ESG reports vs Integrated reports

This week, as we get closer to kick starting annual reporting projects, we want to answer one question we get a lot. Is it better to publish an ESG report, or is it better to publish an integrated report? You may be thinking that deciding what ESG information to disclose is confusing enough, so what is the deal with having two avenues for reporting?

First, for those of you who have never published ESG information, let us briefly define each option.

1. ESG or Sustainability Reports: are annually published documents that describe in detail the actions, initiatives, plans, goals, and achievements the company has had in its ESG efforts. These are often aligned to reporting standards such as GRI, SASB, TCFD, CDP, GRESB, SDGs, etc.

2. Integrated Reports: are a combination of traditional annual reports (which are mostly focused on financial data, corporate structure and governance, risks, market data) and ESG reports.

So, which one is better?

Independent Pros:

• You can share much more detailed information regarding the company’s ESG strategy and achievements, since the sole purpose of the report is to report on this matter.
• Stakeholders who are not that interested in financial information, may find an independent report easier to read, and may actually interpret the time dedicated to this topic independently as an increased focus from the organization on the subject.
• Since there is more flexibility with the publishing timeline, resources may be less stretched in the annual reporting season (but we do recommend being as close as possible to financial reporting deadlines for temporality reasons).

Independent Cons:

• Some people may not look for the independent report and incorrectly assume there is no ESG data from the company available.
• Other non-ESG-linked business areas may feel less involved with the report and thus with the sustainability strategy.
• You may miss the opportunity to showcase the ESG strategy and position the company as an early adopter with investors who are not yet sold on sustainability and therefore don’t actively look for ESG data.

Integrated Pros:

• Integrated reports need board sign-off (an independent sustainability report does not). This encourages cooperation between Finance/IR and ESG teams within the company, which may lead to more robust messaging and holistic thinking regarding strategy.
• These reports become a one stop shop for stakeholders who care about ESG but also need financial data (equity investors, debt holders, etc.), while they also get a broader dissemination and thus reach a wider public.
• As annual reports usually have regulatory deadlines (and ESG reports do not), going for integrated reports supports temporality of ESG data (i.e., it makes the organization commit to similar timelines for publishing financial and sustainability data).

Integrated Cons:

• Considering extremely long reports are usually never read in full, some ESG aspects that would make it into the sustainability report may not make into the integrated report.
• Integrated reporting, when done thoroughly, may stress the organization given the tighter timeline to produce both financial and sustainability data.
• Integrated reporting may imply higher costs and resources, especially while the organization ramps up its ESG knowledge.

 Therefore…

We do not think there is an absolute winner in this debate. It really depends on who you want as your audience, what your communication goals are, and what kind of resources and ESG knowledge the company has.

Those who are beginning their ESG journey, and don’t yet have timely ESG data, but want to make a statement as to how they are making sure to launch a robust ESG strategy, may be better suited with an independent report. Those who have been reporting ESG data for a while, have the right resources to do it, and want to expand your audience for the sustainability data, may want to go for an integrated report.

We are happy to help you with this decision, should you decide to embark on this journey for the 2020 reporting season.

I hope you found this interesting. As usual, if there is anything we can help you with, please reach out.

Best,

Marimar

Partner, Miranda ESG