In sustainability reporting, where a multitude of environmental, social, and governance (ESG) factors intersect, the challenge often lies not in gathering data, but in discerning the vital threads that weave together a comprehensive narrative of a company's sustainable performance. Prioritising key indicators within this intricate landscape is akin to distilling a symphony into its most resonant notes - a task requiring both precision and artistry. As companies navigate the world of sustainability reporting, the ability to identify and prioritise these essential indicators emerges as a cornerstone of effective communication, strategic decision-making, and a genuine commitment to a more sustainable future. However, it’s not a simple task.
Joaquín Tribolo from BDO in Argentina belies it would be a mistake to believe some indicators are more relevant than others, generally. He says that while all indicators are relevant, priority should be given to those that are material to the company, and this information is usually similar for all companies in the same sector. For example, for a professional services firm, the handling of radioactive materials is not a material issue, but for a nuclear power plant it is, and this is where special attention should be paid.
A key requirement under the CSRD, is that an organisation must conduct a double materiality analysis accurately. There are some mandatory disclosures, with others being dependent on the materiality analysis and others being optional. This, alongside the analysis of impacts, risks and opportunities (IRO) using sector-specific indicators is what will give a company its key indicators.
In Chile, for example, some industries have already made great progress in identifying key indicators. SASB provides a list of material indicators for each industry and companies should review SASB, GRI, and other frameworks to identify the most material KPIs for them. Once they have done that, they can set baselines, goals, and objectives.
Viola Möller points out that in many cases ‘sustainability’ will not be something new for the company. Many companies already do something, whether it be trying to use less energy in their buildings or moving to electric vehicles for their fleet. Her advice is to look at what you already do to be more sustainability and then build on this. Leverage your existing focus areas, measures, and targets, and try to connect them to the requirements of the applicable reporting requirements, whether this is IFRS SDS, IFRS SDS as adopted by a particular jurisdiction, or CSRD. There will still be gaps but this is a good start.
Möller acknowledges that many companies are currently under economic strain, and that additional reporting requirements will be seen as an extra financial burden. While this is not a comfortable situation to be in, it will be unavoidable for most large companies.
BDO in Norway is seeing an increased focus on biodiversity and nature-related risks and opportunities, making it important to be able to report relevant measures and indicators. Morten Thuve, Partner at BDO in Norway, highlights the social dimension of ESG reporting, suggesting companies be transparent on measures and indicators related to diversity, equity and inclusion, both in their own business as well as in their value chain. Möller agrees with this approach, believing these factors could be a missed opportunity when it comes to reporting.
