Many considerations affect the decisions companies make about what environmental, social and governance (ESG) information they report and how, where the information should be reported and for which audiences. Choices about what to report are influenced by the regulatory and societal context in which the company operates, its stakeholders, ethical choices and values, etc. The absence of universally agreed objectives, standards and thresholds for external disclosure of ESG information means that reporting takes place against a background of uncertainty. Risks can arise from failure to satisfy stakeholders’ information needs, perceptions of lack of accountability and disconnects between information reported through different channels.
Companies therefore adopt various approaches to ESG reporting in practice. These include:
- Publishing multiple reports aimed respectively at particular subject matter, themes, objectives or framework requirements;
- Integrated reporting that aims to cover all subject matter relevant to performance and value creation, including increasing presentation of ESG information alongside financial statements and management commentary; or
- Hybrid approaches based on a range of influences, including reporting requirements, internal objectives, peer practice and/or targets for inclusion in indices.
All of these approaches are legitimate responses to the demand for ESG information. However, in many cases it is difficult for users of information to discern why a particular approach has been used, what assumptions inform conclusions about ESG information, and what purpose and audience the information is intended to serve. There is also some evidence of a disconnect between the ESG information investors seek and the information provided by companies. The ESG disclosure judgement handbook offers a structured process to address the multiple considerations that form inputs into decision-making about ESG reporting.