Environment, Social and Governance

Environmental, Social and Governance (ESG) reporting is quickly moving from a voluntary corporate public relations tool to a regulated B2B communications prerequisite. To fully understand the drivers behind ESG planning and reporting the Transportation Energy Institute is publishing a new white paper that provides a history and outlook which can help guide businesses.

Because ESG reporting is intended to provide business risk information (including climate change abatement approaches) to investors and boards, the Securities and Exchange Commission (SEC) recently proposed rules to govern ESG and provide some needed guidance. Even before this proposal, however, financial industry stakeholders, from investors to bankers and loan providers, were increasing their reliance on ESG principles when making investment and loan underwriting decisions.

Under the proposed rules, phased-in requirements will put new reporting requirements directly on publicly traded companies. In a surprise move, the SEC not only requires these companies to provide their direct CO2e emissions (Scope 1), but also includes the reporting of all indirect emissions (Scope 3). This will require associated companies (public and private) to report emissions to the publicly held SEC reporting company. As written, ESG requirements will touch every organization that is in the supply chain.

SEC requirements are likely to impact industry as early as 2023. If the SEC rules are delayed, large publicly traded companies have indicated that they will move forward regardless.

Research also shows that investment in ESG related initiatives can create value and contribute a positive return on investment to a company while appeasing societal pressures. Successful programs can result in top-line growth, cost reductions, reduced regulatory and legal interventions, increased productivity, asset optimization, and enhance performance all while benefiting the company’s public relations and increasing access to capital.