New Rimm UK Market Research Report 2023 reveals vibrant sustainability practices in UK SMEs, but strong need for support

Our 2023 report covers emerging sustainability trends in UK SMEs. Learn how small and medium-sized firms are committing to sustainability, and taking action. Find out what challenges they face and how to overcome them.

A new report has revealed an exciting level of interest and activity around sustainability in UK SMEs. Four in five SMEs are committed to sustainability action and reporting – an impressive figure given the challenges involved and the size and resources available in some firms.

Over 50% of small and medium-sized enterprises (SMEs) are even reporting their sustainability commitments externally, according to the 2023 report by Rimm Sustainability. And over 60% are sharing the information internally. This shows the critical role sustainability communication has in many small and medium-sized organizations.

But the report revealed an urgent need for more support as only 35% of SMEs have a manager to oversee sustainability activities and reporting.

Rimm’s survey covered 500 C-suite executives from SMEs across the UK, and explored the awareness, commitment and action SMEs have taken to embed sustainability into their businesses. It also looks at how they have acted to improve performance on sustainability metrics.

The results paint a positive picture of understanding, awareness and interest in sustainability among UK SMEs. But it also shows how important sustainability support solutions have become as they look to improve performance on key metrics. Rimm’s report shows SMEs still face many pain points. Plugging gaps with external support has become necessary for most firms navigating these challenges.

Let’s dive into some of the main takeaways from the report.

UK trends

Commitment to sustainability
Rimm’s survey reveals a strong emphasis on sustainability among SME executives, with eight in 10 expressing their organization’s commitment to it. For example, an impressive eight in 10 UK SMES calculate their carbon footprint, gaining insights into their environmental performance and ways they can decarbonize.

Sustainability reporting
Four in five SMEs participate in sustainability reporting, embracing this crucial step in their journey.

Reporting channels
Over 50% of SMEs already report their sustainability commitments to stakeholders across three main channels – internally with employees (62%); in annual reports for stakeholders (56%); and on websites and social media (56%).

The top reasons for reporting are to:
– Communicate a commitment to sustainability (30%)
– Facilitate greater transparency (29%)
– Comply with regulatory requirements (27%)

Who is driving sustainability in UK SMEs?
35% of SMEs identified a sustainability manager as the key person driving sustainability in their organization. Such a dedicated manager is becoming essential in managing overall sustainability strategy for organizations, and establishing a roadmap to convert their commitments into action. But Rimm’s research shows many SMEs have not yet established this role or found someone to fill it.

Technology reliance
77% of UK SMEs use technology and a sustainability platform to facilitate their goals. Firms are increasingly harnessing the power of technology to help embed sustainability across their organization, provide guidance on regulations, and improve sustainability action and education.

What challenges do SMEs still face?

Disruption deters UK SMEs from translating commitment into action
39% of SMEs committed to sustainability said the risk of operational disruption is a top concern, followed by the risk of making a loss. These figures suggest that, while they appreciate the value of sustainability, negative perceptions linger about how it could interfere with business operations and profits.

Cost is the top reason for not reporting on sustainability
31% of respondents said sustainability reporting costs too much.

The top three pain points around sustainability
1. Understanding what to report (36%) – SMEs are concerned about the complex web of standards and frameworks companies have to navigate
2. Verifying data (35%), which adds a layer of activity for resource-constrained SMEs
3. High prices for most sustainability services (34%).

Sustainability initiatives may help your reputation. But they may also seem expensive and time-consuming for many SMEs focused on survival and growth.

How SMEs can be better supported

SMEs expressed interest in various support in achieving sustainability goals
Different SME types prioritize slightly different factors in support partners. For those with revenue above £20 million, quality and trust are the two most sought-after traits in providers. Improving sustainability performance tops the support wish list for firms with revenue under £20 million.

SMEs want support in these areas:
– A sustainability report that helps with external marketing (40%) and internal marketing (38%)
sustainability standards and frameworks (40%)
– Educational resources (38%)
– External benchmarks to compare performance (36%).

Some are also looking for a one-stop shop for everything around sustainability.

Inclusive, accessible, low-cost solutions are key

Each SME has its distinctive context, hurdles, and prospects. Each must adapt an approach to sustainability that aligns with their requirements, capabilities and readiness levels.

