Thursday, September 26, 2019

ESG Reporting Trends and New Frameworks through the Eyes of an Expert: A Conversation with Wesley Gee

Wesley Ge
I had a chance earlier this month to chat with Wesley Gee, who leads sustainability advisory services at Toronto-based The Works Design Communications and supports corporate/sustainability reporting for clients in sectors including energy, mining, financial services, consumer goods and retail. Wesley also contributed to the development of the GRI and SASB standards and is a judge for CPA Canada’s Corporate Reporting Awards.  

In our conversation, Wesley shares his perspective on sustainability and integrated reporting after more than 15 years helping companies identify and present their purpose, priorities and performance.

MK: How do you counsel clients on integrating new reporting frameworks – such as the TCFD and SDGs – into their reporting, particularly if they already align with the GRI?

WG: We’re excited to see such a range of frameworks and standards. Contrary to common belief, I think they’re actually improving consistency and quality –- from climate risk and financial disclosures (e.g., SASB, TCFD) to sustainability and purpose-driven reporting (e.g., SDGs, GRI). The GRI isn’t the only act in town, so it isn’t always easy to choose the perfect mix of frameworks, especially when companies have different needs to meet.

When advising clients, we first try to understand -- and anticipate -- their stakeholders’ wants and needs, and then discuss what they should really be trying to achieve in terms of their strategy, governance, metrics and communications, including reporting.

We often help companies assess their priorities beyond what may be considered financially material. Doing so can offer a great opportunity to scan the field, and a company’s risk registry, and gain both objective measures and expert insights from its stakeholders that can strengthen the company’s strategy – and improve how it contextualizes important issues, by showing both sides of the story.

There is no one-size-fits-all approach because most analysts still don’t really know what they want, so we recommend that companies report on a combination of two or three frameworks. But when sharing the data, don’t forget the story. Context matters.

MK: What issues do the report issuers you are working with struggle with the most? What are their greatest concerns?

WG: Because of a lack of consolidation across frameworks (and a somewhat agnostic attitude from the Street), companies functioning with one or two practitioners need to make tough choices. Do you continue to complete a 130-page CDP survey or just address the TCFD recommendations? Do you continue following the GRI Standards or streamline your process to report only to the SASB Standards? Many of us know that these frameworks were all developed with unique and valid purposes (e.g., the SASB for financial reporting and the GRI for sustainability reporting), but internal teams often don’t have the time – or inclination – to address all of them.

Additionally, companies are really trying to gain trust and support from their stakeholders and are struggling to find the right mix of tactics to inform, engage and inspire them. While PDF reports and data tables are a necessity, more companies are investing in mainstream marketing, digital campaigns and communications strategies. These efforts are strengthening their presence as purpose-driven brands, and encouraging interaction through open innovation, online forums, engaging videos and gamification. We’re bringing sustainability to the masses.

Lastly, in an age when the stakeholder is the new shareholder, many companies are having an identity crisis. The other day, I read one company’s vision: to become a mid-tier gold producer. And it was nothing short of depressing. How can an employee, a community member or shareholder buy into that? On the other hand, I see “purpose” being used superficially, sometimes inflating a company’s role in, or perceived benefit to, society. The SDGs seem to be helping companies connect to something bigger than themselves and are inspiring a level of introspection that is helping some companies to genuinely consider, and later share, their purpose.

MK: What are one or two things that you wish all reporting organizations would stop doing? Do more of?

WG: I won’t make any friends by saying this but stop complaining and stop trying to keep up with the Joneses. There’s a hell of a lot of work that needs to be done at all organizations to get them into a space where they are fit for the future.

The present is the past, so you can gain perspective by continuing to engage with those who you trust (which, in our emerging space, may include those who you have not yet met, based in other parts of the world), who can help you to understand the broader landscape, challenge hypotheses and refine your strategic plan – including your reporting choices.

When you think you’ve figured it all out, you’ve lost perspective.

MK: Are you seeing, through reports, greater evidence that companies are integrating CR/ESG into their business strategies – through risk management, new products and services that address environmental/social challenges, etc.?

WG: More companies are developing integrated reports that, in many cases, include details on how they create value. They highlight the focus areas where they aim to make wider social impacts, and the outcomes of investments in people, assets, relationships and other capitals.

Since it can take companies up to two or three years of internal alignment to develop their first integrated report, it’s fair to assume that many of them are adapting their strategy to embed a wider range of environmental, social and governance factors into their financial disclosures.

But many companies are still at “stage one” (i.e., admitting there is a problem). After doing this, they still often need to set meaningful long-term targets in a way that will inspire ideas and actions from a critical mass of ambitious and talented people. This is what is required to deliver the change that is needed for a restorative future. So, we have a long way to go before we can feel good about ourselves.

MK: What shifts have you witnessed in CR reporting over the past five years, including any geographical or sector differences?

WG: I’ve been involved in reporting for about 15 years. During this time, I’ve seen shifts from storytelling-heavy documents to data-only reports that lack context. More recently, I’ve noticed that a lot of reporting has started to offer smart functionality enabling companies to develop a better experience for multiple users at once.

Today we’re seeing (and supporting) a reporting approach that is more intentional. We’re working in a more coordinated way with corporate communications, investor relations, human resources and sustainability leads (and their partners) to plan and deliver a complete solution. We believe that good reporting acknowledges expectations and executes on a plan that is far more customized. The formats we choose, those who we engage with (and how) and the analytics we assemble enable us to be nimbler and more objective. It helps us all have a little more fun to thoughtfully and objectively adapt to this changing space.

MK: What are your predictions for the future of ESG reporting?

WG: It’s easier than ever to engage with different audiences and gather useful information that helps us measure and improve our clients’ reporting and communications. Over time, we can iteratively improve how a company plans, segments and integrates its sustainability communications and reporting, so that it can be more intentional. Some users will be delighted to view spreadsheets that are aligned with specific frameworks (and they’ll know what to do with them). Others will want to explore and experience aspects of a company’s value chain and actively contribute with disruptive, innovative practices.

Stay tuned for a new research report from Works Design Communications next month. For more on CR reporting, read my recent article in Triple Pundit: Experts Offer Guidance on Reporting Frameworks to Ease Reporting Pain.

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