Environmental, social, and governance (ESG) are the three factors that measure a corporation’s impact and performance on sustainability and social responsibility. They cover everything from sourcing products and managing resources to practicing workplace diversity and protecting shareholder rights. 

ESG initiatives have a direct financial correlation in terms of cost saving, stock performance, and lower cost of capital. They are also a crucial consideration for investors and analysts who prioritize ESG metrics in their investment decisions. 

They also impact a company’s reputation, increasing its appeal to customers, employees, and other stakeholders. On the flip side, failures in ESG expose a firm to activist protests, adverse publicity, and regulatory action. As such, there is a greater need for transparency. 

Challenges and Considerations With ESG 

ESG metrics have become essential in reporting alongside financial statements. Unlike financial reporting, however, ESG reporting is still largely voluntary. Even when it is regulated, it remains unstandardized, making it incomplete, inaccurate, and inconsistent. 

However, new developments are moving closer to mandatory disclosures and harmonization of reporting standards. Global corporations must consider these. 

From Voluntary to Mandatory 

ESG reporting has long been voluntary. Companies would report only what they want to disclose. However, this is changing. In recent years, there has been a move toward regulation and mandatory reporting. This has impacted how corporations collect, verify, and act on ESG data. 

The latest developments include: 

• SEC: The U.S. Securities Exchange Commission (SEC) now requires climate change disclosure to be increased and standardized in registration statements and periodic reports of SEC-registered companies, including publicly listed corporations. 
• CSDD: The European Commission (EU) has adopted the Corporate Sustainability Due Diligence (CSDD), with a focus on preventing human rights and environmental adverse impacts. The CSDD has a far-reaching scope, requiring global companies doing any business in the EU to implement it. 
• CSRD: The EU adopted the Corporate Sustainability Reporting Directive (CSRD), which requires standardized reporting on environmental and social impact initiatives. The CSRD, which member states must implement, will update and reinforce the EU’s Non-Financial Reporting Directive and will work in tandem with the CSDD. 

From Change to Compliance 

With the rise of ESG, large companies have appointed sustainability officers responsible for creating and implementing sustainable organizational policies that address social and environmental issues. They are also in charge of collecting and reporting ESG data. 

Sustainability officers are viewed as change agents advocating for ESG issues, pushing for ESG initiatives, and communicating ESG performance results. However, with the move toward regulation and mandatory reporting, like SEC reporting of financial performance, ESG is increasingly becoming a compliance and risk management responsibility. 

From Fragmented to Harmonized 

There are an estimated 600 ESG reporting standards globally. A lack of a unified standard makes reporting compliance for global companies confusing and burdensome. For ESG investors, it isn’t easy to compare ESG performance between corporations. Some of these reporting standards and frameworks, each with its own focus and definition of materiality, include: 

• Sustainability Accounting Standards Board (SASB) 
• Global Reporting Initiative (GRI) 
• Carbon Disclosure Project (CDP) 
• International Integrated Reporting Council (IIRC) 
• Climate Disclosure Standards Board (CDSB) 
• Taskforce on Climate-related Financial Disclosures (TCFD) 

However, there is a new direction toward harmonizing and standardizing these overlapping reporting frameworks. The International Financial Reporting Standards (IFRS) Foundation launched the International Sustainability Standards Board (ISSB), which will develop a global baseline of sustainability reporting standards for companies worldwide. Already, it is working on a general requirements prototype and a climate prototype, which will soon be the standard globally. 

Financial information is critical in decision-making. Our white paper, Internationalization Strategy behind Financial Documents, explores the opportunities, challenges, and best practices behind the translation and localization of financial documents. 

ESG Compliance in Global Markets 

It will take time for the ISSB to finalize and release a unified sustainability reporting standard. Meanwhile, global companies must comply with the various regulatory requirements and use different reporting standards for their ESG reports. 

A substantial component of ESG compliance worldwide is translating ESG content to various markets where a company operates or seeks capital. Multilingual content solutions can be used to support a corporation’s sustainability initiatives. 

Taking content global, however, comes with its own considerations and challenges: 

• The volume of content. Numerous ESG reports must be accurately translated into the required languages. The number of documents is substantial, including anti-bribery and anti-corruption manuals, climate change policies, corporate governance, human and labor rights management, procurement and contracting policies,  financial and investment reporting, and many more. 
• The number of languages supported. Apart from the massive amount of ESG documents, companies must translate these into the required languages in the territories they operate and comply with specific reporting requirements from each jurisdiction. 

Work With Welocalize 

For global corporations, translating ESG documents into multiple languages is a complex and costly undertaking. A more cost-effective and efficient alternative is to work with a language service provider that has experience in multilingual content solutions, including ESG reports, and can leverage a global network of linguists and subject matter experts (SMEs) familiar with various disclosure regulations and reporting standards. 

Welocalize’s professional translation and localization services support over 525 language combinations. Our network of over 250,000 linguists, reviewers, and SMEs allows us to translate ESG content in volume and at scale. 

Contact us to find out how we can help you with your global ESG reporting requirements.