Everything You Need to Know About ESG and Its Impact on Carbon Reporting

In today’s world, businesses can no longer afford to turn a blind eye to their environmental impact. Consumers, investors, and regulators are all demanding more transparency and accountability, pushing companies to take ESG (Environmental, Social, and Governance) reporting seriously. At the heart of this shift lies carbon reporting—a powerful tool that goes beyond measuring emissions to shaping a company’s identity as a responsible and forward-thinking brand.  Did you know?  In fact, a study by KPMG suggests that over 80% of the world’s largest companies now reports on greenhouse gas emissions as part of their corporate sustainability efforts. By adopting carbon reporting, organisations can meet critical reporting standards while contributing meaningfully to the global fight against climate change.  There’s a compelling financial upside too. Companies that prioritise ESG and sustainability often find themselves rewarded with increased investor confidence and stronger market positioning. It’s a clear signal that responsible practices not only benefit the planet but also create lasting value for businesses.  As Larry Fink, CEO of BlackRock, stated, “Climate risk is investment risk.”   Embracing carbon reporting as part of an ESG framework can help companies navigate risks and opportunities in an evolving market, enhancing brand trust and long-term viability.   

Purpose of This Blog 

The purpose of this blog is to explore how carbon reporting plays a pivotal role in achieving robust ESG compliance. By breaking down the essential aspects of carbon emissions tracking, aligning with ESG frameworks, and meeting international reporting standards, this blog aims to highlight the practical benefits of integrating carbon data into environmental, social, and governance efforts. 

Key Takeaways 

• Carbon Reporting Drives ESG: Essential for compliance and measurable climate action. 
• Materiality is Key: Focus on ESG issues that truly matter to stakeholders. 
• Investor Appeal: Strong ESG transparency attracts investor interest. 
• Framework Alignment: Following GRI, SASB, and CDP boosts reporting credibility. 
• Brand and Growth Boost: Effective ESG builds resilience and enhances brand value. 

So, let us start with the basics first.

What is ESG? 

ESG—short for Environmental, Social, and Governance—is a framework that’s transforming how businesses impact the world. Think of ESG as the roadmap companies use to manage their effect on people, the planet, and their practices.  Let us understand what the acronym means and its core elements.  Environmental: Think of this as the “planet-friendly” part of a business. Companies are expected to keep an eye on their carbon emissions, cut down waste, save water, and make smart energy choices. The goal?  Reduce their environmental impact and contribute to a more sustainable world. Whether it’s switching to renewable energy, implementing recycling programmes, or lowering their greenhouse gas emissions, companies are stepping up to do their part. With climate change on everyone’s radar, this “E” in ESG has become a true game-changer.  Social: This is all about people and communities. From creating a safe, inclusive workplace to giving back to society, the social side of ESG dives into how businesses treat their employees, customers, and communities. It’s about supporting diversity, fair labour practices, and community outreach.  Imagine companies actively working to ensure their supply chains are fair and transparent or leading volunteer programmes that positively impact the communities they operate in. When companies prioritise people, they’re not just making a profit—they’re making a difference.  Governance: The “G” is the glue that holds it all together, focusing on how companies are run. Good governance is about transparency, ethical behaviour, and staying accountable. This covers everything from how a company’s leadership is structured to its board decisions, executive pay, and overall business ethics.    At its core, ESG tackles three big questions: How does a company protect the environment (from managing carbon emissions to conserving resources)? How does it support people (like employees, communities, and customers)? And how well is it run (with ethics, transparency, and compliance at the heart)?    Now comes the next big question- 

Why is ESG Important? 

• Companies should prioritise ESG because it’s essential for meeting the expectations of today’s stakeholders, reducing financial and operational risks, and staying ahead of tightening regulations on issues like carbon emissions and corporate sustainability.  
• Embracing ESG principles allows companies to build a resilient brand that attracts talent, customers, and investors, all while ensuring long-term growth and profitability. By proactively aligning with environmental, social, and governance standards, businesses not only protect themselves from future regulatory and market shifts but also position themselves as trusted, forward-thinking leaders.  

Sustainability vs. ESG: What’s the Difference? 