However, a common theme is that it is essential to lower the barriers for SMEs to voluntarily disclose sustainability information by alleviating the high costs involved. They also need more high-quality guidance on standardized metrics to help them gather relevant data.

Sustainability needn’t be a lonely and daunting journey for SMEs if they are supported with the right resources and guidance. When looking for a place to start their sustainability journey, an inclusive and accessible solution that enables them to track, measure and manage performance is vital. These tools should also support data collection and provide quality guidance, allowing SMEs to pursue their sustainability journey with minimal struggle.

Want to learn more insights from our report on UK SMEs?

Download our UK market research report today!

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‘True Materiality’ is here to stay: boosting financial growth with holistic ESG integration

Explore the untapped potential of ESG integration as we challenge traditional economic models and financial analyses with ‘true materiality.’ Learn more about what true materiality entails and how your organization can strategically benefit from adopting this moving forward.

Currently, economic models and financial analyses do not incorporate ESG in any core financial driver for companies. ESG activities conducted by companies as risk management and opportunity aspirations have no bearing on the core financial growth strategy or the key cost drivers for any company analyzed.

ESG analysis today

In general, ESG analysis focuses on understanding how Company X manages sector-specific risks and opportunities, with risk management taking priority. Sector risks are assigned based on subjective understanding and interpretation of potential ESG risks that may have a significant or limited potential impact on the company’s financial performance and/or valuation.

Most of the ESG data we have access to today is self-published by companies. It’s only very seldom verified by a 3rd party and do not – in 99% of the cases – include any alternative datasets that could be remotely interesting for an investor. It is plain-vanilla ESG data, minus the vanilla.

The core question investors are really interested in is not answered. What is the center of gravity for sustainable business? Where does it really make a difference for a company, move mountains, break chains, disrupt and evolve capacities?

Well, to find this center of gravity you will need some very daring people who question the conformity of the current financial thinking as well as the current sustainability thinking, which by the way is dominated by the Anglo-Saxon world view.

The disconnect between financial assessments and sustainability

Financial metrics are not assigned in terms of percentage of revenue affected by a “bad” or non-existent Human Rights policy or lack of Scope 3 emissions. Limited information is available on product and/or service levels in terms of potential revenue streams aligned with the EU taxonomy. Exact numbers or appreciation of financial impact, both positive and negative are currently not available, and often estimates are used in many cases as a proxy for investment decisions.

A company is assigned a certain risk and opportunity profile, which is translated into an alphabetic or a numerical rating. Depending on the analytical model used by an asset manager (passive, active, bottom up, thematic, quantitative, etc.) ratings and/or underlying ESG data can be trenched, skewed, or extracted and transformed (with a large portion of estimates) into the portfolio management decision-making process.

All investment decisions are forward-looking, based on expectations that Company X will reach or exceed certain targets, and, in that process, the investor will gain certain profit relative to the starting point of the investment. In principle, investors using current ESG datasets are making forward-looking investment decisions based on ESG datasets covering past ESG (mostly risk) management performance of the company.

Certain ESG data relating to information on products and services are limited, and, when available, they are often unconnected to the company’s overall growth strategy for specific client, market or geography segments. In other words, there is no connection between what, where and how a company plans to grow and how ESG measures deployed by the company will enable, hinder or prevent further growth.

A holistic approach to ESG integration

In the world of ESG these are so-called “ESG-unknowns” and addressing these questions should lead to further integration of ESG into the core of any company’s business and core of financial analysis. “Sustainable” companies and financial institutions selling ESG funds need to be able to answer questions on the financial relevance of ESG as they pertain to:

  • Product and service development
  • Market and client segments
  • Mergers and acquisitions
  • Pricing and sales strategy
  • Volume segments of products and/or services provided by a company
  • Biggest shareholders of the company
  • Balance sheet
  • Climate risk accounting (incorporated in overall financial accounting, not only related to companies’ own emissions, but also their products and services and core business offerings of the company)

At Rimm, we believe in what we call “true materiality,” which refers to the need to see what ESG factors can disrupt a company’s business model and how the company is managing these ESG externalities. This assessment will vary by industry and country.

