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‘The most powerful thing is knowing and measuring what your footprint is’ – Brian Stafford, President & CEO of Diligent, on ESG Reporting

By Business & Finance
28 November 2023
A photo of Brian Stafford, President & CEO of Diligent, on ESG Reporting
Pictured: Brian Stafford, President and CEO, Diligent.

Brian Stafford is President and CEO of Diligent, a governance, risk and compliance (GRC) SaaS company. Business & Finance asked him about the challenges and opportunities with ESG board reporting. 

Why is ESG board reporting so important? 

ESG reporting to the board is incredibly important. ESG is maybe a little bit sooner to the boardroom in Europe than in the U.S., but incredibly important and a topic of conversation across just about every board, because for many organizations, it’s still a little bit of a new concept. What is required for disclosure is different in different countries or jurisdictions, and so it’s an incredibly important and new topic for boards to get a handle on. Ultimately, I think it starts with an understanding of what an organisation’s current state is to then be able to say, what should our strategy be and what are the areas we should invest in to drive ESG strategy. That should be an important part of any business and where it heads.

Do you think there’s an education piece maybe to be done in the business community?

Absolutely. I do think that European board members are slightly more informed than some of the board members in the U.S. on the subject, because most European board members would argue that they’ve been discussing it a little bit longer than many organisations in the U.S. have. When you talk to most directors globally, what is included within ESG and how companies and organisations define it is quite different by industry and it’s quite different by business strategy. For some organisations, their focus might be on climate. Others are focused mainly on water and others again on diversity. So, there is a breadth of components of ESG that different organisations are trying to grapple with in different ways. 

There is comprehensive European legislation coming down the line about standards of reporting and transparency. Is similar legislation to be expected in the US?

The equivalent is coming down the line in the U.S.. Many organisations in the U.S. are expecting to have to disclose a whole set of non-financial information for the first time ever. And many in global organisations have already had to share that because they’re based in different jurisdictions when in the U.S. it is new.

So what issues are you seeing currently arising around ESG reporting? 

I think the initial issue is, what are we disclosing and what targets are we setting? In the U.S., a lot of companies announced net zero targets for their organization over the last few years and now organizations are being questioned: How are you progressing against it? What are the metrics you can share? 

Now, there is an expectation amongst investors, amongst employees, amongst customers in some cases to say how you are progressing against it. In many organizations there is a need to develop that plan and that strategy and then just disclose against it. I think within the U.S., in many cases, when people refer to ESG, they’re referring to climate and carbon, specifically your carbon footprint and depending on which investors you talk to there is an increasing environment around disclosures on some of the other components beyond climate. So, because the term ESG has the potential to be so broad, it is potentially powerful but also can lead to confusion.

What are some of the solutions for these issues? What would you suggest companies do? 

Our take at Diligent is that the most important, powerful thing is knowing and measuring what your footprint is. At first you need to disclose and share the information about where you sit on different sets of metrics. From there it is either up to the board, the CEO or your stakeholders to define how aggressive your targets might be. We don’t presuppose what those targets are, but we encourage our clients that the first step is actually reporting. Once you report, then you can actually set the targets against it. With that transparency, a lot of opportunities will be created. Some companies will set more aggressive targets, others may set more conservative targets, but with that transparency, you’ll be able to see and you’ll be able to vote with your feet as to where you want to invest your dollars, where you want to work or what companies you want to buy products from.

What do you see as the future of ESG reporting? 

It is just going to be a requirement for more and more data to be shared with companies and from companies. From a company perspective, that creates a ton of complexity where now you’re required to disclose more and more information on things that are non-financial in nature and are newer to companies. But I think with that disclosure, I do believe in choice and that creates the ability for an employee, a customer or an investor to decide where they want to invest. So, I think we’re still in the very early stages of that disclosure.