While sustainability and ESG often go hand-in-hand, they serve different purposes in the business world.   Think of sustainability as the big-picture vision—a commitment to practices that protect people and the planet for future generations. It’s about embracing ethical and resource-efficient choices, from reducing carbon emissions to supporting fair labour practices. Sustainability is the mission driving companies to make lasting positive impacts, inside and outside the boardroom.  ESG, on the other hand, is the framework that gives shape to that vision. Environmental, Social, and Governance (ESG) standards provide the measurable steps that companies can take to achieve their sustainability goals. ESG metrics help businesses assess their environmental impact, social contributions, and internal governance practices, making it easier to communicate their progress to investors, regulators, and stakeholders. In short, sustainability is the "why," while ESG is the "how"—together, they create a roadmap for a responsible, resilient business future. 

Why Consider ESG for Modern Businesses? 

Investor Attraction and Market Value 

ESG is no longer just a “nice-to-have”—it’s a financial advantage. Investors are increasingly drawn to companies with strong ESG performance because these companies often show resilience and lower risk.   Fact Check  According to a report by the Global Sustainable Investment Alliance (GSIA), global sustainable investment assets reached $35.3 trillion in 2020, representing 36% of all professionally managed assets. This indicates a strong and growing demand for ESG-integrated investment strategies. 

Resilience and Risk Management 

Companies that embrace ESG are better equipped to handle challenges like climate-related risks and evolving regulations. By proactively addressing environmental and social responsibilities—such as managing carbon emissions and supporting social responsibility—these companies can better withstand market shifts and environmental disruptions, giving them a competitive edge in turbulent times. 

Trust and Transparency 

Transparency is key to building stakeholder trust, and ESG reporting allows companies to openly share their commitment to sustainable practices. Today, around 90% of S&P 500 companies produce ESG reports to showcase their efforts in areas like greenhouse gas emissions and corporate governance. This transparency fosters confidence among consumers, employees, and investors, showing that the company is committed to ethical growth and responsible operations. 

Regulatory Compliance and Preparedness 

As regulatory bodies worldwide push for greater corporate sustainability reporting and accountability, companies with established ESG practices are better prepared for these compliance demands.  Following frameworks like the Global Reporting Initiative (GRI) and aligning with global reporting standards help companies stay ahead of regulations and build a reputation for accountability. 

What are the Challenges Of Implementing ESG Framework? 

While ESG investing is gaining momentum, it’s not without its hurdles and critics.   Did you know?  About 24% of companies identify internal corporate silos as significant barriers to advancing their ESG agendas. This statistic highlights the organisational challenges that can impede the integration of sustainable practices. 

• Lack of Standardisation: One big challenge in ESG investing is the absence of a unified set of metrics and reporting frameworks. This lack of standardisation leads to varying ESG ratings, making it tough for investors to compare companies' side by side and know if they're truly getting the full picture. 
• Greenwashing: Not every company practicing ESG is as green as they seem. “Greenwashing” occurs when businesses make their environmental efforts look far better than they are, often through clever marketing rather than real action. This practice can undermine the credibility of ESG investing, leaving investors with misleading information. 
• Performance Concerns: The question of returns is a hot topic. Some argue that ESG investments can perform just as well—or even better—than traditional investments, while others worry that focusing on ESG factors might impact financial returns in certain market conditions. It’s an ongoing debate, and the answer often depends on the specific market and sector involved. 

 

Metrics Used to Measure ESG in Businesses? 

Did you Know? Before we begin, it’s worth noting that a significant 89% of global investors prefer ESG performance to be reported with globally consistent standards. Investors increasingly see ESG metrics as essential tools for evaluating opportunities, adding credibility to a brand’s story, and strengthening authenticity and trust with stakeholders.  Usually, key metrics include greenhouse gas emissions, workforce diversity rates, and tax contributions—each providing clear benchmarks for a company’s sustainability efforts and commitment to responsible business practices. Let's understand the metrics in detail. 

• Greenhouse Gas Emissions (GHG): This metric tracks a company’s carbon emissions footprint, including Scope 1, 2, and sometimes Scope 3 emissions. Reducing GHG emissions is crucial for meeting climate-related financial disclosures and demonstrating a commitment to minimising environmental impact. 

• Energy Consumption and Efficiency: Monitoring energy usage and improvements in energy efficiency provides insight into a company’s corporate sustainability efforts. This metric is essential for evaluating how a business manages its resources and contributes to environmental impact reduction. 

• Diversity and Inclusion (D&I): This social metric assesses employee diversity in terms of gender, race, and other demographics, along with inclusion practices. High D&I scores reflect a company’s commitment to fostering an inclusive workplace, supporting social responsibility, and addressing ESG issues in talent management. 