The starting point of this analysis is to examine the key cost drivers in the business, including both the cost of the goods sold and operating expenses. Once these cost drivers are identified, each one needs to be tagged to a set of ESG KPIs that would impact that cost. After isolating the ESG KPIs by cost category, (what we call true materiality), we need to rate the company’s performance for each ESG KPI to determine both an absolute rating and a rating within each cost category. The rating can be developed through a combination of absolute scoring, relative scoring based on industry benchmarking or “alternative” data that provides a third-party view on the company’s ESG performance for a certain KPI.

We have to stress that true materiality is not an endgame. It is an analytical framework that allows companies and investors – and indeed all stakeholders – to engage and dig deeper between the ESG and financial connections that are so crucial to all companies. The reality is that public disclosure, even with the big push towards ESG reporting, does not give us enough to really get to the bottom of “true materiality”. It is only a point of departure to more honest discussions within companies and with their stakeholders.

Want to learn more about Rimm’s solutions?

Browse our solutions catalog or book a free demo today!

Sasja Beslik
Senior Advisor, Data Analytics

With 20 years of experience in advising multinational companies, Sasja Beslik is an expert in data analytics and creating strategies for integrating ESG into asset management. He also currently sits on Rimm’s esteemed advisory board.

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Leveraging Sustainability for Talent Attraction and Retention: Key Insights from Our Online Webinar

Discover the key insights from our event, as experts delve into the power of sustainability in shaping the new generation workforce. Gain practical tips on leveraging employee engagement for positive environmental and social impact through disclosure, reporting and analytics.

As the world continues to evolve, so do the values and aspirations of the new generation workforce. Millennials and Gen Z individuals are increasingly driven by a passion for sustainability and a desire to work for organizations that align with their ethical beliefs. This highlights the importance around the ‘S’ factors in ESG and the need to ensure proper measurement and management of organizations’ data around these factors.

Recognizing the profound implications of this trend on businesses, Rimm recently hosted an enriching online webinar titled “Sustainability: Boosting Talent Attraction and Retention in the New Generation.” We had the pleasure of having Ravi Chidambaram (Founder & CEO, Rimm), Angie Wakefield (Learning and Development Lead, Nextwave), Vi Nguyen (Principal Strategist – Sustainable Finance, Forum for the Future) and Dr. Kim Schumacher (Associate Professor of ESG and Sustainable Finance, Kyushu University) on our panel, moderated by Rina Neoh (Co-Founder and Managing Partner, Ficus Capital).

Our diverse panel of sustainability experts and practitioners came together to explore how organizations can harness sustainable practices to attract and retain top talent while fostering a positive impact on the environment and society.

Let’s delve into the key takeaways from this thought-provoking discussion and explore the strategies that businesses can employ to thrive in this new era!

Empowering Employee Engagement for Sustainable Impact

There are greater expectations placed on managers and businesses from the newer generations’ perceptions around work-life balance and culture change. The digital ability to work and work longer hours has allowed people to work longer or be more entrepreneurial and find something they enjoy doing and have higher expectations, Angie shares. For many recruiters, this means they “have to be showing the purpose and mission of your business back to the people who are coming through the door” and “through the recruitment process… finding people who are mission-aligned.”

Within the ESG and sustainability space, there is a strong, growing demand for skills and talent. This, however, comes with some challenges for recruiters as sometimes they may take “the quick route… without there being a lot sufficient material competence behind [the applicants’ credentials],” adds Kim. He highlights the importance of employers formulating what they need materially, as well as weighing training and a proper mix of expertise, as “greenwashing is the next big thing that regulators are looking at.”

Furthermore, within the industry, Vi highlights the greater importance and pressure around the “need to walk the talk,” and shares from experience that “people come to work for us with the expectation that our culture reflects the message that we are sending out there to the market… [which] has to be reflected in the hiring process all the way to internally… that has to be fair and equitable.” She also points out the opportunity to lead by example and the importance of inclusive team dynamics and employee engagement so that “every employee feels valid, safe to express their views and to do their work.”

Challenges in Navigating Sustainability Engagement

With regard to employee engagement, “the biggest challenge is scaling a company culture and ensuring that strong culture is felt,” says Angie. She highlights that there is a responsibility from both employers and employees to show the culture in their day-to-day, allow room for career development, and for there to be an engaging culture that allows for open and honest communication to better facilitate empathy and understanding in the workspace.

