The American Bureau of Shipping (ABS) has published the ABS ESG Blueprint, a report full of best practices and effective strategies for ESG (Environmental, Social, and Governance) monitoring and reporting.
What is ESG?
ESG stands for Environmental, Social, and Governance, and it refers to a set of criteria that investors and other stakeholders use to evaluate a company’s impact on society and the environment. Each component of ESG represents a different aspect of a company’s operations. ESG criteria are used by investors to evaluate the non-financial performance of companies and to make decisions based on not only financial returns but also on a company’s ethical, social, and environmental impact. The goal is to encourage sustainable and responsible business practices.
As ABS notes, it is an important aspect of sustainability reporting processes to identify relevant ESG topics for reporting purposes. According to ABS, some commonly reported ESG topics include:
#1 Environmental
GHG emissions, decarbonization efforts, air pollution prevention, ballast water and marine biosafety, solid waste and wastewater management. Other topics may also be addressed such as marine plastic litter, underwater noise pollution, wildlife collisions, oil spills and biodiversity impacts and shipbreaking impacts.
#2 Social
Community engagement, data privacy, work health and safety (including insurance policy), protection of human and labor rights (considering the whole supply chain), responsible procurement, access to medical care, clean water and sanitation, protection of human wellbeing, appropriate working conditions, protection of mental health and access to education.
# Governance
Anti-bribery policy, business ethics and governances related to environmental sustainability, human rights and safety management, risk management, transparency and accountability
Data collection best practices
Furthermore, ABS explains that data collection is one of the most important elements of sustainability reporting. companies must comply with and be aware of the laws and regulations that are linked with data collection at a regional and international level. Furthermore, data should be accurate, consistent, repeatable and standardized.
To collect appropriate data for the required material topics, as identified in the materiality assessment, a gap analysis should be performed. Since each company has different data entry systems, the gaps between the required input data and the available raw data should be identified.
Data collection, in some cases, can be a very challenging task, since it presupposes a consistent collaboration between internal departments, suppliers, collaborators and other stakeholders.
ABS also clarifies that data collection could also be challenging based on factors such as:
- the availability of data and lack of appropriate recording systems
- the absence of relevant standardized data collection procedures
- the periodicity of data collection and other quality characteristics such as data uncertainty
Since annual ESG reporting needs to be consistent in terms of data collection and associated data treatment methods, especially for these data points, procedure manuals could be added in the existing quality system manuals to increase accuracy, consistency and repeatability of the process.
6 key steps for effective ESG data collection
The data collection process is a structured process that involves the following steps:
- Set up a data collection plan.
- Standardize internal procedures.
- Identify responsible persons for different tasks in the company.
- Prepare detailed data collection templates, including examples, units, quality characteristics, etc.
- Collect information in a systematic way.
- Regular checks on the data collection progress, including resolving data gaps and quality issues.
Digitalized tools, available in the market, could effectively support the data collection process, although integrations with the internal corporate systems and automation capabilities must be customized and critically reviewed by thirdparty experts to mitigate miscalculation risks.
ESG reporting assurance
Assurance of ESG reports involves seeking an expert to give an independent opinion of the report, including checking on the general process flow, data used and treated, materiality assessment, disclosures made and so on.
Receiving assurance is crucial because it increases the credibility of the report, and it may be required for various stakeholders such as banks and lenders. In the context of CSRD, limited assurance is mandatory and in the years to come, the requirement might change to a reasonable level of assurance.
It is worth noting that the International Auditing and Assurance Standards Board (IAASB) has issued a proposed International Standard on Sustainability Assurance — the ISSA 5000 “General Requirements for Sustainability Assurance Engagements” — that remained under public consultation up to 1 December and is expected to be issued before the end of 2024.
It’s expected to be the dominant market standard for the ESG reporting assurance. According to ABS, ISSA 5000 is suitable for the assurance of any sustainability information prepared according to any reporting framework and covering any sustainability topic.