• Board Independence and Diversity: Under the governance pillar, this metric evaluates board composition, including the percentage of independent and diverse members. It reflects a company’s corporate governance practices, transparency, and accountability, which are crucial for building stakeholder trust. 

• Water Usage and Waste Management: This environmental metric measures a company’s water consumption and waste reduction efforts. It reflects on resource efficiency, sustainable operations, and commitment to reducing environmental impact, aligning with standards like the Global Reporting Initiative (GRI). 

How Does Carbon Reporting Drive ESG Compliance? 

Carbon reporting has become a cornerstone of ESG compliance, especially within the critical Environmental pillar, by providing measurable insights into a company’s carbon emissions and overall greenhouse gas emissions.  Yet, the urgency for reliable carbon reporting is underscored by recent findings. In 2024, a survey of nearly 2,000 companies revealed that only 9% comprehensively report their Scope 1, 2, and 3 emissions.   This gap highlights the need for more robust carbon reporting practices to meet evolving ESG standards and ensure true accountability in environmental impact. Here’s how carbon reporting strengthens ESG alignment: 

• Enhances Regulatory Compliance: Carbon reporting ensures that companies align with regulatory standards on emissions, meeting government and industry requirements for ESG compliance. As regulatory bodies push for transparency, accurate carbon reporting can help avoid penalties and legal challenges. 
• Builds Transparency and Trust: Reliable carbon reporting demonstrates a company’s commitment to environmental impact reduction, building trust with stakeholders. Investors, customers, and employees can clearly see how a business is taking responsibility for its carbon footprint, enhancing corporate sustainability. 
•  Supports Risk Management: Tracking carbon emissions allows companies to identify climate-related risks and make informed decisions on how to address them. With Mavarick's carbon reporting solutions, companies gain precise insights to strengthen their ESG frameworks and effectively manage potential environmental challenges. 
• Boosts Brand Reputation: Companies that actively report and reduce their emissions are often seen as leaders in sustainability. This commitment to transparency and responsibility improves their brand image, appealing to conscious consumers and socially minded investors. 

Which are the Major ESG Frameworks  

In ESG reporting, several major frameworks guide companies in achieving transparency and accountability. With efficient and innovative platforms like Mavarick simplifying the process, businesses can align with these standards more effectively to meet their sustainability goals. Here’s a quick look at four of the most impactful frameworks: 

The Global Reporting Initiative (GRI) 

The Global Reporting Initiative (GRI) is one of the most widely used ESG frameworks, helping companies report on their environmental, social, and governance impacts. GRI standards cover various topics, from greenhouse gas emissions to labour practices and corporate governance, making them suitable for organisations of all sizes and industries. By following GRI guidelines, companies can improve their corporate sustainability efforts and demonstrate a strong commitment to accountability. Learn more about GRI.  Fact Time: According to a study that examined disclosure practices among the world’s 250 largest companies by revenue (the G250) and a broader pool of the top 100 companies across 58 countries (the N100), 78% of the G250 now adopt the GRI Standards for reporting, up from 73% in 2020.  

Carbon Disclosure Project (CDP) 

The Carbon Disclosure Project (CDP) is an independent non-profit that collects environmental data from companies worldwide, assessing areas like carbon emissions, water use, and supply chain practices. With over 18,700 companies reporting through CDP in 2023, it’s become a go-to resource for investors seeking clear, comparable climate data. Platforms like MAVARICK empower companies to streamline their CDP submissions, ensuring that their climate impact data is accurately reported and easily accessible. Explore CDP.  Did you know? In 2023, a record-breaking 23,000+ companies, representing at least two-thirds of global market capitalisation, disclosed environmental data through CDP, marking a 24% increase from the previous year and underscoring the growing commitment to environmental transparency. 

The Sustainability Accounting Standards Board (SASB) 

The Sustainability Accounting Standards Board (SASB) focuses on creating standards that help companies report ESG factors that are financially material to their industries. SASB standards are industry-specific, allowing companies to highlight the ESG issues that directly impact their financial performance. This makes SASB especially valuable for investors looking to understand a company’s financial disclosures alongside its sustainability practices.   Fact Time:  By 2021, more than 600 companies disclosed SASB metrics, with over 1,000 companies referencing SASB as an input to their reports, reflecting the global adoption of industry-specific ESG reporting. 

