ESG, Sustainability or Impact Report: What to Consider Before You Rename Your Report
By Constanze Duke, Senior Sustainability Consultant; Karina Hilton Spiegel, Senior Sustainability Consultant; and Marya Skotte, Sustainability Consultant
In recent months, our team at ISOS Group has seen an uptick in questions from clients about what to name sustainability reports. “Should we still call it an ESG report, given the ESG backlash?” “Are companies getting away from using the term, Sustainability Report?” In response, we did a bit of research and found no indication of a substantial report re-naming movement. But we understand why companies might be anxious and hope to clear up some of the confusion. Let’s start with a rundown of the most common report names and their definitions before diving into our recommendations.
1. Sustainability Report
While the term sustainability has been used since 1713 (in the context of forestry at the time), modern sustainability reporting evolved from environmental reports published by large corporations in the 1980s following the catastrophic Exxon Valdez oil spill. After the Brundtland Commission used the term sustainable development in 1987, sustainability became more prominent in reporting circles and was solidified in 2000 when GRI (Global Reporting Initiative) published its first version of sustainability reporting standards. Sustainability is a broad term that considers impacts on the company as well as the company’s impact on people and nature.
2. Corporate Social Responsibility (CSR) or Corporate Responsibility Report
The concept of CSR has been around since the 1950s but was formally and extensively defined by the ISO 26000 guidance on social responsibility in 2010. Like sustainability, this is a broad term encompassing inside-out and outside-in perspectives. While frequently mistaken as referring only to community initiatives and philanthropy, social responsibility includes responsible governance and environmental stewardship. After all, societies can’t thrive on a deteriorating planet. Sustainability and CSR can be used interchangeably in your report name, but using both is redundant.
3. ESG Report
The term ESG was first used in a 2005 report (“Who Cares Wins”) by a joint initiative of financial institutions at the invitation of the United Nations. It was defined as a framework to help investors “understand the investment implications of environmental, social and governance (ESG) factors” by Principles for Responsible Investing. ESG is a component of sustainability or CSR that considers financial impacts on companies. Although we’ve seen claims of ESG being the data-driven version of sustainability, this is quickly debunked by the data-driven disclosure requirements of earlier standards. The term ESG, as originally defined, is best suited for companies focused on financially material disclosures, though many companies now use it interchangeably with sustainability.
4. Impact Report
This name is quickly catching up with other report names. It’s an elegant, non-controversial option that can be used in lieu of ESG and Sustainability for reporting purposes, though each report should define its objective early on. The term most likely arose from the GRI Standards and their guidance on impact materiality, where impacts can be positive or negative.
If you’re feeling creative, here are some other names we came across:
Stakeholder Report | Social Impact Report | Imprint Report | Citizenship Report | Global Responsibility Report | Responsible Business Report | Stewardship Report |Mission Report
Our Recommendations
Now that we’ve created some clarity around these sustainability-related terms, we will walk you through our recommendations for report naming. Our recommendations center on two important considerations — content and audience. What is the content of your report? Is it focused on financial impacts on the company or impacts the company has on the economy, environment and people? Who is the intended audience? Is it primarily for investors or for a diverse group of stakeholders such as employees, community partners, customers and consumers?
We recommend using the ESG Report title if your report meets the following criteria:
Content: It primarily includes information about financial impacts on the company, i.e. financially material risks and opportunities. This can be viewed as the outside-in perspective, or how sustainable development challenges impact an organization financially, i.e. the impact of sustainability topics on the company’s ability to create value.
Audience: It is mostly intended for investors.
We recommend using the Sustainability or Impact Report title if your report meets the following criteria:
Content: It is focused on a balanced account of impacts. Impacts refer to the effects that an organization has or could have on the economy, environment and people because of its activities or business relationships. This is an inside-out view and refers to how the organization contributes to sustainable development, i.e. the impacts of an organization's activities on the world. Or, it covers both financial sustainability-related information and impacts of the organization’s activities on the world.
Audience: It is intended for a diverse group of stakeholders, not just investors.
Companies who are prioritizing financial impact but wish to move away from the term ESG have other options. You could use the name of the standard they are aligning with, for example, use Sustainability-related Financial Disclosures for IFRS S1 and Climate Report for IFRS S2. Another option is to fall back on Impact Report and specify early on that you’re prioritizing financial impact. Integrated reporting is also an option. Companies that absorb their sustainability-related reporting into their annual report, as we are seeing more frequently in Europe, no longer face challenges in naming the report.
Finally, it is important to keep in mind that content matters more than the report's title; we recommend you be consistent with the name you choose rather than changing the name from year to year based on external pressures or trends.
The Big Picture
Understanding the context of report naming conventions is crucial, as is aligning them with long-term company goals and global trends. Companies should take a wide, holistic and strategic view in determining the future of their sustainability reporting efforts and projects.
Despite perceived backlash against sustainability, data shows most companies are maintaining their focus on sustainability issues. At ISOS Group, we work with public and private companies across various sectors and industries, primarily in the U.S., and we have not seen any major shifts away from the term, ESG. The concern seems primarily U.S.-based, with minor backlash observed in parts of Europe.
Companies, especially those with international operations or aspirations, should consider a global perspective. Regulations like the European Union’s Corporate Sustainability Reporting Directive (CSRD) and similar initiatives in India and Brazil indicate a growing global trend toward corporate transparency and more robust sustainability reporting efforts. U.S. companies can look to how companies in other more progressive countries are reporting for inspiration. For example, many companies in the EU now lump their sustainability reporting and financial reporting into one comprehensive “Annual Report.”
In determining their report naming approach and broader sustainability communications strategy, companies should base these efforts on their mission, vision and values. Inflated issues and backlashes will pass, but commitment to principles and stakeholders should remain steadfast. If a company’s values revolve around treating its people, communities and the environment with respect, the company should continue to publicly communicate these efforts.
In a landscape where ESG receives more scrutiny, it's understandable that many companies feel compelled to mirror the actions of their peers. Drawing inspiration from others is entirely acceptable, yet it's crucial to remember that your company's unique mission, vision and values should steer your approach. Prioritizing transparent communication about the issues that matter most to your key stakeholders should be your utmost concern. This approach ensures that your sustainability reporting rings true to what your company stands for, rather than just reflecting industry trends.
At ISOS Group, we have over a decade of experience in sustainability reporting and communications. We work with clients across industries and sectors and have our finger on the pulse of the evolving reporting landscape.
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