ESG regulations are designed by government bodies, international organizations or relevant authorities, and they should be viewed as incentive tools that help a company or organization increase investments in environmental, social and governance initiatives. Disclosure regulations are produced and implemented because said authorities want to drive change and speed up ESG performance within companies and organizations. 

First off – What is ESG Reporting?

There are many different types of reporting frameworks for ESG, and it can be a complex task to understand these various ways of doing ESG reporting. It is, however, important to get a sense of what they entail in order to fully comply with the regulatory requirements that exist. 

Some requirements are mandatory, while others are regulatory. Depending on which ESG reporting framework you follow, you are required to collect and report on certain data. ESG reporting frameworks are either mandated by regulatory bodies or adopted voluntarily by organizations.

US and EU ESG regulations are evolving rapidly and therefore you must have a process in place for how to respond to these developments. 

SEC reporting requirements

The U.S. Securities and Exchange Commission (SEC) have made revisions to its reporting requirements. Revised in 2024, they include a set of rules that businesses must comply with. They must disclose climate-related information like environmental risks on their organization, what their processes are for identifying these risks, and their greenhouse gas emissions and concrete strategies to reach their reduction targets. 

CSRD reporting requirements 

In 2023, the Corporate Sustainability Reporting Directive (CSRD) took effect. The EU directive consists of ESG compliance rules that require companies to standardise and verify their reporting on ESG performance. Considering the scope of this directive, many companies are affected by it and must be compliant with the CSRD.

CSRD requires strategic and procedural considerations, in particular, to materiality. The design of double materiality analysis, and reporting responsibilities, are therefore crucial to nail down. A materiality analysis is a comparison of the risk quantification to a predetermined threshold. However, in a double materiality analysis, you must also comply with certain requirements within the CSRD. 

What is a double materiality analysis? 

1. An outside-in assessment of external ESG-related risks 
2. An inside-out assessment of the company’s environmental and social impacts globally, which should be considered through the value chain (from sourcing to manufacturing)

CSRD requires companies to complete the analysis for every legal entity. If a single global or regional report is issued, then this analysis must be included in every report. 

Through proper guidance and expert advice, your ESG reporting will become more comprehensive and effective. In CEMAsys we help large and small organizations with their ESG reporting, which ensures that sustainable initiatives are well thought out and implemented on every level that they make sense.

1. Determine reporting strategy 

It is key to determine reporting strategy before you assess the requirements that the various regulations set forth. This is a way for you to ensure that you meet certain requirements. 

2. Collect data 

Collect ESG data and decide what is relevant for the reporting requirements. The data is also influenced by the ESG scores and metrics you adapt to.

3. Address riks 

In the reporting strategy, you will have had to assess the risks of climate change. When you do risk assessments you should additionally consider the overall control environment, including key controls for data quality and disclosure. This must be consistent as well. 

4. Comply with the regulations 

Every regulation has certain reporting requirements, and it is essential that you comply with them. This is possible by determining scope, assessing sustainability risks, and aligning stakeholders.

5. Enable automation and technology

Take advantage of digital systems that will benefit your reporting flow. For example, in the CEMAsys software you can tailor the reporting on ESG metrics on your company’s needs and size. This provides the flexibility you need to report compliantly and efficiently.

The ESG disclosure is a report on how a company is actually committing to environmental, social and government-related initiatives. ESG disclosures provide transparency and accountability in reporting on risks, emissions, or supply chain disruptions that are critical to the operations. They are also provided in a structured and preemptive manner. This builds loyalty and trust from investors, but also consumers and customers. Stakeholders use the data to assess, understand and make decisions on business effectiveness, risk, and sustainability.

• It helps reduce operational costs. ESG data and reporting create greater transparency around your performance, enabling you and your stakeholders to identify inefficiencies and opportunities for improvement.
• It allows you to track progress toward your goals. With consistent ESG metrics and a structured measurement process, you can quantify performance over time and assess how effectively you’re advancing toward your sustainability targets.
• It helps you comply with ESG regulations. ESG reporting is increasingly governed by regulatory requirements—many of which are outlined in EU directives. Measuring your ESG performance is a critical step toward meeting these obligations and avoiding compliance risks.
• It improves your brand recognition. Demonstrating ESG performance enhances your reputation at both local and global levels, in addition to influencing various stakeholders, from consumers to potential investors. 

1. Environmental data. Generally, environmental data covers measures that you take within the company to reduce carbon emissions or general pollution. It can also be documented data on practices for waste disposal or air and water quality improvement.
2. Social data. Documented data on how your company is working to include gender, BIPOC and LGBTQ+ initiatives, do data protection and privacy, and follow labor standards.
3. Governance data. Documentation of internal controls as well as data on politics and principles on various internal activities. These can be shareholders’ rights, board elections, lobbying and whistleblower programs.

Based on ESG metrics 

ESG metrics are quantifiable performance metrics that you use to measure the impact of your ESG initiatives. 

Including ESG scores 

ESG scores are external assessments of how well you are performing based on the ESG data you have collected. Independent, third-party organizations like Bloomberg, Sustainalytics and Dow Jones assign ESG scores. 

Attributes in ESG disclosures 

Additionally, ESG disclosures provide information on risks, opportunities, strategy and performance. This information is important to get the full picture of the situation that the company is in.

We want to summarize this article with the three best practices for doing ESG reporting. Our intent is to provide you with some guiding rules you can follow to ensure that you make credible recommendations into how ESG activities can be improved. Companies will enhance the effectiveness of their operations, build stakeholders’ trust, and be more accountable in environmental, social, and government-related initiatives.  

Use your ESG data effectively 

The key to proper ESG reporting lies in the data foundation and how you utilize this effectively. You should use both internal and external data, meaning you must include supply chain data from partners and stakeholders. 

Additionally, we recommend that you use various data analytics tools and establish data governance processes. Data is nothing if it is not controlled for accuracy and proven to be reliable. That is why compliance with data governance is essential. 

Ensure that all ESG reports are consistent

That an ESG report is produced consistently can mean several things. One, it should be formatted in the same way all the time and two, it should be published on a regular basis. This provides reliability and consistency for the relevant stakeholders. 

In practice, this includes standardizing the methodologies of data collection and reporting, as well as aligning with industry standards.

Be a credible source 

Related to the previous practice, all ESG reports must be credible. Not only should the data be accurate and reliable, but you should involve stakeholders in the reporting process. Get their feedback and use that input to make your ESG reports even more transparent and relevant. 

Streamline your sustainability reporting process with our software solution. Consider it a hub for sustainability data where you can retrieve, analyze and visualize your ESG adherence across sources. Explore the CEMAsys solution now and speed up your ESG compliance.