Leading up-to and since COP26 there has been a lot of talk about ESG reporting. With this, comes ESG reporting requirements. But what exactly are ESG reporting requirements? Where do they apply? And how do they impact businesses in the UK? This article will demystify the world of ESG reporting requirements for UK businesses.
ESG stands for Environmental, Social and Governance. It refers to the positive impact factors that are attributed to an organization beyond traditional financial performance. Though ESG’s have become more prominent recently, they have actually been around for several years.
ESG’s are typically operationalised as reporting metrics, which are assigned through an ESG framework. There are many types of ESG frameworks, each with their own specific metrics.
Traditionally (and still today), ESG factors were used by investors to identify risk and growth opportunities of businesses, with a focus on the ‘humanitarian good’.
As the climate crisis has worsened, the environmental impact of businesses has been thrusted further into the limelight. This has meant investors and other stakeholders are paying more and more attention to a businesses environmental impact.
The increased attention paid to environmental impact, along with the awareness that sustainability impacts long-term profitability of businesses, is what has created the ‘perfect storm’ of demand for ESG metrics.
Though reporting requirements differ from framework to framework, there are general themes that will be covered by most frameworks. Not all themes are relevant for your industry, so it is wise to choose a framework that most reflects the needs and operations of your enterprise.
Typically, ESG frameworks will cover the following in terms of reporting requirements:
Environmental factors include:
For each of these, there will be technical protocols and accounting metrics to ensure the standards are followed correctly. An example of this is procedures to account for Scope 1, 2 and 3 emissions, a way of estimating carbon emissions that occur further down supply chains.
Social factors include:
In the UK, companies already have certain legal standards that they have to adhere to. Which standards apply depends on the type of company, size, industry and the activity it undertakes.
They can range from simple financial reports (e.g annual accounts) that apply to most businesses to more specific reports; such as anti-bribery or employee engagement statements for larger companies. For more information on this, see the companies act of 2006, and bribery act of 2010.
Though many of these measures have been in place for several years - as of February 2022, a unified framework typically thought of when describing ESGs is not mandatory for UK businesses.
Part of the reason for this is that a unified framework is not yet agreed upon. There is however a growing effort to achieve this, at which point it is likely to become mandatory.
As alluded, there is a considerable effort to bring a unified reporting structure, that would then be mandatory for UK businesses. The benefits of having a unified reporting standard is that organisations will be comparable to one another, like-for-like. This maintains fairness and consistency in reporting.
Some of the organisations working towards a unified ESG reporting structure include the World Economic Forum and Deloitte. They’re looking to identify common ground in existing frameworks, which can then be extrapolated in a common framework.
The view from these organisations is that once a common reporting standard can be agreed upon, that this will pave the way for regulatory requirements to disclose said information according to that standard. This could then be adopted internationally, ensuring multinationals are reporting to the same framework that subnational organisations will report to.
More specifically to the UK, recent events have suggested a mandatory reporting structure to be imminent.
The Green Finance Roadmap describes the planned roll-out of the Sustainability Disclosure Requirements. These requirements have been developed in collaboration with the TCFD (Task Force on Climate related Financial Disclosure), and will apply to all businesses with >500 employees and >£500m annual revenue. This will begin to affect UK organisations in 2022.
It should be noted that this is likely just the beginning of mandatory ESG reporting requirements. Even if your organisation currently is not mandated to report according to a framework, it will likely be the case that it is mandatory in the near future.
It should also be considered that the TCFD framework is initially being rolled out in the UK, but may not be the international standard, so some adjustments may be necessary post-adoption.
It would be wise for all organisations to begin considering how they track, measure and report on ESG metrics. Having processes and procedures in place now will make the adoption of future frameworks much easier, reducing friction caused as a result.
You may wish to assign an individual or department within your organisation the role of ‘ESG manager’, or ‘ESG programme manager’ where a portfolio of ESG projects are in place to aid progress.
We would also recommend considering that whatever framework is adopted, that it could change as new regulations come into place. Therefore, any tools or software adopted must be adaptable for changes, or significant friction is likely to occur.
Intuitix was designed to allow ESG programme managers to quickly and easily update their reporting frameworks, while maintaining automations and project data consistency. For more information on how we can help you do this, book a timeslot with one of our team.
We wish you the best of luck on your ESG reporting journey!
You’ll probably have heard a fair amount about ESG reporting frameworks lately.
What was once a niche among organizations looking to quantify, measure and report the good that they were creating, is now growing in popularity.
