Metrics in use for ESG Reporting- 1 Best and complete read

Metrics in use for ESG Reporting

Here is a list of Metrics in use for ESG Reporting that companies can use to start communicating on the ESG issues. The metrics have been divided into four categories:

Each category contains recommended disclosure metrics (both qualitative and quantitative) that have been marked either as minimum disclosures (relevant to all companies) or additional disclosures (that might not be relevant to all companies).

The selection of recommended disclosure metrics has been informed by relevant regulatory initiatives i.e. the CSRD and the ESRS as well as the Warsaw Stock Exchange corporate governance code. Moreover, to address increasing investors’ data needs, they have been also aligned with the mandatory PAI indicators for corporate investments required by the SFDR (see mapping in the Appendix – Relevance of the Guidelines to investors). References have been added below each section to other frameworks and resources that companies may also consider (Appendix – Alignment with EU regulations and other frameworks).

It should be emphasized that the Guidelines do not provide an exhaustive list of indicators and topics. Rather they aim to offer less advanced companies a minimum set of carefully selected disclosure metrics that will help them to prepare for the upcoming requirements stemming from the CSRD and the ESRS and better respond to investors’ ESG data needs. Companies in scope of the CSRD should use the ESRS to prepare their disclosures on material sustainability topics.

Metrics in use for ESG Reporting – General information

General information metrics provide essential context to understand the company business activities and value creation model, it’s material ESG impacts, risks and opportunities, and how it is managing them.

General information

What should be disclosed:

I

M 1

Business model

  • Short description of the company business model and value chain.
  • Whether the company is active in the following sectors: fossil fuel (coal, oil and gas), controversial weapons along with related revenues.

Companies may consider including the following characteristics when describing their business model: economic activities; products and services offered; markets of operation, company size (in terms of workforce, business locations, revenue, etc.)

I

M 2

Sustainability integration

  • Whether and how sustainability matters are integrated in the company strategy and business model.
  • Resilience of the company strategy and business model(s) to material sustainability risks.
  • Policies and actions adopted to manage material sustainability matters.
  • Targets related to management of sustainability matters.

I

M 3

Sustainability governance

  • Governance bodies roles and responsibilities with regard to sustainability matters (e.g. in relation to risk management, target setting, sustainability disclosure).
  • Whether governance bodies are informed about sustainability matters, and how they are addressed by administrative and/or management bodies.
  • Whether incentive schemes are offered to members of governance bodies that are linked to sustainability matters.

I

M 4

Material impacts, Risk and Opportunities

  • The processes used to identify material impacts, risks and opportunities.
  • Sustainability due diligence process.
  • Outcome of the materiality assessment (identified material impacts, risks and opportunities).
  • How material impacts, risks and opportunities interact with the company strategy and business model.

I

M 5

Stakeholder engagement

  • Description of the company main stakeholders, and how the company engages with them.
  • How the interests and views of stakeholders are taken into account by the undertaking’s strategy and business model.

Metrics in use for ESG Reporting- Environmental disclosures

Environmental metrics cover issues that arise from or impact the natural environment.

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The real meaning of Integrated reporting

The real meaning of integrated reporting

Integrated reporting is more than only aimed at informing interested stakeholders about performance achieved against targets, the vision and strategy adopted to serve the stakeholders’ interests, and other factors that can influence business performance in future.

Clearly regulations require companies to exercise transparency. However, a more fundamental reason for reporting lies in accountability: a company needs to account for the impact it has on the stakeholders it relates to. Not exercising such transparency would impose serious risks, including high financing costs to compensate for a lack of transparency or governance or, ultimately, losing the license to operate. By contrast, a transparent approach would not only improve reputation, but also would bind stakeholders such as employees to the company’s objectives.

The reason for including environmental and social factors in reporting

In today’s world companies play a significant role in shaping the future of society. Awareness of this has risen significantly over the last decades, resulting in changed attitudes towards the role business is expected to play.

It also resulted in changes in the views of business leaders about the role they want to play.

Business these days is seen more than ever as the agent of a wide group of stakeholders. Unlike the old paradigm that ‘the business of business is business’, companies accept wider accountability in current times towards the stakeholders whose interests they impact – no longer can companies focus only on the interests of those with a financial interest.

This wider accountability implies that companies have to fulfil the (information) needs of those who provide them with integrated reportingother economic resources such as labour, space, air or natural resources and those who enter into transactions with the organization such as customers. Therefore a company’s current performance and future ability to continue operations and achieve business growth needs to be evaluated on the basis of a comprehensive set of factors that influence these.

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Relationship of Growth ROIC and Cash Flow

Relationship of Growth ROIC and Cash Flow – Disaggregating cash flow into revenue growth and ROIC helps illuminate the underlying drivers of a company’s performance. Say a company’s cash flow was $100 last year and will be $150 next year. This doesn’t tell us much about its economic performance, since the $50 increase in cash flow could come from many sources, including revenue growth, a reduction in capital spending, or a reduction in marketing expenditures.

But if we told you that the company was generating revenue growth of 7 percent per year and would earn a return on invested capital of 15 percent, then you would be able to evaluate its performance. You could, for instance, compare the company’s growth … Read more

Market Bubbles – How 2 best understand it

Market Bubbles- During the Internet bubble, managers and investors lost sight of what drove return on invested capital; indeed, many forgot the importance of this ratio entirely. When Netscape Communications went public in 1995, the company saw its market capitalization soar to $6 billion on an annual revenue base of just $85 million, an astonishing valuation.

This phenomenon convinced the financial world that the Internet could change the way business was done and value created in every sector, setting off a race to create Internet-related companies and take them public. Between 1995 and 2000, more than 4,700 companies went public in the United States and Europe, many with billion-dollar-plus market capitalizations. Market Bubbles

Many of the companies born in this … Read more

Fundamental Principles of Value Creation

Fundamental Principles of Value CreationFundamental Principles of Value Creation – Companies create value by investing capital to generate future cash flows at rates of return that exceed their cost of capital. The faster they can grow and deploy more capital at attractive rates of return, the more value they create.

The mix of growth and return on invested capital (ROIC) relative to the cost of capital is what drives the creation of value. A corollary of this principle is the conservation of value: any action that doesn’t increase cash flows doesn’t create value. Fundamental Principles of Value Creation

The principles imply that a company’s primary task is to generate cash flows at rates of return on invested capital greater than the cost of capital.… Read more