ESG guide
The New ESG Journey Explained:
Targets, Reports, Scoring, etc.
CONTENT
CONTENT
2
Foreword
4
Why an ESG Guide?
5
How can a successful ESG strategy rely on EHS functions?
What is ESG all about?
ESG reporting & scoring
ESG Reporting
ESG score
Why are EHS functions necessary and important for ESG?
Making the right choices
6
7
8
8
8
9
10
IFRS and EFRAG’s New Sustainability Reporting Standards
CSRD and the ESRS standards
ISSB and the IFRS standards
Will the application of ESRS and IFRS standards be mandatory?
The United States and sustainability-related financial standards
ESRS, IFRS and the challenge of data collection
12
13
15
16
16
17
ESG Strategy: Between Governance & Operations
Strategic analysis and the standards’ choice
Strategic framework
Standards framework
Define your strategic objectives
Analysis of the strategic risk registers
19
20
20
21
21
23
Choosing the Right KPIs for your ESG Strategy!
How to choose the best appropriate indicators?
Which KPIs to choose to keep track of your ESG strategy?
How to display the dashboards?
Dynamic Dashboard
25
25
26
27
28
Synthesis
30
About BLUEKANGO
31
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
2/31
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
3/31
Foreword
Nowadays, global warming, climate change, protecting the environment
and the energy crisis are the main issues on the table of the international
community.
Companies worldwide are looking for innovative solutions and new strategies to
comply with new regulations regarding energy efficiency and conservation and
ESG (Environmental, Social and Governance) criteria to keep up with a highly
competitive and demanding market.
In the early 2000s, CSR (Corporate Social Responsibility) was established in
companies. However, its application was voluntary along with numerous
standards. In the last decade, new sustainable development actions and
criteria have been developed paving the way to ESG, considering the financial
impact of companies and their CSR commitment.
New standards are being developed to homogenise and standardize the
practices, set a clear framework for reporting and allow companies to
benchmark their activities' impact and ESG scores.
The ESRS (European Sustainability Reporting Standards) is being prepared by
EFRAG (European Financial Reporting Advisory Group) under the new European
Directive the CSRD (Corporate Sustainability Reporting Directive). And the IFRS
S1 & S2 standards (International Financial Reporting Standards) are being
prepared by the ISSB (International Sustainability Standards Board), which is a
working group in the IFRS created for this purpose. These standards will allow
companies to build their ESG strategy along with their short, medium and
long-term objectives.
Youssef NOHRA
EHS & Environmental Specialist / Quality
Content Manager
BlueKanGo
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
4/31
Why an ESG Guide?
Starting in 2024, many companies around the world will be forced to apply the
new ESG criteria and, therefore, must re-evaluate their political strategies
and operations, to face the climate challenges (global warming) and the
energy crisis and respond to a highly competitive and demanding market.
Digital technologies can be the ultimate ally and solution to help and guide
companies with these new challenges, especially with constantly evolving
situations, both in the market and business strategy.
The adoption of an ESG strategy necessitates a well-developed and mature EHS
management system. However, the EHS functions will find themselves
evolving with the collection, analysis and reporting of environmental data
(GHG emissions, water quality, etc). This might present some great challenges to
companies and EHS departments that have not yet adopted an environmental
management system (ISO 14001, EU taxonomy, etc.). This guide will help these
companies to lighten the burden on the EHS teams in their new functions
and help them gain precious time in their daily tasks and reporting.
Throughout its 20 years of experience in the fields of Environment, Health
and Safety, Quality, CSR and ESG, BlueKanGo has managed to distinguish itself
in the market through its own unique expertise. BlueKanGo's digital platform
helps corporations from all industries to achieve their objectives. Especially
when a company adopts an ESG strategy, a dedicated digital tool will greatly
help with the elaboration and sharing of the action plan, in addition to
transparent communication to engage and involve its employees and
stakeholders.
In this guide, BlueKanGo shares its knowledge of ESG and guides you to
understand the main strategic and operational performance in the digital
world.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
5/31
How can a
successful ESG
strategy rely on
EHS functions?
Nowadays, ESG (Environmental,
Social and Governance) has
become a major strategy for various and wide businesses around the
world. With new emerging standards and frameworks concerning
ESG, companies understood the importance of EHS (Environment,
Health and Safety) functions to adopt a successful ESG strategy.
Therefore, a company must have well-developed and mature EHS
management to embark on the ESG journey.
In the last decade, companies started to
face new challenges with emerging
technologies and new operational
applications. Companies are thus facing
new risks and threats, especially when
it comes to the safety of the
environment and their stakeholders.
One way to address these challenges is
through sustainable activities and ESG.
ESG criteria and their corresponding
metrics will allow the quantification of
the adopted actions by companies in
terms of sustainability. These criteria
are aligned with the UN’s sustainable
development
goals
for
2030.
Moreover, new standards, regulations
and frameworks (existing and new) are
emerging to prepare and present the
ESG disclosure according to certain ESG
reporting frameworks (IFRS -IFRS S1 &
S2 draft, EFRAG-ESRS draft, GRI, CDP,
etc.).
