Companies are running out of time to start this year’s ESG report process – in fact, a business starting today might not make it in time. “That doesn’t mean they should just forgo submitting a report. It’s worth making the effort and getting at least half of it done,” said Grant Thornton Baltic partner and Head of Audit and Assurance Services Mart Nõmper.
ESG report is not something that can be ignored, because then it won’t be possible to submit the entire annual report, which has pretty serious consequences," said Nõmper
The first and most important topic that should lead off the process is double materiality assessment, said Grant Thornton Baltic partner and audit manager Anni Vaiksaar. Double materiality assessment is a process that involves all people and management at a company along with an external party. “It’s a big value chain: what comes into your company, where you source it from, who are the end buyers of your product or service, who your customers are and how they conduct themselves,” said Vaiksaar.
“This process must start earlier than merely while you are preparing the management report, because you won’t have time to go through the engagement step if you’re planning to start it in January of the following year for the previous year’s report,” she said.
Nõmper added that depending on the size of the company, it’s still possible to get this year’s report done if you immediately bring consultants aboard and pour resources into it.
Although Alexela is not among the companies that were required to file a report for last year, they still voluntarily conducted an ESG audit as a “practice round”. “The whole process is very multifaceted but I would emphasise the engagement of personnel and conveying the understanding that ESG is important for everyone, horizontally through the company,” said the head of ESG audit at Alexela, Kadri Ambos.
The realisation has to sink in at the company that an ESG audit is a joint challenge. “There are definitely pressure points in a good sense, which every company could put to use for their own development. Cultivating the capacity for managing changes horizontally through the whole organisation will definitely be a major boon as that’ll make it easier for both management and team leaders to master the new way of doing things,” said Ambos.
“I think it’s really important not to keep on running up against the denial phase when you have a lot of new things coming at you at once. People’s natural reaction is to immediately go: no, I don’t want to, I don’t get it, it’s bad, I don’t want to deal with it,” said Ambos. But once that is overcome, she added, an ESG audit certainly yields benefits that will work to a company’s advantage, added Ambos.
“AI can be a helpful resource for businesses that that haven’t yet started on their ESG journey,” said Anni Vaiksaar. “It can be asked for advice on what other similar companies have highlighted in their reports, what are the important standards and where to start,” Vaiksaar listed. This way you get initial input information, but you cannot use it directly in your report.
AI can be more useful on an ESG report than for financial statements, since ESG reporting systems are not yet as firmly in place, said Nõmper. “It’s like a little crib sheet and reference guide, but AI should always be considered critically, as we well know,” warned Vaiksaar.
There’s currently a lot of greenwash in ESG reports, said Nõmper. “One reason is that a unified standard hasn’t existed to this point. Everyone has been able to do things the way that’s best for them. But with auditor oversight being introduced on top of the uniform standards, that will certainly cut down on the greenwash effect significantly.”
ESG reporting will undoubtedly mean more red tape, and no small amount. “But the way I look at it is, will the extra bureaucracy make something better in society as well. Estonia is a tiny drop in the global sea. For example, our giant neighbour Russia isn’t doing anything and is a very negative actor in this field.”
And in that light, companies should consider which countries they want to be in the same community with. “The fact that your neighbour doesn’t exercise doesn’t mean that you shouldn’t be in good shape,” said Nõmper in summation.
In short, it’s time to quit postponing ESG reporting. Ultimately, it is up to all companies as to the values they want to align themselves in the community of nations and markets.
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