Disclosure and strategy should work together in a process of eternal renewal, symbolised by the Ourobouros and the snake in the banner pic. Right now, most of us are neck deep, responding to disclosure guidance and, though it may feel eternal, there’s nothing renewing about it… It feels more like a snake waiting to bite.

Double-entry accounting – which separates an entity’s resources from claims on those resources – was developed in 1494 by Italian monk Luca Pacioli. Narrative entries tracking barters pre-date this by at least 5,000 years. (These and other interesting facts courtesy of Investopedia.) The International Integrated Reporting Council (IIRC) published its <IR> framework in December 2013, informed by about three decades of social and environmental reporting. Early steps became great leaps when mainstream investors saw the extent of ESG risk bearing down on their portfolios. ESG experts spun the wheel and floored the accelerator of a system that had gathered momentum over thousands of years. It was bound to hit a few snags.

One of those is simply being able to keep up with the changes: Puma’s early exploration of environmental profit and loss; blockchain-inspired calls for distributed governance models and ‘Triple-Entry Accounting’ to combat manipulation and financial fraud; ‘rich data’ that combine the insight of personal narrative with the scale of big data’. On a more basic level, companies that understand a bit about social change are battling to work out which metrics provide reasonable indicators of things that are useful to know.

Here’s a sketch to help you navigate the basics:

The sketch makes a few points, including:

ESG raters track more data than they request. The range of data they scrape from the web is expanding all the time. This is good news. They got that media release on your recent lower-cost offering in pursuit of new, underserved markets. They also picked up the controversies the Board instructed you to omit from the sustainability report. When planning your disclosure, keep the big picture in mind and back up written communications with in-person engagement, particularly with long-term investors.

Your strategic indicators are potentially unique. They track areas where you make a difference, based on your demonstrable ability to control or (more likely) influence impact. They are not selected from a standardised list of disclosures. While no guarantee of improved ratings (find more on why here), ESG differentiators put you in line to attract what my friend Phil Barttram calls ‘smart capital’. Today’s smart capital understands that a company’s value is inextricably linked to its multi-horizon impact on social and environmental systems – even if the feedback is not obvious today. It asks probing questions about tipping points and pivot points. Smart capital is discerning. Be prepared to sell your ESG effort on its unique insight and contribution, not simply better ratings.

ESG disclosure standards and expectations are a good place to start. The launch of the International Sustainability Standards Board signals early stage convergence, even if not as all-encompassing as they suggest. If you haven’t done so already, get down to listing and cross-referencing the disclosure expectations of SASB, the GRI and the ESG raters used by your largest investors. (Here’s an example of a comprehensive and accessible ESG data book from BHP Billiton.) Phew. Of course, all the lines on the sketch are dotted and issues can shift around as easily as algorithms can. And then there’s the juicy stuff which lies in relationships between the issues, which are about context not content. In other words, depending what you do and where you are, decarbonising your value chain may be as much about potential job losses (just transition) as it is about Scope 1, 2 and 3. While accordance with standards and guidelines gets you well down the track on disclosure, be open to stripping those compliance blinkers off as readily as you put them on.

Our general advice for practitioners: transition your ESG reporting and disclosure to digital as soon as possible. Apart from a stellar upfront narrative, much of your Sustainability Report and ESG data books should be writing themselves. ESG disclosure is the tail-end of decisions and action at the ESG intersect. It is prefaced by smart strategy and the steadfast development of even smarter metrics. Good disclosure invites a response, which should feed back to inform and enrich decision-making.

As I said, disclosure and strategy should constitute a process of eternal renewal. ESG disclosure should help us come alive, not drown in muddy depths.

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Banner image cropped from a photo by Jan Kopřiva on Unsplash