ESG started to emerge and gained
international recognition and interest
around the mid-2000s. Alongside
Corporate Social Responsibility (CSR),
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
6/31
Companies adopting ESG strategy
understood or are understanding the
new emerging functions for the EHS
divisions, and how to combine the
tasks between ESG (rather managed by
the
financial
and
compliance
departments) and EHS to provide the
best ESG disclosure and respond to
multiple criteria according to the
reported metrics in their ESG reports. In
other words, having a well-defined
strategy and management for your
EHS department can help you fulfil
your ESG goals.
can help stakeholders and other
interested
parties
(investors,
government, etc.) to better understand
how risks and threats are managed in
an
organisation
regarding
the
environmental, social and governance
criteria.
E (Environmental). It is the most
“famous” criterion of the ESG along with
its corresponding metrics. Environmental
criteria are numerous, and they are
related to the company’s operations and
their impacts on the environment (risk
management). These criteria include
Green House Gases (GHG) emissions,
water management and pollution, waste
management, and impact on climate
change.
So, what is ESG all about? Why are the
EHS functions ideal and important for
ESG?
What is ESG all about?
S (Social). The social pillar is all about
the consideration of stakeholders and
relationships. The S of ESG is all about
measuring the human factor in and
outside the company, this also includes
the company’s operations impact and
supply chain management on the
community surrounding it. Customer
satisfaction, the health, safety and
welfare of employees (probably the most
regulated criterion by legislation),
hazards
management
(chemical,
biological, physical), skills and training
development, diversity, and human
rights are among the topics covered by
the social criteria.
ESG
(Environmental,
Social
and
Governance) is a strategy adopted by
companies to act on threats and risks and
turn them into opportunities. It is the
basis of sustainable operations adopted
by companies. ESG is often seen as a
strategy adopted by businesses to act
and limit the negative impact on the
environment, and to be actively involved
in climate change problems. However, it
is not only about the environment, ESG
concerns also the stakeholders and their
welfare, and how the operations of a
company impact the community around
it, its employees, suppliers and
customers. So, ESG is a framework that
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
7/31
G (Governance). Corporate Governance
is all about the ways of running a
company. Governance first defines the
mission, the long-term vision, the
purpose, the corporate risk appetite and
the culture that must be developed. This
directly concerns the management board
in the way they are leading the company
and the policies adopted, to ensure good
business practices and be transparent to
investors. Thus, gender equity in the
board composition, fighting bribery and
corruption,
internal
control
and
employee and executive compensation
are among the main topics covered by
Governance.
and formats set by ESG reporting
frameworks, otherwise, the information
and data reported can be misleading and
considered greenwashing.
ESG reporting will include the targets
and objectives set by each company,
depending on the selected metrics
covered by ESG. Companies must report
their
ESG
results
by
adopting
standardised frameworks (such as
EFRAG, IFRS, GRI etc.) depending on the
materiality assessment and selected
metrics. Every company will select a
reporting framework depending on the
adopted strategy to set its ESG goals.
These frameworks make sure that the
ESG data is normalised and comparable
across various industries regardless of
their size and activity.
ESG reporting & scoring
ESG disclosure data give important
information to investors about a
company’s performance and may
impact their decision to further invest or
leave a certain organisation. Sometimes,
these data are also used by governments
to provide some funding or to penalise
companies according to their ESG
performance.
ESG Reporting
When a company adopts an ESG strategy,
after the end of a cycle, it has to issue an
ESG report. ESG reporting is the
disclosure of all the data related to ESG,
by making its related activities
transparent to the public and all
stakeholders.
ESG score
ESG reporting can greatly help
stakeholders to see how a company is
managing its risks and opportunities.
However, ESG disclosure/reporting
should be done according to guidelines
ESG score is important to objectively
evaluate the performance of a company
regarding ESG topics.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
8/31
There are two different types of ESG
scoring systems, internal and external.
Why
are EHS
functions
necessary and important for
ESG?
External scoring is conducted by rating
platforms by using the ESG disclosure
data and allows for comparing
companies from various industries
regarding ESG performance. There are
various types of rating platforms
depending on the data analysed. For
example, the CDP (Carbon Disclosure
Project) will publish ESG ratings related
to environmental criteria.
When a company decides to adopt an
ESG strategy, the EHS department finds
itself at the core of the ESG strategy's
success and implementation.
ESG reporting, whether it is voluntary or
required, should be done under certain
disclosure
frameworks.
For
EHS
professionals, reporting according to
standards and regulations is part of
their daily tasks. Their knowledge about
reporting and complying with multiple
and complex requirements, makes the
EHS functions valuable and important
for this task. Moreover, ESG reporting
necessitates quantified data, here also,
EHS functions are essential for
completing this task. For example, all the
incidents, near misses, environmental
emissions, and many other factors are all
measured and reported by the EHS
professionals according to certain
requirements and regulations. This can
greatly benefit the ESG strategy as it does
not add more functions to the EHS
department
but
comes
as
complementary and helps the company
to achieve important ESG goals.
Internal scoring is conducted by the
company’s stakeholders to assess their
own ESG performance. Internal control
is important to directly compare yourself
to others in the industry, directly analyse
some issues affecting the company and
many other topics. Internal scoring and
monitoring will allow the management to
make fast and right decisions to steer the
company on the correct path of ESG
performance.
However, a successful ESG strategy must
be aligned with successful EHS
functions and management. The two
departments are entwined and directly
linked, as many ESG criteria are covered
by EHS functions.