The Climate Disclosure Standards Board (CDSB) 

The Climate Disclosure Standards Board (CDSB) provides for climate-related financial disclosures. It guides companies in reporting environmental information in mainstream financial reports, making it easier for investors to assess climate-related risks and environmental impact. CDSB’s focus on integration with financial reporting aligns it closely with the Task Force on Climate-related Financial Disclosures (TCFD). More on CDSB here.  Did you know? In 2015, responses to the CDP Climate Change questionnaire revealed that 341 companies across 32 countries were utilising the CDSB Framework to disclose environmental information to their stakeholders. 

Mandatory ESG Reporting Requirements in Ireland 

In Ireland, ESG reporting requirements are primarily governed by the Corporate Sustainability Reporting Directive (CSRD), which was transposed into Irish law on July 5, 2024. This directive mandates that companies meeting specific criteria must disclose information on their environmental, social, and governance practices. Read more about it here.  Timeline Implementation:  

• From January 1, 2024: Public interest entities already subject to EU non-financial reporting rules (those with more than 500 employees) are required to comply. 
• From January 1, 2025: Other large companies and public interest entities with more than 250 employees must begin reporting. 
• From January 1, 2026: Listed small and medium-sized enterprises (SMEs) are expected to comply, with an option to opt out until 2028. 

Companies within the scope of the CSRD are required to report on a double materiality basis. This means they must disclose not only the risks they face from climate change and other ESG matters (financial materiality) but also the impacts their operations have on climate and society (impact materiality).   Additionally, companies are obligated to provide information on their value chain. To facilitate the transition, for the first three years of reporting, if information on the value chain is unavailable, companies may explain their inability to obtain the data.   These requirements aim to enhance transparency and standardise ESG reporting across Ireland, aligning with broader European sustainability objectives. 

5 Major ESG Reporting Practices for Businesses 

Here are five major best practices for ESG reporting: 

Align with Recognized Frameworks 

Adopting established frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Carbon Disclosure Project (CDP) ensures that your ESG reporting is credible and comparable. These frameworks provide standardized guidelines that help businesses structure their ESG data effectively. For example: 

• GRI is widely used for comprehensive sustainability reporting. 
• SASB focuses on financial materiality tailored to industries. 
• CDP emphasizes environmental disclosure, such as carbon emissions and water usage. 

By aligning with these frameworks, businesses demonstrate accountability and meet global reporting standards. 

Focus on Material Issues

A materiality assessment helps businesses identify ESG topics that are most relevant to their operations, stakeholders, and industry. Material issues vary by sector—for instance: 

•  Tech companies may prioritize data privacy and energy efficiency. 
• Manufacturers might focus on carbon emissions and waste management. 

By focusing on these key areas, businesses provide meaningful insights rather than overwhelming stakeholders with irrelevant data. This approach enhances the value and clarity of ESG reports, making them actionable and aligned with stakeholder priorities.

Set Clear, Measurable Goals

Vague commitments won’t cut it in today’s accountability-driven world. Businesses need to establish specific, measurable ESG goals. For instance: 

•  Reducing greenhouse gas emissions by a certain percentage within five years. 
• Achieving gender diversity benchmarks within leadership roles. 

Regularly tracking and reporting on progress not only boosts accountability but also helps businesses showcase their commitment to continuous improvement. Clear goals also make it easier for stakeholders to understand a company's ESG strategy and monitor its impact.

Ensure Data Quality and Transparency

Accurate and transparent ESG data is critical for building trust with stakeholders and meeting compliance requirements. Businesses must: 

•  Establish robust data collection processes. 
• Validate the accuracy of reported metrics, particularly for environmental impacts like carbon emissions and resource consumption. 
• Be transparent about methodologies and limitations to avoid greenwashing allegations. 

High-quality, reliable data allows businesses to make informed decisions, benchmark performance, and communicate their efforts credibly to investors, customers, and regulators.

Leverage Technology

ESG reporting can be complex, but technology simplifies the process. Tools like Mavarick’s ESG software enable businesses to: 

•  Streamline data collection and management across various ESG metrics. 
• Automate calculations and ensure accuracy. 
• Create compliant and visually compelling reports tailored to different stakeholders. 

Technology reduces the manual effort involved, minimizes errors, and enhances the efficiency of ESG reporting processes. Leveraging digital solutions ensures businesses can adapt quickly to evolving reporting standards and demands. 

