_{Advertisement feature _{Five steps to ensure consistent messaging across your ESG reporting efforts
How to know what to disclose and where}}

Five steps to ensure consistent messaging
across your ESG reporting efforts

How to know what to disclose and where

Whether you are a young growth company seeking initial recognition or a more established and well-known firm, you probably find you are constantly competing for capital with others around the globe. One powerful way to distinguish yourself is with a carefully crafted ESG message.We work with hundreds of companies to either initiate reporting or fine-tune and expand existing programs, and we often hear these questions:

Where should we start?

What matters most?

What should we disclose on our website and in the proxy, 10K and other channels?

Considerations for what to disclose whereWebsite: You don’t get credit with ESG data providers for what you don’t disclose, so publicizing existing policies can be a good starting point. Consider making available data privacy, workplace health & safety, equal opportunity and anti-harassment/discrimination policies and documents, as well as employee codes of conduct and supplier codes of conduct. Website disclosure can be maintained and updated more readily and cost-effectively than static formal reports or annual regulatory filings.IR messaging: Consider including a slide or two of ESG highlights in your investor presentation. Similarly, quarterly earnings calls are a terrific opportunity for updating investors on ESG progress.Proxy statement highlights: For companies newly embarking on this journey, the proxy may be their first such disclosure effort. With well-selected highlights, this single disclosure can be an effective way to move the needle on influential ratings and rankings. While there is no one perfect template, some of the most effective proxy disclosures discuss:

Board oversight, including identification of any committee tasked with this, and the competencies and qualifications of board or committee members to effectively oversee these matters

Board, executive and workforce diversity. Note that investors are increasingly asking companies to report on ethnic and racial diversity separate from gender, though clearly they can overlap

ESG and human capital program overview. When we refer to proxy statement highlights, we mean just that. Discuss identified risks, opportunities and priorities and, if available, recent performance in these areas. But reserve the full story for the website

Executive compensation. Any ESG-related compensation metrics should be highlighted, such as health & safety, employee development and diversity initiatives

Covid impact statements. These may center around employee health & safety, expansion of remote work and how productivity and morale were maintained during the pandemic. At many companies, this Covid story will heavily influence the human capital story.

These disclosures may appear in various locations including: substantive CEO and/or board cover letters and/or proxy summaries (highlighting the initiatives), in the governance and board section (oversight) and the compensation discussion & analysis (human capital, compensation metrics).Annual report/10K: US companies typically lag their European and Asian counterparts when it comes to providing integrated reporting. But short of fully integrated reporting, companies can still include an expanded discussion of ESG risk factors and the company’s sustainability focus, thereby aiding investment decisions that consider a broader range of factors.Effective November 2020, the SEC is calling for a principles-based approach to human capital disclosures. As set out in SEC Reg SK modernization, companies may have to include in their 10K (or other filings) a description of their human capital resources and any human capital measures or objectives that are a focus of managing the business.Your inaugural CSR report: This may be the most comprehensive compilation of your performance across a broad range of inter-related topics. Remember your CSR report will be reviewed carefully by all stakeholders, including potential employees. The time and resources required to create a CSR report depend on the type of report you decide to produce:

SASB fact sheets – three to six pages in length – can take two to three months to create

Summary sustainability reports, often 15-25 pages in length, typically take three to four months

Full-blown CSR reports of between 60 and 100 pages typically take six to 10 months – or longer – to create, and generally involve broader internal and external teams.

Inclusion of GRI, SASB and similar content-mapping indexes can make any of the above more useful to a broad range of investors, data-gatherers and other stakeholders

Our five-step ESG reporting process

Select material indicators: While the major materiality and reporting frameworks aren’t yet fully integrated, there is substantial overlap among them. Focusing primarily on SASB, GRI and TCFD, we select between five and seven relevant material indicators for your industry group and for which you have information to disclose.
Conduct a peer review: Given the relative nature of ratings and rankings, analyzing peer disclosures (proxy, 10K, website) can both identify industry-specific topics not captured in step one and establish what is required to match or exceed the disclosures of your peers.
Identify thematic messaging: Based on steps one and two, you may have identified between seven and 10 topics as the foundation of your disclosures. Here, for communications purposes we distill these down to three to five thematic tenets (such as ‘our people’, ‘our purpose’, ‘our planet’).
Create content: Working with you, our ESG consultants, analysts and writers advise on and/or draft content that meets the criteria above.
Develop infographics: Our creative designers transform ESG text and data into marketable documents via impactful design in harmony with your company branding.

This five-step process is equally applicable to proxy, 10K, annual report, website and CSR report development. Following these steps helps ensure consistency of materiality prioritization – and of messaging – across documents and channels.

About DFIN

DFIN has helped many companies get started on their ESG journey, and we’re here to help you to progress at later stages as well. To discuss your situation and identify where we can add the most value to your current process, please contact:
Ron Schneider, director of corporate governance services
ronald.m.schneider@dfinsolutions.com

For examples of DFIN client proxy ESG and human capital management disclosures, see our Guide to Effective Proxies, eighth edition, at www.proxydocs.com/xDFINx.