Having mature and successful EHS
management in your company will make
the implementation of an ESG strategy
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
9/31
successful and reliable. Having poor EHS
management will be a great obstacle to
achieving ESG goals and even its basic
implementation. Every manager should
also keep in mind that they are not
obligated to answer all the metrics and
criteria of ESG. They should define with
the ESG and EHS departments all the
necessary and most important ones to
their company. If this is not the case, you
will be submerged by a huge number of
requirements and data you must cover.
safety measures installed in the
workplace, is a major part of the EHS’s
daily tasks. These data and other EHS
functions related to “Social” cover
important metrics in this pillar.
Governance. Steering the company in
the right direction is a heavy burden on
the shoulders of the management board.
The aim is always to get the best ESG
scores. This is where EHS management
should be well conducted to provide the
best functions to fulfil the ESG goals.
Governance must manage its own
register of strategic and ESG risks with
sentinel people to monitor them. Risk
management does not only cover the
health and safety of employees but every
threat and risk related to ESG. Monitoring
and controlling risks and threats to
eliminate them and/or transform them
into opportunities cover the three pillars
of ESG.
Here are some examples for every pillar
of ESG that EHS can cover:
Environmental. Monitoring, controlling,
reporting
and
evaluating
the
environmental
emissions
of
the
company’s activity correlate with EHS
functions. Especially when we are talking
about GHG emissions and monitoring, to
achieve net zero emissions. In addition to
the carbon footprint achieving carbon
neutrality by 2050. These criteria can be
easily quantifiable, especially when the
EHS departments rely on software to
measure all this data. Of course, many
other environmental factors are covered,
such as waste management, water
management, etc.
To succeed with the implementation of
an appropriate ESG strategy adapted to
your company, it is clear now and
necessary to have mature and
well-established management of your
EHS functions.
Social. EHS functions contribute greatly
to this pillar, especially to their most
important and classic tasks, the “Health,
Safety
and
Well-being”
of
all
stakeholders. Reporting incidents, near
misses and all the corrective actions and
Making the right choices
Adopting an ESG strategy is a great
decision and means you care about the
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
10/31
community and the environment.
However, when it comes to acquiring all
the necessary data to include in the ESG
reporting, a lot of work is done by the
EHS department. Sometimes, the data
collection for all the adopted metrics by
the company can be challenging,
especially if it is done manually
(paperwork) or via classic desktop tools.
ESG has become an important tool to
evaluate the engagement of certain
companies in the market regarding
environmental and social criteria.
Establishing a mature ESG strategy
can’t be done if the EHS functions in a
company are badly managed, this will
lead to poor ESG scores. ESG and EHS
are closely related. However, even with
impeccable
EHS
management,
companies find themselves in difficult
situations regarding the balance
between
short-term
business
objectives and long-term ESG goals.
Adopting new technologies and making
the right choices in which digital tools to
invest in, is important to collect the
needed information and data on a single
platform. Centralising the data on a
single platform will make it easy to
monitor all the actions and the
performance of EHS functions via
dedicated KPIs. This will make it easier to
take necessary corrective actions if
needed. All the real-time data can be
represented by dynamic dashboards
that can be easily integrated into your
ESG reporting framework. In addition
to an internal scoring evaluation tool that
will allow you to monitor your own
performance regarding the adopted ESG
metrics.
Once the EHS teams understand how
their new and how traditional
functions can benefit the ESG strategy,
the board of directors should decide
which ESG framework and standards
they should adopt to correctly achieve
their sustainable development goals.
The new emerging standards for ESG
are ESRS (European Sustainability
Reporting Standards) and IFRS S1 & S1
(International Financial Reporting
Standards).
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
11/31
IFRS and EFRAG’s
New Sustainability
Reporting
Standards
2022 witnessed a tremendous and
massive movement towards
sustainability. This movement is
accompanied by the emergence of
new regulations and standards. With these standards, ESG
(Environment, Social, Governance) reporting becomes more and
more regulated. Among these standards are the ESRS (European
Sustainability Reporting Standards) and the IFRS S1 & S2.
What are ESRS and IFRS all about? Which
organisations prepared these standards?
We will be clearing it all out.
A year before, in 2014, the European
Commission
adopted
Directive
2014/95/EU also known as the NFRD
(Non-Financial Reporting Directive).
The NFRD made the ESG disclosure or
non-financial
reporting
regulated,
especially for large companies and ones
with more than 500 employees. For the
other companies, non-financial reporting
remained exclusively voluntary. The
disclosed information was about the
environment, social and governance
criteria in general. While in Europe, ESG
In 2015, the 2030 Agenda for
Sustainable Development had been
adopted by all member States of the
United Nations. This means that all
member states accepted and agreed to
achieve
the
17
Sustainable
Development Goals, which are about the
safety and impact on the environment
and society.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
12/31
reporting was more or less regulated, it
remained voluntary all around the world
or depending on each country’s
regulations and laws. There are a lot of
disclosure frameworks that helped
companies and governments to prevent
“greenwashing”, such as GRI (Global
Reporting Initiative), CDP (Carbon
Disclosure Project) and many more.
CSRD and the ESRS standards
The CSRD directive will replace the
NFRD. The new directive will extend the
reporting requirements to all large
companies and all companies listed on
regulated markets including ones with
more than 250 employees (before 500).