With the popularity of ESG’s set to grow - now is as good a time as ever to start exploring the different ESG reporting frameworks.
To help you with this, we’ve broken down some of the main ESG reporting standards. We’ve also provided some of the pros and cons of each, so you
The increased popularity of ESG ratings come down to a variety of factors. In most cases, the pressure to improve is around the worsening state of climate change.
Key events such as COP26 have meant that organizations are under more pressure to do their bit towards net-zero. One of the ways to make sure of this is by following an ESG framework. ESG frameworks quantify the progress towards net-zero emissions that organizations are aiming for. This helps measure progress and keep everyone on track.
Next, investors who own stakes in your organization are looking to ensure their money is in safe hands. One of the ways they do this is by requiring the organization to report on their ESG ratings.
The Norwegian Sovereign Wealth Fund was a pioneer in showing that responsible investments are also more likely to outperform market averages. This makes positive ESG rated organizations attractive not just from a humanitarian perspective, but also a commercial one.
In order to grade organizations' ESG ratings, organizations are required to report on company activities. To make sure that organizations are reporting on useful data that is comparable with one another - standards have emerged. These standards are what forms ESG reporting frameworks, which will often dictate ESG reporting requirements.
There are many different reporting frameworks, each with their own reporting requirements. Choosing which ESG reporting framework to follow also means choosing which requirements to follow, so choose wisely!
There are many ESG reporting frameworks, and new ones are being created all the time. In fact, for some organizations, it may make sense to create your own ESG reporting framework, rather than following an existing one.
For most organizations however, your best option is usually to follow an existing framework.
When choosing an ESG framework, there are lots of variables to consider. Not all are made equal. This is why we’ve written this article, to take you through and compare some the different ESG reporting frameworks available.
The following ESG reporting frameworks are some of the most popular, and ones we would suggest considering:
SASB
SASB is one of the most popular frameworks for reporting on ESG factors.
It makes clear distinction between frameworks and standards - focusing on the latter. This means that the SASB provides specific and actionable metrics, rather than more general guidelines for what topics and themes to report on.
It is designed specifically for companies to report to investors on sustainability issues that impact the long-term value of traded companies.
More information on SASB can be found on their website.
Pros
The SASB standards are robust, and when widely used within industry, provide a useful comparison point to evaluate companies against one another.
SASB standards also provide a way to implement frameworks that are relevant to the company.
Cons
The focus is on standards (metrics). This means not every metric included will be relevant to your organization. It therefore is more useful when used in conjunction with another framework that guides the areas relevant to your organization and its strategic objectives.
GHG Protocol
The Greenhouse Gas Protocol states that it provides the ‘world's most widely used greenhouse gas accounting standards’. They owe this to wide stakeholder consultation throughout the development of these standards.
They offer a multitude of different standards, for different use cases. This includes standards for: corporations, cities, products, supply chains, projects, policies and more.
They provide the foundations for organizations to build their own, more sophisticated, ESG calculation tools and frameworks. They also provide fairly basic tools that can offer a springboard into more advanced measurement tools.
For more information on GHG Protocol, head to their website.
Pros
As stated, they’re the most widely used protocol, giving a high degree of comparability between organizations.
Foundational frameworks provide organizations the freedom to develop more sophisticated models.
Cons
Focus is primarily on Greenhouse Gas, meaning other sustainability factors aren’t considered.
Foundational frameworks mean additional development is often needed - this could reduce comparability if ‘overdeveloped’.
GRI
The Global Reporting Index sets standards for impact reporting. Their standards are fairly diverse, covering people, the economy and the environment.
They work closely with governments and other public-sector organizations in defining standards that are both representative and independent. To ensure fair representation, they’re governed by layers of committees, stakeholders and strategic representatives.
They claim to have the most widely used sustainability standards (differing from GHG Protocol’s ‘Greenhouse Gas Standards’). They also (like SASB) have specific sector and topic standards, allowing organizations to implement those most relevant to them.
For more information on GRI, click here.
Pros
GRI’s emphasis on governance and transparency in the formation of it’s standards suggest that they’re most likely to be a fair representation of stakeholders needs. They’re unlikely to be biased or skewed to a specific group.
Standards are freely available and can be adopted without any investment
Cons
GRI has a heavy public sector influence, which although ensures the reliability of representation in the standards, may be less useful for private-sector companies.
Although they’re a non-profit and standards are freely available, GRI (like others) charges for consultations and appraisals of the implementation of those standards.