Ravi adds that “a lot more data and analytics could be added to this particular field and delivered to clients.” Ravi and Kim highlight the importance of materiality in understanding an organization’s sustainability performance, as well as highlights the strengths and weaknesses to gain clarity on how to strategize more effectively moving forward. For SMEs constrained by resources, there is still a necessity, global expectation and regional regulations for better management of sustainability and ESG performance. While “there is a global push for more sustainability and ESG regulation,” says Kim, if aligning with sustainability frameworks seems too resource-intensive, SMEs can conduct a materiality analysis that can help to reveal gaps and areas for improvement. “If you identify these gaps, then the next step would be to… go out and seek external ways of capacity-building, getting additional resources… It’s never too late to do a materiality analysis,” says Kim.

Measuring and Evaluating Progress: The Path to Success

“A big part of purpose is also how your company is externally making a difference, and those are things we can track better. There’s more client engagement around the S issues, particularly at larger companies,” shares Ravi.

At Rimm, we offer a very strong materiality map to map out material factors to analyze, benchmark and report on for all companies. Often in service-driven companies, the S issue becomes prominent, and these issues can be highlighted in materiality maps and tracked and benchmarked quite carefully through our assessments. We collect a lot of data on key ‘S’ metrics, including in terms of employer performance, salaries, diversity, benefits and workplace culture. We then benchmark this against our database and provide a performance analysis. As part of the process, we also tap into alternative data sources, such as Glassdoor ratings, to reinforce the overall perception of companies’ records as employers.

From this analytical framework, “companies can see how important the employer performance issue is to their industry, how that starts to affect their business and operations, and how they can benchmark themselves and set targets and objectives,” says Ravi.

In a world where sustainability has become a critical factor in talent attraction and retention, organizations must embrace these changing dynamics to thrive in the new generation workforce. Our online webinar, “Sustainability: Boosting Talent Attraction and Retention in the New Generation,” offered a wealth of insights and best practices to help organizations leverage employee engagement as a powerful sustainability strategy. By empowering their workforce, navigating regional nuances, and measuring progress, businesses can align with the values of the new generation and create a positive impact on both their people and the planet.

Interested to learn more about sustainability and leveraging employee engagement through disclosure, reporting and analytics in attracting and retaining talent?

Watch our full webinar recording to understand how you can make a positive environmental and social impact.

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Solving the Puzzle of Sustainability Disclosure: a guide to the new ISSB standards for SMEs

The new International Sustainability Standards Board (ISSB) standards help solve the problem of global reporting fragmentation, enabling clearer, more consistent reporting for SMEs. Learn how the standards can help your firm boost credibility and efficiency in your sustainability reporting.

As a small and medium-sized enterprise (SME), staying informed about the latest standards and frameworks that can impact your business is essential. This can be an onerous task given the fragmented jigsaw of global standards that have grown up around sustainability. The new International Sustainability Standards Board (ISSB) framework, announced in June 2023, is a major step forward as it aims to simplify reporting by setting a baseline for all companies.

Companies and their investors don’t currently have a common language for communicating about sustainability. But the ISSB’s first set of standards – IFRS S1 and S2 – aim to change all that by creating a common framework for all disclosures. This should bolster trust and confidence in sustainability-related information to drive investment and resourcing decisions. 

Let’s break down the new ISSB standards to understand how they can benefit your SME.

What is the ISSB?

The ISSB is an international organization dedicated to developing and promoting globally accepted standards. The International Financial Reporting Standards (IFRS) Foundation set up the board in 2021 to enhance transparency, credibility, and comparability of sustainability reporting by providing a comprehensive global baseline of disclosures.

The board’s creation helps consolidate and simplify the fragmented array of sustainability standards that has grown up over the last few decades. The Value Reporting Foundation (VRF) and the Climate Disclosure Standards Board (CDSB) have consolidated into the IFRS Foundation. And the ISSB builds on and consolidates the work of other investor-focused reporting initiatives, including:

  • Sustainability Accounting Standards Board (SASB) standards
  • Task Force for Climate-related Financial Disclosures (TCFD) recommendations
  • Integrated Reporting Framework
  • Climate Disclosure Standards Board (CDSB) framework.

ISSB will also be incorporated into the CDP global environmental disclosure platform.