The new CSRD directive widens the scope
of action of the previous NFRD, by
improving the quality, reliability and
sincerity of the disclosed information
(auditing of the reported information by a
third party). It also introduces more
detailed
reporting
requirements
concerning ESG and we will no longer talk
about non-financial reporting, but
sustainability
reporting
or ESG
reporting. The draft of the European
sustainability reporting standards is
developed by EFRAG and it led to the
ESRS standards.
However, since the end of 2021 and the
beginning of 2022, great advances have
been developed in terms of standards
and
regulations.
The
European
Commission adopted in April 2021 a new
directive,
the
CSRD
(Corporate
Sustainability Reporting Directive) that
lead to the preparation of the new ESRS
(European Sustainability Reporting
Standard)
by
EFRAG (European
Financial Reporting Advisory Group),
which takes into account the EU
Taxonomy Climate Act. And at the same
time, and on an international level, the
IFRS (International Financial Reporting
Standards) established the ISSB
(International Sustainability Standards
Board) to work on the new IFRS
sustainability standards related to ESG
reporting, which are IFRS-S1 and
IFRS-S2. Both IFRS sustainability
standards and the ESRS drafts had been
made public for feedback and comments
before issuing the final versions by the
end of 2022.
The new reporting requirements draft
contains 13 standards related to ESG.
According to EFRAG’s Appendix I draft,
the 13 standards are classified into 4
categories:
● Cross-cutting:
❖ ESRS 1 General principles
❖ ESRS 2 General, strategy,
governance
and
materiality assessment
● Environment:
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
13/31
❖ ESRS E1 Climate change
❖ ESRS E2 Pollution
❖ ESRS E3 Water and marine
resources
❖ ESRS E4 Biodiversity
❖ ESRS E5 Resource use and
circular economy
sustainability
standards
and
requirements. Therefore, companies
concerned with EFRAG’s standards
should take into consideration not only
how the external threats, environment
and other issues influence their business
operations and activities but also how
their activities impact the environment
and communities. The ESRS standards
will include major guidelines and much
detailed information to help and guide
companies on the adoption of the most
appropriate ESG policy and reporting
framework.
● Social:
❖ ESRS S1 Own workforce
❖ ESRS S2 Workers in the
value chain
S3
Affected
❖ ESRS
communities
❖ ESRS S4 Consumers and
end-users
One should always keep in mind, that for
now, the EFRAG’s sustainability
standards are still a draft and subject to
change. However, the major standards
will remain the same. The final version
will be issued towards the end of 2022.
● Governance:
❖ ESRS G1 Governance, risk
management and internal
control
❖ ESRS G2 Business Conduct.
We should mention that EFRAG’s work
takes into consideration the already
existing regulations and directives, such
as the Sustainable Finance Disclosure
Regulation (SFDR) (regarding the
financial market), the EU Taxonomy, the
Corporate Sustainability Due Diligence,
and others. Moreover, EFRAG’s team took
into account the existing international
reporting standards and frameworks to
align the requirements and include the
best practices, among which we can
mention the previous NFRD, GRI, TCFD
(Task Force on Climate-Related Financial
Disclosures) and many more.
Therefore,
companies
that
are
concerned with the new CSRD must
disclose how sustainability is integrated
into their business strategy and how the
ESG materiality impacts, risks and
opportunities
are
identified
and
managed. This is the basis of EFRAG’s
sustainability standards, which is the
“double
materiality”
(financial
materiality and impact materiality).
This is one of the most important
differences between the ESRS and the
IFRS standards where only the “simple
materiality” (financial materiality) is
concerned with ISSB’s work on the
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
14/31
Ongoing negotiations between the
European Parliament and Council to
finalise the legislative texts of the CSRD
will determine the date of the adoption of
the ESRS standards. The date seems to be
towards the end of 2022, which will mean
that the concerned companies have to
comply with the sustainability reporting
standards in 2023 and their first
publication the year after.
and reporting frameworks, among which
the TCFD, the Climate Disclosure
Standards Board from CPD, the
Sustainability Accounting Standards
Board and more recently the GRI.
This work led to the proposal of:
● IFRS S1: General Requirements
for
Disclosure
of
Sustainability-related
Financial
Information;
S2:
Climate-related
● IFRS
Disclosure
In parallel to EFRAG’s sustainability
standards, other standards are being
developed,
such
as the ISSB’s
sustainability standards IFRS-S1 and
IFRS-S2.
IFRS S1 will require companies to report
information about sustainability-related
financial information. The data disclosure
will be based on the core content of IFRS
S1, which are the companies’ views of
“governance,
strategy,
risk
management, metrics and targets”. This
will lead to the measurement, monitoring
and
management
of
sustainability-related
risks
and
opportunities. IFRS S2 will include the
same reporting strategy concerning the
core content of IFRS S1, but with more
climate-related physical and transition
risks and opportunities.
ISSB and the IFRS standards
The ISSB was founded by the IFRS to
develop global sustainability reporting
standards, which led to the creation of
the IFRS Sustainability Disclosure
Standards S1 and S2. These standards
aim
to
connect
both
sustainability-related
and
financial
reporting of a company.
