and experience to make it easy for you to create a successful ESG program.

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