The Global Reporting Initiative – another popular sustainability framework – has said it will be distinct but complementary to the ISSB, and the two frameworks are aligning their work programs. The GRI says its standard will ensure transparency on organizations’ impacts on people and planet, while the ISSB supports efficient and resilient capital markets. Together these two standards can provide a complete picture on sustainability impacts and performance, says the GRI.

Will ISSB standards be mandatory for SMEs?

Local regulators decide whether to mandate climate disclosures and to what extent their rules align with ISSB. Currently, the ISSB standards are not compulsory in most jurisdictions. But they could start aligning with global regulatory requirements as local rules evolve. 

The UK, for example, became the first country to mandate companies to make climate-related disclosures in 2022. These disclosures are currently based on TCFD, but there are plans to update them to reference the ISSB standards.

The UK rules currently only apply to large companies. However, the government plans to make climate disclosures mandatory ‘across the economy’, implying smaller firms will be included, by 2025. 

ISSB standards – the key features

The new standards apply to annual reporting periods beginning on or after 1 January 2024.

The rules are designed to be user-friendly and easy to understand, with practical guidance and examples to simplify implementation.

The standards are flexible, accounting for the varying legal, cultural, and economic environments in which businesses operate. This helps organizations comply with minimal burden or disruption to operations.

The standards are scalable, recognizing the diversity of organizations and different levels of readiness. This allows businesses to adopt them in a phased manner. SMEs can prioritize the implementation of specific standards based on their needs and resources.

The ISP framework takes an integrated approach, going beyond financial information to include non-financial factors such as environmental, social, and governance (ESG). 

Main requirements

The disclosures organizations provide for IFRS S1 (General requirements for sustainability-related financial disclosure) must be useful to financial report users in making decisions about providing resources to the entity. It requires entities to disclose information about risks and opportunities that could reasonably affect their prospects, including the entity’s cashflows, and access to finance or cost of capital over the short, medium or long term.

S1 requires entities to disclose information about their sustainability-related risks and opportunities – in particular: 

  • Governance processes, controls and procedures the entity uses to monitor, manage and oversee sustainability-related risks and opportunities
  • Strategy for managing risks and opportunities
  • Processes for identifying, assessing, prioritizing and monitoring them
  • The entity’s performance around sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation.

IFRS S2 (Climate-related disclosures) has the same key disclosure requirements as for S1 listed above, but for specific climate-related risks and opportunities rather than those relating to general sustainability. 

Disclosed targets should align with the latest international agreements on climate change – such as the Paris Agreement – and local plans, known as nationally determined contributions.

Where next?

Having launched its general sustainability and climate standards, the ISSB is also reportedly now exploring whether to extend its remit to cover areas such as biodiversity, ecosystems, human capital, and human rights.

The benefits for SMEs aligning with ISSB standards

SMEs have faced difficulties in navigating the complex alphabet soup of ESG regulations. But ISSB provides them with a solid foundation for improving financial reporting, enhancing business efficiency, and facilitating international growth.

The ISSB standards can help SMEs improve their reporting processes, ensuring consistent, accurate and reliable information. This transparency enhances credibility and helps SMEs attract potential investors and financing.

Aligning with the ISSB standards helps SMEs better manage risks by identifying how sustainability and climate issues may affect their prospects. 

It can help SMEs streamline their internal processes, making them more efficient and effective with improved decision-making, cost reduction, and operational excellence.

Adhering to internationally recognized standards also positions SMEs for global expansion. It enables SMEs to meet the expectations of international stakeholders, facilitates cross-border transactions, and simplifies compliance with regulatory requirements in foreign markets.

Keeping pace with the latest standards and frameworks is crucial for SMEs aiming to thrive in an increasingly competitive global market. By adopting the standards, SMEs can strengthen their credibility, attract investors, and unlock new opportunities for success. 

Want to learn more about Rimm’s solutions?

Browse our solutions catalog or book a free demo today!

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Leveraging AI for a Sustainable Future: Revolutionizing ESG Data Collection, Analytics, and Reporting

AI for Sustainability: Revolutionizing ESG Data Collection, Analytics and Reporting

AI is revolutionizing ESG data collection, quality checks, analytics and report generation. Here’s how to unlock the power of technology for a sustainable future with Rimm solutions.