Therefore, and as mentioned before,
IFRS
Sustainability
Disclosure
Standards are based on financial
materiality only. This means that
companies will report on how the
environment and the community will
affect their business operations, so it’s
more of an “outside-in” strategy while the
The ISSB’s set of global ESG disclosure
standards was developed to make
sustainability-related
risks
and
opportunities more comparable between
companies. Same as EFRAG’s team, the
ISSB working group collaborated and
integrated other sustainability standards
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
15/31
double materiality of EFRAG’s standards
includes the impact materiality which we
can call the “inside-out” strategy. Now,
this is the major difference between
both sets of standards, even if there are
many similarities between the two
sets, there were also other differences as
pointed out in EFRAG’s Appendix V IFRS Sustainability Standards and ESRS
reconciliation table. However, the ISSB
has put together a working group to
enhance compatibility with the ESRS.
Members of the working group include
the Chinese Ministry of Finance, the
European Commission, EFRAG, the
Japanese Financial Services Authority,
the Sustainability Standards Board of
Japan Preparation Committee, the
United Kingdom Financial Conduct
Authority and the US Securities and
Exchange Commission (SEC). This
collaboration highlights the aim of the
world's major states to accelerate the
movement toward more sustainable
actions and development.
the ESRS standards. But as mentioned
previously, the collaboration that was
created between the ISSB and EFRAG will
lead to two complete sets of standards
rather than competitive, but only time
will tell especially since the final versions
are yet to be issued.
The EFRAG’s standards, the ESRS, will be
adopted by the new CSRD directive. This
will mean that in the European Union
(EU), this set of standards will be
mandatory and transposed afterwards in
each member state after its final issuing.
This will mean that companies present on
EU soil will have to comply with the ESRS
standards, even if their headquarters are
outside the EU.
On the other hand, IFRS sustainability
standards will not be mandatory, and
each jurisdiction outside the EU will
decide whether they require companies
to apply these standards or not. However,
166 different jurisdictions apply the
IFRS standards, and some of them are
most likely to apply sustainability-related
standards.
Will the application of ESRS
and
IFRS
standards
be
mandatory?
The
United
States
and
sustainability-related
financial
standards
Before we answer this question, it is
important to mention that we might find
ourselves with two competing standards
around the world, especially since the
European Commission will be adopting
In the US, the SEC adopts the US GAAP
(Generally
Accepted
Accounting
Principles) collection of accounting rules
and standards for financial reporting
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
16/31
rather than the IFRSs’. The US SEC allows
the adoption of IFRS standards for
financial reporting for only foreign-based
companies. However, in terms of ESG
disclosure rules and laws, the US SEC has
proposed a rule to “Enhance and
Standardize
Climate-Related
Disclosures”. This ESG disclosure rule
and along with the US GAAP financial
reporting standards will make ESG
reporting in line with the financial
reporting of US companies more and
more regulated.
assess the ESG performance of a
company.
Compiling all the necessary information,
and data concerning the 3 ESG pillars
can be tedious, and time-consuming.
Digital tools exist to help collect all the
data, indicators and statistical analysis,
and automatically include them in
predefined reporting forms.
In addition, a digital tool will significantly
help the monitoring of the adopted
objectives, targets and actions via KPIs
and KRIs thanks to a real-time data
feed. Such a tool can be the solution for
the standardised formatting of a
mandatory report and allows fast
decision-making according to the data
feed and the boards' strategy.
ESRS, IFRS and the challenge of
data collection
The CSRD directive will “require
companies to digitally tag the reported
information, so it can feed the European
single access point envisaged in the
capital markets union action plan”. In
other words, companies should collect
their data and report them in a digital
tagged form.
Finally, a digital tool can shed the light on
the differences and similarities between
both sets of standards, ESRS and IFRS.
This feature allows every company to
make the right decisions by choosing the
most appropriate standards while
dressing its ESG strategy.
Therefore, companies should be at the
forefront of collecting all the necessary
information and complying with the
formalities of the directive. It is the same
when it comes to IFRS standards, data
should be collected and reported to
disclose the necessary information, and
digital forms will greatly help all the
stakeholders and investors to easily
All these talks about sustainability
standards and applications will bring
to light the real contribution and
impact of many business operations on
the environment and community. Two
huge sets of standards that will be
proposed at the end of 2022, will
greatly help companies and many
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
17/31
organisations carefully choose their
new ESG strategy and framework to be
the best performing company on the
market.
standards for its ESG strategy, its main
challenge will then be to conciliate its
short-term business strategy and
objectives and the long-term ESG
targets and policy.
Even if a company has an impeccable
EHS management system, and if they
choose the most suitable set of
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
18/31
ESG Strategy:
Between
Governance &
Operations
ESG reporting is getting a lot of
attention these recent years.
Moreover, ESG disclosure will become
regulatory in many countries around the world, and many ESG
standards are being issued and prepared to help companies define
their ESG strategy and be more attractive on the international
market.
How companies will define their ESG
strategy? What are the right decisions
and steps for the best ESG policy
implementation?
the light on how sustainability goals
(threats, impacts, risks and opportunities
related to environmental, social and
governance) are integrated into corporate
strategy and governance.
In our previous articles, we mentioned
the importance of EHS management
and its link to a successful ESG strategy
in addition to the emergence of new
regulations and standards (ESRS and
IFRS S1 & S2) and their role in regulating
a company’s ESG report and its ESG
strategy globally. These standards shed
Companies will be facing new, major and
ambitious
economic,
social and
environmental challenges. Organisations
will then have to review their strategic
views and positioning, starting with a
long-term political and economic point
of view to include ESG’s regulatory
requirements,
and
simultaneously
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
19/31
deploy an operational strategic plan
for the short-term period.
