How owner-managed businesses are navigating ESG reporting

Concerns range from which reporting requirements companies are subject to, including whether they are direct or indirect requirements through the supply chain. Other problems include environmental, social and governance (ESG) themes to focus on and which sustainable development goals are most appropriate. Research by Forvis Mazars in 2023 looked at how owner-managed businesses were navigating these concerns and what steps they were considering.  

Frameworks emerge 

Investors are the main stakeholders pressurising organisations to report on ESG, while regulators and policies are also putting pressure. Understanding the internal and external pressures for ESG integration will enable improved strategic decision-making. In terms of reporting, popular sustainability reporting frameworks for privately owned businesses include the Global Reporting Initiative (GRI) Standards, the Sustainability Accounting Standards Board (SASB) standards and the International Sustainability Standards Board (ISSB). The Corporate Sustainability Reporting Directive (CSRD) is also increasingly seen as relevant. Privately owned businesses should now assess sustainability frameworks and use them to support and guide strategic decisions and reporting obligations. 

ESG theme selection 

ESG theme selection is motivated by considering areas with the highest potential for Return on Investment (ROI) and the highest level of external pressure in the form of partner pressure or societal need for action. The Greenhouse Gas (GHG) Protocol Corporate Standard and the Carbon Disclosure Project (CDP) are the primary reference points used by investors for carbon reporting. It is important to note that these reference points are not in competition with each other. CDP is a non-profit organisation that collects and discloses climate change-related information from companies and cities on behalf of investors and other stakeholders. The GHG Corporate Standard is a voluntary, consensus-based standard from the World Resources Institute that provides companies with a framework to measure and report greenhouse gas emissions. Expect investors to request private businesses to report carbon emissions based on accepted reporting frameworks, although preference of the suitable framework will depend on the region. Start narrow but broaden rapidly. The ISSB, for example, is quick to state that its approach is climate first, not climate only. 

Sustainable development goals  

The preference for sustainable development goal topics varies geographically due to fluctuating core issues in each region, such as climate change, gender equality or poverty. The focus on climate action is expected due to the global commitment to tackle climate change, particularly within the European and North American markets. However, it should be noted that a company cannot follow all 17 United Nations Social Development Goals (UN SDGs), and priorities should drive focus and alignment to a company’s strategy. This presents an opportunity for privately owned businesses to identify the most relevant UN SDGs within specific sectors and regions and generate meaningful impact to support reporting requirements. 

The need for privately owned businesses to facilitate continued sustainable growth is now business-critical. In terms of the capabilities to respond to sustainability reporting demands, there is mounting pressure to find the necessary skills and support to fulfil challenging ESG reporting requirements. Importantly, the ability to react to ESG reporting requirements indicates that the proper steps are being taken to investors and stakeholders alike. 

If you would like more information or you require assistance with sustainability reporting, please contact your usual Forvis Mazars advisor or alternatively our sustainability experts via the form below or on:

Authors: Bongiwe Mbunge and Bernhard Schacht, Forvis Mazars

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