The business environment has become very competitive and challenging. At any one moment, risks can merge from anywhere and blanket your organization. One example is the recent COVID-19 pandemic, which negatively impacted businesses, with some plunging into losses and others closing down. 

One of the best ways of managing risks is sustainability reporting. So, what is ESG reporting? How does it work? Sustainability reporting allows companies to attempt to pre-identify risks and prepare for them. 

Keep reading to learn more about ESG reporting and why you should include it as part of the company’s risk management. 

What is Sustainability Reporting? 

Sustainability reporting is the process of disclosure of a company’s environmental, social, and governance (ESG) impacts. The primary goal is to demonstrate the company’s efforts in making the planet a better place. Once stakeholders see the report, they review the company’s efforts and compare them to those of others before deciding to invest or associate with the brand. 

Notably, the process of ESG sustainability reporting goes way beyond creating a report for stakeholders. In addition, it offers your company an opportunity to transform its way of doing things, which means greater efficiency, higher productivity, and more profits. Other benefits that come with the adoption of ESG sustainability reporting include: 

  • Easy compliance with laws on environmental management, financial reporting, and listing on stock markets.
  • Better connection to stakeholders. 
  • Helps to strengthen the brand image on the market. 
  • Improves staff morale, commitment, and retention. 

How Sustainability Management Helps with Risk Management 

Once you have answered the big question, “what is ESG reporting,” it is time to delve deeper into how sustainability can help with risk management. So, how exactly does it help? Here are some insights:

  • Helps with Review of Company’s Risk and Opportunities 

The process of sustainability reporting starts with a comprehensive review of a company’s processes with the aim of identifying the main challenges and opportunities. This offers you the best chance to understand what is working and what is not. For example, if poor performance is resulting from outdated machinery, you should consider replacing them or adopting a proactive maintenance schedule. 

Improving the production system can help you avoid production risks and poor performance. You might want to work with an ESG sustainability reporting consultant to make more from the process. Remember to also select an appropriate sustainability reporting framework.

  • ESG Reporting Helps Companies Anticipate and Prepare for Future Challenges 

When Hong Kong Stock Exchange (HKEX) introduced the mandatory ESG sustainability reporting, one particular requirement made it stand out: focus on the future risks. This requirement is now emerging to be an important tool for managing risks. Now, investors are looking at this part because it assures them of good company performance even in the event of unexpected challenges ahead. 

  • Sustainability Helps You to Reduce Common Global Risks 

Some of the risks impacting businesses are associated with global problems like global warming. For example, companies that use agricultural products as raw materials might suffer a breakdown in their supply chains because of global warming. Water pollution and loss of biodiversity could also be major causes of risks for companies that rely on them. 

Joining other companies, governments, and international organizations to address these challenges is an excellent way of removing the threats on the way. So, put more effort into cutting down waste, reducing emissions, and maintaining a diverse workforce. You might also want to encourage other companies in your supply chain to start sustainability reporting

In this post we have answered the big questions, “what is ESG reporting?” and “how does it help with risk management?” We established that a business’s journey is full of risks, and success is only possible if you are able to address them appropriately. ESG reporting can be part of your risk management efforts, helping you to pre-identify future challenges and prepare for them. Reach out to Diginex to get the best ESG reporting app and expert assistance.