Strategic analysis
standards’ choice
and
What do the regulations dictate? What do
we want? What do our customers want?
What are investors looking for? How can
we contribute to the sustainable
development of our company?
the
The Corporate Governance body will
define the overall strategic framework of
the company. The corporate governance
body generally comprises the company’s
CEO, the shareholders and investors. This
body will develop and set the strategic
guidelines for the long-term ESG
objectives.
Strategic framework
In the business of today, and especially
for large companies, it is clear that ESG
strategy and corporate strategy are no
longer dissociated. One might even say,
that ESG is becoming “The” strategy of
businesses today. Companies will need to
adapt and review their global strategy so
that sustainability goals in addition to
environmental, social and governance
criteria are completely integrated into the
company’s purpose statement. This
newly developed strategy will increase
the company’s value on the market and
make it more attractive to stakeholders.
Once these objectives have been set, the
rest of the processes are played out
inside the company. The CEO selects a
management committee, and together
they will define an operational strategy
where the objectives and the action plan
are set for the short, medium and long
term.
For every step of the ESG strategy’s
development, it is important to carry out
a strategic risk analysis. For this task, the
management committee can rely on
tools such as SWOT or PEST analysis.
This is the major step that will transform
risks into opportunities.
Before defining any strategy, or
conducting the materiality assessment,
every company should identify its
internal and external stakeholders with
knowledge about factors and conditions
that affects ESG performance. Their
feedback will be of high importance
when conducting the materiality
assessment, choosing the best and
appropriate objectives and having a
mature ESG strategy.
Therefore, we talk now about risk
appetite, especially when the corporate
governance body is setting the
company’s strategy and framework. The
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
20/31
question that always comes up is: How
far are we willing to go to reconcile
ambition and risk-taking? For example,
risk appetite and Occupational Health
and Safety (OHS) can be related by: “No
strategic or economic decision should
impact the health and safety of my
employees”. The same goes for financial,
operational, strategic, regulatory and
equipment risks.
certain amount of criteria and metrics,
such as the disclosed information and
the materiality assessment. For
example, IFRS’s standards (International
Financial Reporting Standards) rely on
simple materiality whereas the whole
ESRS (European Sustainability Reporting
Standards) set of standards is built upon
double materiality.
If you are located in Europe, you will be
obliged to comply with the new CSRD
directive
(Corporate
Sustainability
Reporting Directive), and thereby apply
the ESRS standards.
Therefore, to define an appropriate
internal strategy, it is necessary to define
the risk appetite and to have a precise
overview of the overall context in which
the company wishes to operate. Thus, an
exhaustive risk register takes into
account the internal (e.g. its values) and
external framework of the company (e.g.
possible political, military, health, social
or environmental pressure).
Define your strategic objectives
Once the strategic analysis is carried out,
it will be time to define the targeted
objectives.
Standards framework
As mentioned before, it is necessary to
prepare and ask the right questions,
which will allow the development of the
global strategy and the terms of reference
for each project. The specifications will
be highly ambitious but realistic and
above all, they must be measurable.
We have already treated the standard
framework in our previous article “IFRS
and EFRAG’s New Sustainability
Reporting Standards”, and we have
mentioned the importance of this set of
standards in relation to an ESG strategy.
Every board of directors along with the
CEO should determine which standards
to apply to set their ESG strategy’s
framework.
Choosing
the
most
appropriate standard for your company is
essential as certain standards differ by a
The strategic objectives can
determined for 2 time periods:
be
● Long-term. This will concern the
political
and
economical
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
21/31
objectives
defined
by the
corporate governance body. For
example, when setting the safety
objectives, the aim is 0 accidents
within 10 years, and on the
environmental level, the goal is to
achieve a negative carbon
footprint by 2050 to become a
major player in the Climate Plan
and its objectives of carbon
neutrality.
measurable
indicators.
key
performance
Defining the objectives is never an easy
task. Moreover, prioritising them is a
whole other matter. Every company
should rely on their internal and external
stakeholders and conduct a materiality
assessment to also define their
objectives depending on the ESG topics,
and afterwards, prioritise them. The
materiality matrix will be generated and
the importance and urgency of the
objectives will be determined. If your
company decided to adopt the ESRS set
of standards, you will be subject to
double materiality, where you will be
obliged to measure both the financial
and impact materiality of your strategy.
The materiality assessment is conducted
via a survey dedicated to all
stakeholders.
● Short-term. This will concern the
operational objectives defined by
the board of directors. An action
plan will be elaborated to meet
the
long-term
strategic
commitments. Clear, precise and
measurable
objectives
are
defined. For example, these
objectives will rely on daily tasks
to achieve 0 accidents within 10
years and a negative carbon
footprint by 2050. In this case, the
actions are achieved and held by
internal processes and in close
collaboration
with
various
stakeholders and departments
(production,
maintenance,
Quality, EHS, Marketing, Sales,
HR, etc.)
The materiality matrix results are
shared in the form of a graph. The
abscissa usually represents the internal
stakeholders or the impact on business
operations, and the ordinate represents
the stakeholders. The rating goes from
less important to high importance for
both coordinates. Hence, the objectives
on the upper right of the graphs are the
most important ones.