Carbon Disclosure Project (CDP)
The Carbon Disclosure Project differs to the other ESG Frameworks in the sense that it provides a central platform by which all participants report to. They’re then ranked by the CDP on their scores.
This sets the CDP apart as a governing authority, who collate ESG data rather than the other organizations, who are more issuers of those standards and frameworks.
The CDP could therefore be viewed more as a ‘managed service’, providing a hands-on evaluation of ESG scores - as opposed to giving your organization the framework and allowing you to do with it as you wish.
Pros
Organizations who wish their ESG score to appear in the public domain may benefit from their ranking system.
Those who wish to essentially ‘outsource’ the calculation of ESG data have the option to here.
Cons
It is unclear what frameworks they’re using, whether it is one internally created or another that has been discussed.
The ‘managed service’ may not be ideal for organizations who wish to retain control over their ESG reporting.
TCFD
The Taskforce on Climate Related Financial Disclosures was the brainchild of the Financial Stability Board. It is made up of 32 members from different industries across the world, with the goal of transparency and advancements in climate related disclosure
Rather than producing specific frameworks or metrics, the TCFD makes recommendations for industries across a range of themes and topics. This includes governance, strategy, risk management and targets/metrics.
Pros
The TCFD’s board members include representatives from some of the largest and most influential companies. The chair is a representative from Bloomberg.
The private sector focus may be appealing to for-profit companies.
Recommendations provide organizations with flexibility to establish their own standards.
Cons
Guidelines and recommendations can only go so far, and do little to provide ‘comparability’ over different organizations and industries.
With all the different standards available, it would certainly make things easier if a global ESG standard was introduced. Thankfully, some of those organizations mentioned are working to bring them together - creating a global ESG standard.
Until then, we suggest you go with the standard that best caters your own needs. Then, once new more cohesive standards are introduced, consider switching.
The important thing to consider is that whatever standard is introduced may change, and that the software you use to help calculate will have to accommodate this.
Intuitix has been designed to update and evolve with new ESG frameworks, making the process simple and easy to introduce new reporting frameworks. To find out more, book a call with one of our team.
Before talking about examples of Innovation in the Workplace, it’s worth taking a minute to explore what’s meant when we say “Innovation”. But if you don’t need some blog telling you what “Innovation” means, then go ahead and scroll to the examples! We don’t mind.
Innovation can seem like a buzzword sometimes - some nebulous concept to do with changing things to be newer, sexier, better. It’s a hot potato at the moment, with companies needing to adapt to the triple threat of digitalization, the Covid-19 pandemic, and the climate crisis.
For many people, “Innovation” means new technology, and this is often true – see our blog on successful examples of Product Innovation. But, the meaning of innovation is much broader than the introduction of new tech. Professor Benoit Godin of INRS Montreal tells us that the concept of innovation was born in Ancient Greece, where it meant changes to laws and political constitutions. Later, early Christians used the word to mean “spiritual renewal”, and perhaps this is what many companies mean when they say “Innovation” today. Godin tells us that after the Protestant Reformation, innovation became for a while a pejorative concept, viewed as introducing dangerous change into the established order, and innovators were persecuted. Luckily, from the 19th Century onwards and certainly after World War Two, innovation was seen as a tool for political, social and material progress. I for one am glad that innovation today is more likely to involve smoothies and zoom calls than dungeons and rusty thumbscrews!
Anyway, a vital and often overlooked form of innovation is Workplace Innovation. What exactly this is depends on who you ask, but Workplace Innovation EU have a great definition:
“workplace practices and cultures which enable employees at all levels to use their knowledge, competences and creativity to the full.”
Sounds pretty good, right?
A lot of the workplace innovation philosophy is simply creating the space for employees to use their own initiative to help create the future of the company. As Steve Jobs said:
“It doesn't make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.”
Here are some instances of companies making bold changes to the workplace that in a bygone era might have had them pursued by the inquisition, but that in the 21st Century led them to profits, happier and more innovative employees, and success :
The life of a yoga teacher can be a precarious balancing act. While yogis model poise and inner peace in the studio, the employment landscape can be treacherous and teachers are often under a lot of stress.
This is because yoga teachers generally work on a freelance basis, paying studio fees and relying on a good turnout to make a profit. It is notoriously difficult to make a living on yoga teaching alone, with many relying on other jobs or independent funds to stay afloat.