As businesses strive towards greater environmental and social responsibility, artificial intelligence (AI) has become crucial for collecting and analyzing ESG data efficiently, says Faddy Ardian, Chief Data Scientist at Rimm Sustainability.

Here we look at how AI is transforming sustainability data practices and gain insights from Faddy on how AI is impacting ESG and sustainability performance reporting.

AI-enabled data collection

Traditionally, gathering, analyzing and verifying environmental, social and governance (ESG) data has been a labor-intensive and time-consuming process, often relying on manual surveys and reports. AI has revolutionized this landscape by automating data collection from sources such as social media feeds, news articles and financial records.

Using natural language processing (NLP) and machine learning algorithms, AI can rapidly analyze vast amounts of unstructured data and extract relevant insights. This efficiency saves time and improves the accuracy and reliability of ESG data.

‘Financial data is easy to gather and extract because it is structured,’ says Faddy. ‘But ESG information is often much less structured, there are fewer exact and consistent standards, so it is harder to extract. But AI can help.

‘It enables organizations to accurately measure and report their sustainability performance, and make informed decisions that promote a sustainable future. As the demand for transparent and responsible business practices grows, embracing AI becomes imperative for companies aiming to have a positive societal and environmental impact.’

Increasing transparency and accountability

Companies face increasing pressure from stakeholders – including investors, customers and regulators – to provide transparent and accurate ESG reporting. AI enables them to streamline data collection, validation, and reporting processes, reducing the risk of errors and inconsistencies.

Through AI-powered platforms, companies can automate their generation of comprehensive ESG reports, ensuring compliance with reporting standards and enhancing transparency. This automation saves time and resources and supports a consistent and reliable sustainability performance assessment.

Enhanced analytics and reporting

AI-powered analytics tools enable companies to delve deep into their ESG data, identifying patterns, trends, and correlations they might otherwise not notice. Machine learning algorithms can identify complex relationships between ESG factors and help businesses understand the impact of their sustainability initiatives. This data-driven approach empowers organizations to make informed decisions, set ambitious targets, and develop effective strategies for addressing ESG challenges.

Faddy says an example is that AI can help you identify risk patterns, such as around greenhouse gas (GHG) emissions, across different levels of your supply chain. This saves a huge amount of time compared to mapping risks without AI.

It can also help you benchmark and verify you are using the right documents to evidence your reporting by checking if it aligns with what peers in your sector and region are using.

‘AI can help confirm your measurements are accurate through outlier checks,’ says Faddy. ‘For example, if you’re an oil company, AI can tell you what your range of GHG emissions measurements should be. If yours is outside that range, it could be an error.’

AI can also help you with materiality. ‘Using natural language processing (NLP), we can help you identify which topics you need to track according to your sector,’ he says. ‘For example, if you’re in the software industry, data privacy is a key material sustainability factor. But if you are in the food industry, health-related issues may be more important.’

And one more thing – AI can help make your reports more presentable and written in good English.

Driving innovation and efficiency

AI’s potential extends beyond data collection, reporting and analysis. By harnessing these technologies, companies can drive innovation and develop sustainable solutions in areas such as, energy consumption, reducing waste, and improving supply chain efficiency.

For example, AI-powered algorithms can identify opportunities for renewable energy integration; enhance resource allocation; and minimize environmental impact.

Faddy says an example of how AI can help companies optimize their energy use is by calculating which floors in a building need electricity automatically turned off and when.

You can also then use AI to interpret the results and find ways to improve, for example, on how to improve your employment policies, by finding best practice case studies and other companies.

How Rimm can help

Artificial intelligence has become a game-changer in sustainability data collection and analytics. At Rimm, we empower companies to address ESG challenges effectively by automating data collection, improving transparency, enhancing analytics and reporting capabilities, and driving innovation.

To learn more about Rimm’s AI-integrated solutions, browse our catalog or book a free demo today!

Dr Faddy Ardian

Dr Faddy Ardian
Chief Data Scientist

Dr Faddy Ardian manages Rimm’s large and proprietary database, ensuring that data is kept up to date for all clients and employees for easy analysis of data. This wide database aims to assist companies in making sustainability decisions by driving understanding through data.

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Mixing Materiality, Reporting and Strategy: How to Ace Sustainability

Discover how to combine sustainability reporting compliance and ESG data analytics with a proactive, strategic approach to build transparency and sustainable success!