For each objective, there are its own
associated risks. Therefore, a risk
assessment is necessary and the
resulting analysis will lead to the
elaboration of an action plan and
Below you can find an example of a
materiality matrix from Unilever:
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
22/31
Source: Unilever
2019/2020
Materiality
A small reminder about double
materiality, which is about the analysis
of each strategic and operational
decision from an economic point of view,
in addition to the impact of these
operations on the environmental
footprint of the company. With ESG,
companies can no longer ignore the
environmental and social metrics that
weigh heavily on international markets. A
company with a complete and mature
ESG strategy will attract more customers,
shareholders and investors.
Matrix
Then, statutory auditors, third-party
bodies, and ESG assessment bodies will
rely on these analyses and other
ESG-adopted criteria to assess and score
companies.
A dynamic dashboard makes it possible
to structure the approach, monitor and
analyse each and every action linked to a
certain objective. This monitoring is
conducted thoroughly through time and
will allow the transformation of risks into
real opportunities.
Analysis of the strategic risk
registers
Nowadays, dedicated tools for the
monitoring and strategic decisions of
companies are more abundant and
provide a fluid and global vision of
processes and decisions to make.
Once the strategic and ESG plan has been
validated, the objectives defined and
analysed, a risk register is dressed and
after the assessment and analysis,
mitigation measures are implemented.
When
talking
about
Corporate
Governance, the latter is defined by its
missions, its short and long-term vision,
its fundamental values, its purpose, its
risk appetite and its culture. All these
characteristics and many others are
necessary to develop, analyse and
especially share clearly and interestingly
way with all stakeholders. This is what we
To achieve this task, you can rely on
dedicated performance indicators.
These indicators can rely on the double
or simple materiality assessment and
the resulting objectives and actions, to
monitor their evolution and the changing
risks that might occur through time.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
23/31
call TRANSPARENCY, the core and the
most important aspect of ESG!
Companies adopting ESG strategy,
whether it is voluntary or regulated,
will be at a certain point audited and
evaluated. Therefore it is important to
anticipate and invest important time
and resources in ESG criteria.
Companies should choose and measure
the right metrics and carefully choose
the best-suited ESG framework to
prevent overreporting. ESG strategy
and objectives must be integrated into
how the company does its business and
its functions to be the most successful.
Finally, a digital tool makes it possible
to correlate the launch of the ESG
investment with the standards,
centralise and present in a clear and
structured way the data and the KPIs
to all stakeholders.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
24/31
Choosing the Right
KPIs for your ESG
Strategy!
Adopting an ESG strategy is not an
easy task. However, the new
emerging standards will help set the
pace for companies and provide
important guidelines for choosing
the best criteria adopted for their businesses. The adopted ESG
strategy must be monitored internally to ensure compliance with
the requirements of the standards. Key performance indicators
(KPIs) will provide important insights into the advancement and
monitoring of the strategy, in addition, to producing important
figures for the ESG report.
Therefore, you must wonder: How to
choose the best indicators? How to edit
the ESG report?
choose the most appropriate indicators,
analyse them and make the best use of
them.
No matter the situation, objectives or
processes, the implementation of KPIs
and/or risk indicators (KRIs) is
essential. For Quality, EHS and ESG, these
indicators
represent
a
universal
continuous
improvement
lever.
Therefore, it is important to know how to
How to choose the
appropriate indicators?
best
Strategic objectives, which are closely
linked to the policy and general strategy
of an organisation, are managed and
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
25/31
monitored via KPIs and KRIs. Thus, these
indicators will allow the governance
body to verify the effectiveness,
efficiency, relevance and reliability of
operations.
This
monitoring
and
management will greatly help with
raising awareness of certain issues and
fast decision-making. Furthermore, it is
important to choose the right and most
appropriate
indicators
to
avoid
overloading the dashboards.
Which KPIs to choose to keep
track of your ESG strategy?
To help companies and organisations
adopt and monitor the right KPIs, there
are numerous solutions, from standards
and regulations to existing online
platforms and ESG scoring bodies.
Online platforms or ESG scoring bodies
provide well-defined indicators that will
help
companies
with
their
self-assessment, improve performance
and internal scoring.
The best and most appropriate strategic
indicator should be:
● Linked to a strategic objective;
● Easily measurable and achievable
(must meet realistic objectives);
● Implemented for a dedicated
operation/activity;
● Assigned to one or more pilots for
analysis and follow-up;
● Defined in clear terms, precise
and timely;
● Regularly monitored;
with
other
● Comparable
organisations.
The KPIs are always about the 3 pillars of
ESG: Environmental, Social and
Governance.
Depending
on
the
platforms there are various types of
indicators for each pillar.
Here are some examples of indicators
that you might find:
Environmental indicators:
●
●
●
●
Members of the directory board decide
on whether or not to adopt an indicator.
Once all the indicators have been chosen,
the associated dashboards are shaped.
CO2 balance sheet;
Monitoring of waste management;
Water management;
And many more.
Environmental indicators will hence
allow the assessment of, for example, the
impact of operations on biodiversity,
GHG emissions, and circular economy.
Social indicators:
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
26/31
some indicators about specifically
climate change topics. Both standards
will require companies to disclose
information about their GHG emissions
(scope1, 2 and 3), energy consumption
and many other indicators that can
impact climate change.