Marianne Meehan and her business partner James Wilson, founders of Tribe Yoga, decided to challenge this, when they spotted a gap in the market for a high-end yoga studio in Edinburgh. After engagement with the Innovating Works initiative at the University of Strathclyde, Marianne and James decided to break from the status quo of hiring only self-employed teachers. Instructors were given the option to move to employee status, and every one chose to do so. They haven’t looked back.
One Tribe teacher said:
“It's quite lonely being a yoga teacher... you move from studio to studio with little team or client contact beyond your teaching hours. At Tribe I know most of my clients by name and have developed amazing friendships with my colleagues. I'm far happier being at Tribe, and I know it shows in my classes.”
There have been many business benefits too – employees are engaged and invested in the future of the business. Teachers also work on social media, events, marketing, reception work and sales efforts. Sick leave and absenteeism are way down.
Tribe Yoga made the bold decision to innovate beyond the “passion exploitation” model too common in the yoga teaching industry. Did offering fair and stable employment work? Well, Tribe Yoga achieved £1.5m turnover after 3 years, and now has 3 sites in Edinburgh, attracting a diverse clientele including Premier League footballers. It worked.
I expect you’ve heard of Art Fry, a scientist at 3M who dreamt up the idea of applying weak adhesive to the back of a piece of note paper.. and the post-it note was born! A classic example of product innovation. But what you may not know is that this light bulb moment was the result of a workplace innovation.
Fry came up with his now ubiquitous invention during his “15 percent time”. At 3M, employees are encouraged to set aside a part of their on-the-clock time to “proactively cultivate and pursue innovative ideas that excite them”. This is a fairly common practice nowadays, with Google, HP, and other tech giants offering similar initiatives. (Google’s 20 percent time birthed Gmail, Google Earth, and Gmail Labs). But 3M introduced 15 percent time in the 1950s, a period of rigid hierarchy and strictly defined job roles. It was a radical workplace innovation, and led to radical success.
15 percent time continues to be a fixture at 3M. IT was implemented under William McKnight, who outlined his attitude to management:
“Hire good people and leave them alone. Delegate responsibility and encourage men and women to exercise their initiative. Management that is destructively critical when mistakes are made kills initiative. And it’s essential that we have many people with initiative if we are to continue to grow.”
For 3M, Google, and other companies, allowing employees free space and time to be creative and to risk failure has allowed huge ideas to flourish.
If I were to ask you to name the most hip, cool, progressive organisation operating today, what would you say? The UK Department of Work and Pensions, right?
Exactly! In 2011, the generally beige DWP got on board with one of the hottest ideas at the time – gamification. If you use a gaming app, Duolingo, or, well, anything really – you’ve encountered gamification. It involves the application of “game” elements such as point scoring, competition with others, and linear progression, to other arenas of activity, such as learning a language or keeping fit. Or encouraging innovation at a large government department!
In 2010, the DWP developed a gamification platform to encourage innovation – Idea Street. If an employee comes up with an idea, they get points – “DWPeas”. These Peas could also be earnt for developing that idea, or the idea of a colleague. The Peas could also be “invested” into proposals and shareholders would profit (with more Peas) if the project progressed but would lose their Peas if it was scrapped. The most successful participants were temporarily seconded onto the innovation team.
Did it work? More than 6,000 staff used Idea Street and over 60 proposals generated using the scheme were implemented, saving more than £20m. It also encouraged a culture of innovation, and the cross-pollination of ideas. The system was rolled out to a number of other government departments.
There’s no one-size-fits-all formula for what makes successful Workplace Innovation, but this definition from Totterdill, P., Dhondt, S & Milsome, S gives a pretty good description of what we’re after:
‘Workplace Innovation’ defines evidence-based organisational practices that enable employees at every level to use and develop their skills, knowledge, experience and creativity to the fullest possible extent, simultaneously enhancing business performance, engagement and well-being.
This can look different for every organisation. Workplace Innovation often means going against the grain. We saw how in the case of Tribe Yoga, applying an fair employment structure to a wishy-washy sector paid off. Conversely, with 3M and the DWP, it was creating a little blue sky and allowing employees to play within rigid organisations that led to fantastic success.
Workplace Innovation often involves taking risks. At large organisations it requires the exchange of information between many departments. Its benefits can also appear nebulous and difficult to justify to stakeholders. Intuitix centralises and streamlines the innovation process, reducing time spent on administration with a single version of the truth. Intuitix also automates stakeholder communication, providing full transparency at every step. Allow Intuitix to disentangle the workplace innovation process, leaving your employees free to come up with the next post-it note.
