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Why ESG reporting at the end of the financial year is more than a nice-to-have

As we approach the EOFY, it’s time for SMEs to turn their attention to their Environmental, Social, and Governance reporting in a real and measurable way.
Jake Majerovic
Jake Majerovic
ESG reporting
Source: Canva.

As we approach the end of the financial year (EOFY), it’s time for small and medium-sized businesses to turn their attention to their Environmental, Social, and Governance (ESG) reporting in a real and measurable way. Meeting ESG outcomes is no longer about ticking regulatory boxes to ensure compliance — it’s about integrating responsible, values-driven business practices into the core of your business.

Increased stakeholder activism for authentic environmental and social initiatives, means regulators are cracking down on greenwashing, Indigenous initiatives and other attempts to falsely present products, brands or operations as more sustainable and socially responsible than they really are. As ESG reporting is not yet mandatory, many businesses ignore this responsibility, focusing purely on financial results. However, industry leaders are waking up to the fact that effective ESG planning and reporting can be powerful levers for sustainable commercial transformation.

Seizing the moment: Turning ESG compliance into competitive advantage

The enforcement of mandatory climate reporting in Australia was due to start in the next fiscal year, however this implementation has been deferred by 12 months. But that doesn’t mean it’s time to take your hands off the wheel — in fact the opposite. These standards are still to be enforced soon, possibly as early as January 1, 2025, so now is the time to get your ESG planning and reporting set up for sustainable success.

It’s also an opportunity to refine your approach to ESG so you can pave the way in your respective industry, setting high standards and establishing your business as a market leader, rather than a follower. Don’t wait until enforcement happens to shift the dial. By taking action before these standards become mandatory, you can turn compliance into a competitive advantage.

At the end of the day, businesses shouldn’t be motivated solely by legislative compliance, they should be doing it because it’s the right thing to do. It’s time for organisations to go beyond compliance play, viewing ESG planning and reporting as a responsibility to build an ethical value chain, play an active role in the circular economy, increase internal diversity and make regulatory compliance a competitive strength.

Integrate ESG into your business plan

Thinking about ESG in isolation won’t cut it. You need to embed ESG planning and reporting into your annual and quarterly business cycles to maximise impact. It’s not enough to simply aim to ‘be better on carbon results’ or to ‘have a reconciliation action plan’; you need specific, actionable targets with clearly defined results that make a real-world impact. It’s time to cut the fluff and get real. Ask yourself: What are we aiming to achieve? What do we need to do to achieve this? How can we measure success? How does it matter? These questions should help inform your business strategy, ensuring that ESG outcomes are just as integral as your financial targets.

Hone your focus to improve outcomes

If you want to succeed in your ESG reporting, plan better and don’t try to do everything. Decide what aspects are most aligned with your business values, and focus on making an impact where it counts. For instance, if environmental impact is your focus, define clear targets like reducing reliance on raw materials, optimising operational energy use, or implementing specific sustainable sourcing practices. By narrowing your focus, you can set more realistic goals and ensure you are working towards achievable outcomes that can be reflected in your reporting standards whilst feeding future planning.

Build long-term value through ESG

Focusing on ESG is more than just compliance; it’s about building long-term value and relevance for your business. In today’s market, more consumers are making decisions based on ethical considerations such as climate disciplines and social impact. Even if prioritising ESG strategies seems like a financial burden, working smarter not harder means you don’t have to do it all in one hit. Learn what you can change now, so you can continue to evolve tomorrow. Your customers, shareholders, employees and broader community will notice; trust the process.

Learning from the leaders: The case of Tony’s Chocolonely

Tony’s Chocolonely is a shining example of how a company can transform the burden of ESG compliance into a competitive advantage. Born out of a mission to combat child labour in the chocolate industry, Dutch chocolate brand, Tony’s Chocolonely aims to make chocolate 100% slave-free. At a time when there is increasing consumer consciousness in purchasing ethically sourced products, Tony’s Chocolonely is seeing impressive revenue growth, with 23% in 2023, reaching $162 million. 

The chocolate industry is fairly controversial with multiple ethical threats to the supply chain including potential child labour and underpaid farmers. In order to combat these ESG issues, Tony Chocolonely picked a handful of outcomes to work on. One was improving payments to farmers to ensure they are above the fair trade premium and stamping out child labour in their supply chains, so that they could have a direct and measurable impact on people’s lives.

In their annual reporting, the company uses radical transparency and measurable KPIs to showcase increased investment into their supply chain, including increasing the “premium paid to farmers to reach Living Income Reference Price $575 per metric ton in Ghana and $825 per metric ton in Ivory Coast”. They also highlight their Child Labour Monitoring and Remediation System, in place across all seven of their cocoa cooperatives and found 387 cases of illegal child labour in the 2023 fiscal year, with 221 remediated by the company. This approach not only enhances their reputation but also highlights tangible improvements in the lives of their suppliers.

In 2021, Tony’s Chocolonely came under fire after an article in The Times revealed that they were removed from the ‘Slave Free Chocolate’ list. Instead of letting this derail their ESG efforts, they issued an insightful response explaining it was “not because there were suddenly cases of modern slavery in our value chain” but because they work with Barry Callebaut, a chocolate producer who had been accused of abuses in his supply chain. They also note that, “Slavefreechocolate.org is not an official certification. When it comes to official certifications like Fairtrade and B-Corp, Tony’s passes with flying colours.”

They used this opportunity to set themselves apart from their competitors, showcasing authentic and measurable ESG impact on their website: 

“We have never found an instance of modern slavery in our supply chain, however, we do not guarantee our chocolate is 100% slave free. While we are doing everything we can to prevent slavery and child labour, we are also realistic… we cannot be there to monitor the cocoa plantations 24/7, and we don’t believe in that kind of monitoring… we want to change the whole industry which involves being where the problems are so that we can solve them. Only then can we say we have achieved our mission to make all chocolate 100% slave free.”

They highlight the Child Labour Monitoring and Remediation System as a unique initiative that sets them apart from their competitors, “Most big chocolate companies do not know how many cases of illegal labour there are in their cocoa supply chain and therefore they cannot work to remediate them…we have a 100% traceable supply chain”.

Going from just doing ESG to precision ESG 

This is a perfect example of Precision ESG. Tony’s Chocolonely has demonstrated a commitment to genuine change throughout every nook and cranny of its value chain, going beyond regulatory requirements to do the right thing — and it has paid off. Its precision-led ESG strategies have carved out a strong market differentiation, improved stakeholder sentiment and, as a positive by-product, had a material financial impact (evidenced in its 2023 revenue growth).

The value of doing it right 

ESG planning and reporting isn’t always easy, but the rewards of doing it right are immense. Not only does it ensure you comply with emerging ESG standards, but it also demonstrates your commitment to responsible business practices. Just like financial reports, ESG reports should provide clear insights into your initiatives resulting in measurable outcomes that drive impact with integrity and precision. 

Jake Majerovic is the managing director of Thinkless Group.

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