TAIPEI (Taiwan News) —Taiwan listed companies with capital of NT$2 billion (US$63 million) are obliged to prepare ESG reports this year.

It is expected these reports follow the Task Force on Climate-related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) standards, which relate to the disclosure of material sustainability information.

The Financial Stability Board (FSB) created TCFD to improve and increase reporting of climate-related financial information. The FSB is an international body that monitors and makes recommendations about the global financial system.

The FSB was established after the G20 London summit in April 2009 as a successor to the Financial Stability Forum. The SASB is a non-profit organization, founded in 2011 to develop sustainability accounting standards.

That is quite a task even for some listed companies that should have the resources to produce the report. Some unlisted Taiwanese companies, being convinced of the benefits of ESG, are also striving to create reports, and that is unquestionably a challenge.

The following provides some topics on which to focus in creating appropriate ESG reports while being mindful that there is no one template that fits all companies.

A proper ESG report will take time and thought, and companies must assess what is considered material, financially or otherwise, and the metrics the company will track, measure, and report. It is also important to remember that each ESG report is just a start, as companies will be required to regularly reassess materiality as regulations, frameworks, and stakeholders' demands evolve.

There are four areas in which to start: research, engagement, prioritization, and implementation.

Research

Research is essential for the company to inform itself of its materiality assessment. If the company has an ESG team, this team should determine key internal stakeholders and ESG owners, who might include the ESG or sustainability team, investor relations, finance, members of the C-suite, board members, or even customers.

The SASB Materiality Map may be of assistance in determining which sustainability issues might affect financial and operating performance within the company’s industry.

Research should also involve reviewing general ESG reporting frameworks, as well as industry-specific frameworks or standards. Where possible, companies should review industry peers' reporting, messaging, disclosures, and ESG ratings.

Engagement

Following research, stakeholders should be engaged to determine and rank, on an updated basis, the environmental, social, and governance issues that are most material to the company. A company that listens to its stakeholders is able to identify issues that are not only financial material to its business but also the social and environmental impacts of the company.

Keep in mind that a company’s ESG report should be accountable, authentic, and actionable. The report should also influence corporate decisions on products, services, and strategy.

Prioritization

Following research and engagement, it is time to use the findings to identify trends and the company’s priorities. This will be the stage to consider ESG frameworks, organizing key impact areas by whether they relate to “E”, “S” or “G”.

Again, companies should review any industry or peer disclosures. It is also the stage to apply a qualitative summary to any important themes and topics. Qualitative scores should also be applied to things like how many times a topic was reported and why, the amount of data available, market expectations, consumer trends, what rating agencies are saying, and how important each of those factors is to the company.

Implementation

The company should then be able to implement its findings and develop a materiality matrix or heatmap. This is important as companies can expect to be challenged in their methodology. Poor research or engagement will lead to poor results and the company’s reputation may suffer as a result.

Companies should create an ESG scorecard that identifies what issues are financially material, those that are environmentally and socially material, and if there is any material intersection between the issues. The scorecard should be able to plot issues such as greenhouse emissions, if applicable, or board diversity, an increasingly important issue in global business.

Finally, and by no means least, all of this must be consolidated into some form of ESG report. The report must be of a sufficiently professional nature to gain the necessary support from the C-Suite and the all-important review by industry peers, potential investors, and any regulatory body where relevant.

The production of an ESG report must be taken seriously, and there will be challenges in finding experienced resources to complete such reports now and on an ongoing basis. Handing the production of a report of this nature over to third-party service providers is possible, but it comes, not only with an expensive price tag but also with the risk that the company receives a generic report and not a report that is fully nuanced to the company in question.

Taiwan’s companies have many things to consider when embarking on their ESG report journey.