As regulatory scrutiny and stakeholder demands around sustainability grow, organizations worldwide need to ace their compliance with reporting rules and standards. But they also have an opportunity to combine materiality mapping, reporting, data analytics and strategy to smash their long-term goals and build a more sustainable business.

By identifying and disclosing performance on the most material topics as part of a strategic approach, organizations can not only meet regulatory requirements, but also enhance their reputation, gain insight with relevant data analytics to drive sustainable business practices and gain a competitive edge.

Here we explore why and how to take a strategic approach in identifying material topics that align with sustainability reporting regulations, address stakeholder expectations and incorporate double-materiality to drive long-term performance.

The global backdrop

The worldwide focus on sustainability reporting continues to intensify. Reporting rates are expected to grow as new regulation on non-financial reporting is introduced, according to 2022 research by KPMG. The Global Reporting Initiative (GRI) is the most common standard used globally, though some regions prefer Sustainability Accounting Standards Board (SASB) or local stock exchange guidelines. The number of organizations reporting climate-related risks is also rising dramatically, for example those reporting against the Task Force on Climate-related Financial Disclosures (TCFD) doubled, said KPMG.

In response, organizations should build a strategic approach to reporting and operating sustainably with a materiality assessment and stakeholder engagement at its core.

Engage with stakeholders

A 2022 report from McKinsey highlights that the growth in sustainability reporting rules and standards has not been driven by regulators, but by stakeholder expectations. The ‘social licence’ organizations gain by meeting these stakeholder needs will be critical to their future success, it says.

It is therefore essential that your business prioritizes asking your stakeholders – such as investors, customers, employees, suppliers and wider communities – for their input on material topics. This engagement helps ensure your reporting addresses their concerns and priorities, in line with regulatory reporting expectations and the wider need for social licence.

Done correctly, this engagement should also demonstrate your commitment to inclusivity and inform your business strategy too.

Use comprehensive materiality assessments

Robust materiality assessments are a key part of this stakeholder engagement and will form the cornerstone of compliance with sustainability regulations. These assessments evaluate the significance of sustainability topics based on their potential impacts and stakeholder interests. Follow these steps for an effective assessment:

  1. Identify potential topics: develop a comprehensive list of sustainability topics relevant to your industry and organization, considering the regulatory requirements and stakeholder interests.
  2. Assess impacts: evaluate the potential economic, environmental and social impacts associated with each topic. Consider operational risks, regulatory compliance, financial and reputational consequences. Use double materiality by considering not just climate-related impacts on your organization, but also the impacts of your organization on the climate as they relate to ESG.
  3. Evaluate stakeholder significance: Gauge each stakeholder group’s level of interest and influence around each sustainability topic. This helps you prioritize issues for reporting.
  4. Prioritize topics: Based on the assessment, prioritize the topics that are most relevant and impactful to your stakeholders, and that have substantial impacts on your organization. These topics will form the foundation of your reporting strategy, and ensure compliance with reporting regulations.

Align with reporting frameworks

To ensure compliance and comparability, align your material topics with reporting frameworks recommended or mandated by the regulators. These frameworks provide standardized guidelines, reporting indicators and disclosure requirements for specific sustainability topics. By adopting recognized frameworks – such as GRI, SASB and TCFD – you can show your commitment to transparent and standardized reporting, increasing the credibility of your sustainability efforts.

Review and update

Sustainability reporting regulations evolve continuously, as do stakeholder expectations. To maintain compliance, review and update your material topics on a regular basis. Stay informed about regulatory developments, engage with stakeholders frequently, monitor emerging trends, and adjust your reporting strategy accordingly. This iterative process will help you stay ahead of evolving requirements; maintain credibility with regulators, investors and other stakeholders; and hone your strategy.

Compliance with sustainability reporting regulations is no longer a choice but a necessity for companies seeking to build trust, foster transparency and drive sustainable growth.

But combining compliance with a proactive and strategic approach to sustainability reporting and data analytics brings many more opportunities. It safeguards your organization’s reputation, aligns strategy with stakeholder needs, sharpens competitive edge and contributes to a more responsible business. It could be the grand slam you need to build a more successful and sustainable organization long-term.

Want to find out the most material topics for your organization?

Generate your own materiality map for free with myCSO.

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