● Partnerships with associations
and engagement in society;
● The existence of a profit-sharing
agreement;
● Employment equality and gender
diversity:
● And many more.
Companies can rely on their internal
communication and collaboration
especially between the EHS, compliance
and financial departments to always
keep an eye on evolving indicators, and
anticipate regulatory changes. Especially
since both sets of standards, IFRS and
ESRS, are still in draft versions.
Nevertheless, the published disclosure
requirements will allow companies to be
ready when they decide to adopt the
“perfect” ESG strategy.
Equal opportunities, respect for human
rights and corporate values ​are metrics
and indicators at the centre of the Social
pillar.
Governance indicators:
● Recognition by third parties via
certifications or other related to
ESG and/or CSR;
● The purpose;
● The corporate mission;
● And others.
How
to
dashboards?
The interest and commitment of
stakeholders represent a strategic lever.
Moreover, internationally recognised
standards can also provide all the
necessary requirements and guidelines
to adopt the most appropriate indicators,
such as ESRS (European Sustainability
Reporting Standards) and IFRS S1 & S2
(International
Financial
Reporting
Standards).
display
the
The monitoring of KPIs (or KRIs) can be
done by relying on dashboards. For
starters, the data can be presented in the
form of summary tables. Thus, the
performance indicators can be correlated
with various data, such as the company’s
Sustainable Development Goals (SDG),
the risk and strategic issues as well as
the
financial
and
non-financial
performance data.
For example, the IFRS S2 standard and
the ESRS E1 standard are both
environmentally related and provide
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
27/31
Furthermore, digital tools give the
possibility to rely on dynamic
dashboards. Hence, data processing is
done in an automated way with real-time
feed and updates. In addition, all
stakeholders can easily access these
dashboards.
An example of the dynamic dashboard
with Bluekango
Dynamic Dashboard
Adopting an ESG strategy alongside the
implementation of its indicators is not an
easy task. Especially since all the
information around ESG, from the
collected data to the standards
framework (IFRS, ESRS, etc.) is in
constant evolution. Therefore, to avoid
tedious administrative tasks, where
updating
and
summarising
the
corresponding and related information, it
is essential to rely on a dedicated tool,
that will also secure all your data.
ESG reporting is the final step. All the
collected data from all the ESG criteria
along with their corresponding key
performance indicators and all the
necessary information are disclosed in
the ESG report or the sustainability
report (including objectives, targets,
actions, etc.). The ESG report will make
the related activities of companies
transparent to the public and all
stakeholders. ESG reporting will play an
important role to attract more investors
and more funding from government
bodies.
A digital dashboard dedicated to ESG
criteria allows the management of the
global strategy and an automated action
plan will allow acting precisely on
important
and
concrete
actions.
Dynamic dashboards enable efficient
analysis of ESG data. The key
performance
indicators
are
automatically updated thanks to a
real-time data feed, and afterwards,
they are represented in your ESG report.
Key performance indicators must be
chosen carefully and wisely in order to
guarantee an effective continuous
improvement policy and comply with
ESG standards. They provide key
information for the ESG report. Digital
technology will play an important role
in the ESG strategy. The management
committees and governance bodies can
rely on digital to extract and analyse all
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
28/31
the necessary data to make the best
decisions to steer the company in the
right direction.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
29/31
Synthesis
Engaging in an ESG strategy is an opportunity for a company to improve its
operations, its economic performance and its environmental impact. Nowadays,
adopting a successful ESG strategy and fully complying with many of its criteria,
will greatly improve the performance of a company, develop a new and better
brand image and attract new investors.
Beyond the strategic and organisational aspects, an ESG strategy is a managerial
and administrative challenge in order to collect, monitor and show transparency
of the company’s activities. Gender equality, recognition, professional training,
quality of work life, environmental impact reduction, data transparency, etc.
When the protocols and procedures are well implemented, then the road is clear
for companies wishing to forge strong, responsible and sustainable business
ethics and most importantly stand out from the competition.
There is nothing like a digital tool as the best ally to efficiently manage, monitor
the adopted strategy and simplify the drafting of operational documents and
finally the ESG report. Thus, you will have all the necessary key elements to
implement a sustainable management system and be fully committed to carbon
neutrality by 2050.
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
30/31
About BLUEKANGO
Manage your ESG
strategy with the
BlueKanGo platform
BlueKanGo meets this ambition. Every stakeholder can access the BlueKanGo platform
from their computer, smartphone or tablet and feed, monitor or consult the ESG data and
strategy. The information is transmitted in real time and is represented in a form of a
dynamic dashboard. Automatically generate your ESG report, and easily share it internally
and/or externally. Monitor your approach in a collaborative way via an integrated action
plan.
BlueKanGo is a 100% SaaS platform, fully customisable (No-Code solution) and it
interfaces with your Information System interface for easy data import/export and with
Ecovadis’ ESG scoring system.
CSR Assessment & Audit
CSR Dashboard
GreenHouse Gas assessment
Integrated Management System
Global Action Plan QHSE-CSR ESG
Audit management software
Sustainable Development
ISO 50001 standard app
Discover our best ESG applications on the BlueMarket
More than 3 500 clients across many industries have adopted BlueKanGo
ESG guide - The New ESG Journey Explained: Targets, Reports, Scoring, etc.
31/31