The importance of ESG reporting is increasing,especially because investors and other stakeholders are putting more pressureon companies to disclose their ESG practices. An ESG report acts as a singledocument that can address any concerns or questions a stakeholder may have. Thereport creates accountability for the ESG practices of these firms and can havean effect on shareholders’ willingness to invest as well as the perception thatcustomers can have of the company.

ESG reporting allows for a deeperunderstanding of a company’s ethical, environmental and social practices. Itcan give responsible companies a competitive edge over their non-ESG counterparts.

ESG reporting accounts for both qualitativedisclosures of ESG practices and quantitative measures utilised by a company tomeasure its performance. This creates a measurable way to assess ESG risks andopportunities, as well as relevant strategies. This allows investors to assessthese risks and come to a final decision about whether to invest in a company.Investors have been known to even overlook companies that choose not todisclose their ESG practices through ESG reports.

Creating an ESG report can be challenging asit must meet specific requirements and have a balance between different ESGagendas. Companies will have to determine which information and indicators toreport and how to communicate this information. High-quality data is needed toensure that reporting is accurate. External auditors are often brought in toevaluate the accuracy of ESG reporting to ensure this accuracy.