Key Trends in ESG Investing 

• Growth in ESG Assets: ESG investing has experienced significant growth in recent years. According to Bloomberg Intelligence, ESG assets surpassed $30 trillion in 2022 and are projected to exceed $40 trillion by 2030, accounting for over 25% of the projected $140 trillion in total AUM.
• Focus on Climate Change: Climate change remains a central theme in ESG investing. The Task Force on Climate-related Financial Disclosures (TCFD), led by the Financial Stability Board, has been instrumental in pushing companies to disclose climate-related risks and opportunities. Investors are now prioritising companies with robust climate action plans and low carbon footprints.
• Integration of ESG Metrics: The use of ESG metrics in financial analysis is becoming more refined. Frameworks such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide standardised ways to assess ESG performance, helping investors evaluate companies’ environmental, social, and governance practices with greater accuracy.
• Impact Investing: Impact investing, which seeks to generate positive social or environmental outcomes alongside financial returns, is gaining momentum. The Global Impact Investing Network (GIIN) estimated the size of the worldwide impact investing market to be $1.164 trillion as of 2022, marking the first time the estimate has surpassed the $1 trillion mark. 

ESG Reporting Examples 

Here are some real-life examples of how companies are implementing ESG practices: 

Microsoft – Carbon Negative by 2030 

Microsoft has committed to becoming carbon negative by 2030, aiming to remove more carbon from the environment than it emits. By 2050, the company plans to eliminate all carbon it has emitted since its founding. This initiative includes transitioning to renewable energy, investing in carbon removal technologies, and enhancing energy efficiency.  

Patagonia – Environmental and Social Responsibility 

In 2024, Patagonia, an outdoor apparel company, pledged a portion of its maritime shipping volume to ZEMBA’s first-ever zero-emission shipping initiative and committed to purchasing environmental credits tied to this zero-emission shipping for 2025 and 2026. The company is committed to transparency in its supply chain and environmental impact, aligning closely with ESG principles.  

Unilever – Sustainable Sourcing and Community Impact 

Unilever's Sustainable Living Plan focuses on reducing environmental impact and enhancing social impact through sustainable sourcing and community engagement. In 2023, 79% of Unilever's key agricultural materials were sourced sustainably, with primary crops accounting for two-thirds of the agricultural raw materials they purchase. The following outlines the specific actions Unilever is taking to achieve these sustainability goals. 

Tesla – Electric Vehicles and Renewable Energy 

Tesla's mission is to accelerate the world's transition to sustainable energy. Through its electric vehicles, solar products, and battery storage solutions, Tesla has contributed significantly to reducing carbon emissions in the transportation and energy sectors. The company discloses information on ESG metrics such as greenhouse gas emissions and energy usage in its impact reports. 

Wrapping Up! 

Sustainable practices and ESG reporting are no longer just ideals but essential drivers of long-term success and resilience. As companies increasingly adopt frameworks like the GRI, SASB, and CDP, they’re setting benchmarks for transparency, trust, and positive impact.   By prioritising the environment, the global focus on sustainability intensifies, and companies that embrace robust ESG practices are positioning themselves as leaders in a new era of responsible and profitable growth.  Ready to take your ESG reporting to the next level? Discover how Mavarick’s powerful tools can streamline your sustainability journey and enhance transparency. Contact us today to see how MAVARICK can drive your ESG success! 

Frequently Asked Questions (FAQs) 

What is ESG reporting, and why is it important?

ESG reporting involves disclosing a company’s performance in Environmental, Social, and Governance areas, showcasing its commitment to responsible practices. It’s important because it helps build trust with stakeholders, aligns with regulatory standards, and enhances a company’s brand and market competitiveness. 

How can ESG reporting benefit my company? 

Effective ESG reporting can attract investors, improve stakeholder relationships, and help companies align with industry standards. It also supports long-term sustainability goals and strengthens brand reputation. 

Which ESG standards should companies align with? 

Companies commonly align with widely recognised frameworks like the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and Carbon Disclosure Project (CDP), which provide established guidelines for consistent and credible ESG reporting. 

What specific metrics are typically tracked in ESG reporting?

 ESG reporting often includes metrics such as carbon emissions, energy consumption, diversity and inclusion, supply chain transparency, and governance practices, offering a comprehensive view of a company’s ESG performance. 

Is ESG reporting mandatory for my business? 

ESG reporting requirements vary by country and industry. Many jurisdictions now require certain companies, particularly large corporations and publicly listed businesses, to disclose ESG information to ensure transparency and accountability.