From the onset of the 1980s, sustainability reporting emerged as a scattered concept. But with the arrival of the 2000s, sustainability reporting renewed with vigor. Then in 2004, the term ESG was popularized in a report titled, “Who Cares Wins”, a collaboration of financial institutions at the invitation of the UN.
Sustainability reporting vs ESG reportingHow different are they?
From the onset of the 1980s, sustainability reporting emerged as a scattered concept. But with the arrival of the 2000s, sustainability reporting renewed with vigor. Then in 2004, the term ESG was popularized in a report titled, “Who Cares Wins”, a collaboration of financial institutions at the invitation of the UN.
From 1980s till the 2000’s, we witness the rise of conscious effort by nations and businesses alike to build sustainable business practices that push human developments while safeguarding the planet. With time, sustainability and ESG reporting emerged which meant enterprises must report on their non-financial activities.
But with growing policies and changes, these concepts became more comprehensive, and several distinctions arose. For those who are new to this race, these phrases may seem interchangeable. However, they are distinct from one another.
This blog aims to clarify the distinction, share facts, and highlight their importance so that organizations can ultimately decide – what suits their requirements. Let’s dive in.
Sustainability and ESG reporting: Definitions and its importance
Sustainability reporting
According to Greenly.earth, sustainability reporting entails the disclosure of environmental, social and governance (ESG) goals. With sustainability reporting, a corporate entity takes stock of the action plan implemented to reach its targets.
With sustainability reporting, enterprises enjoy better risk management, improved cost optimization, enhanced reputation and more. These benefits result from accessing social and environmental risks and creating risk management strategies, set newer goals, integrate sustainable business practices that help businesses navigate them better.
ESG reporting
Greenbusinessbureau.com states that ESG reporting is the disclosure an enterprise’s data on its initiatives across environmental, social, and governance aspects. By disclosing this information, a company’s progress related to these three fields can be examined against benchmarks and targets. Upon examination, an ESG report is crafted with the intention of providing complete transparency to the various stakeholders.
The benefits of ESG reporting include:
- Improve risk management: ESG reporting helps access risk, find suitable solutions and build enterprise resilience for the long-term.
- Comply with regulations: With evolving regulations, ESG reporting helps comply with different regulation requirements present across the world.
- Attract and retain investors: With an increasing ESG concern, investors continue to scrutinize enterprises based on their ESG initiatives. With ESG reporting, investors gain confidence on a business’s endeavors and attract more investors.
Now that we understood the definition and importance, let us focus the difference between the two reporting concepts.
ESG vs. Sustainability: Three Differences
Here is a tabulated version of the key difference between sustainability reporting and ESG reporting.
| Sustainability reporting | ESG reporting |
|---|---|
| Sustainability as a concept and reporting has a broader focus incorporating scientific inputs. | ESG reporting has a narrow focus helping enterprises assess a company’s performance and risks. |
| Sustainability reporting is used as a communication tool by enterprises. | ESG reporting is considered by investment decisions for businesses. |
| Sustainability reporting utilizes various metrics such as carbon footprint, energy consumptions, and water consumption. | ESG reporting also uses some of the sustainability measures but has a more comprehensive inclusion with metrics related to gender equality, employee benefits, greenwashing among others. |
| Sustainability reporting has been vague which deters businesses from accepting it. Also, without a clear measurement for performance and reporting, businesses find it hard to quantify the result. | Given its precision, more businesses adopt ESG reporting, and it has been proven that businesses having high ESG performance showcase lower risk exposure and higher returns on investment, along with increased resilience and performance. |
While these differences are minute, their impact upon a company’s performance is immense. Both sustainability and ESG reporting have their strengths and weaknesses and it is upon an enterprise’s focus that depends on which reporting measure they should choose.
Other resources
Top 5 questions on sustainability and ESG reporting answered
Sustainability has gained a lot of traction in recent times, but with little clarity. As businesses strive to incorporate more environmentally conscious strategies and reporting into their operations, they seek visibility into this ever-evolving process.
Why should you invest in ESG reporting?
With an increasing focus on the environment and increasing climate risk, it is not surprising for businesses to be more transparent with their financial and non-financial reports.
Sustainability has gained a lot of traction in recent times, but with little clarity. As businesses strive to incorporate more environmentally conscious strategies and reporting into their operations, they seek visibility into this ever-evolving process.
With an increasing focus on the environment and increasing climate risk, it is not surprising for businesses to be more transparent with their financial and non-financial reports.