PART ONE
With many hospitality and foodservice companies setting their own environmental targets and publicly starting to implement changes to improve the sustainability of their business, ESG reporting is a hot topic.
What exactly is ESG reporting and what does it mean for you? Grab a coffee and have a read of the first part of our ESG explainer, as Laura Kirwan PhD, Sustainability Lead at Nutritics, gives us the lowdown.
So, what is ESG reporting and how will it impact my business?
An ESG report provides an overview of a company’s performance and activities related to environmental, social and governance issues. Through the disclosure of key data, an ESG report aims to provide stakeholders with a transparent picture of the business’ impact in these areas.
In recent years, as we’ve all become more conscious of our environmental and social responsibilities, increasing importance has been placed on ESG reporting. Customers, stakeholders and investors now expect ESG to be embedded in a company’s annual reporting and for businesses to be transparent and take responsibility for their ESG credentials. In fact, when making investment or purchasing decisions, environmental and social responsibility is a key priority.
Therefore, it’s vitally important that businesses prioritise ESG reporting. Companies who are unable to demonstrate their commitment to these issues, or who are not seen to be transparent about their impact, could face significant financial and reputational issues.
Is ESG reporting mandatory for UK businesses?
Although the UK is yet to introduce mandatory ESG reporting requirements, major developments in climate reporting have been observed over the past year and environmental legislation is expected to be introduced in the coming years.
In the UK, the Department of Environment, Food & Rural Affairs consulted on improved reporting of food waste by large food businesses in England in 2022.
In addition, the Principles for Responsible Investment (PRI) published a briefing paper comparing similarities and differences across climate-related disclosures using Task Force on Climate-related Financial Disclosures (TCFD) recommendations and guidance as a comparative baseline*. Legislative changes and investor and customer demands are therefore driving expectations for evidence-based climate action.
OK – so which data should I be monitoring and reporting?
When it comes to identifying data sets for ESG reporting, it is important to evaluate any current data structures and frameworks that are already implemented across your business. The availability of data over time on procurement, supply chain, products, outputs and elements such as employee travel and energy bills can provide a concrete basis for estimating emissions and identifying trends and changes over time.
When it comes to ESG reporting, a lack of an international standardised framework means it’s about choosing which framework is most relevant to your business. However, when deciding what data to disclose, it is important that companies are transparent and logical in their process of data selection, integration and all calculations used across the business, in order to ensure that reporting outputs are clear. To ensure credibility, companies must align the content of their ESG report with their values, mission and purpose and those of investors and stakeholders. Furthermore, it’s important to focus on areas against which your business can set a realistic benchmark, and against which you are able to track and measure progress over time. The ability to demonstrate to key stakeholders that you have a robust strategy and a strong dedication to improving will not only potentially benefit financial performance, but pave the way to investor confidence and customer loyalty.
In the hospitality and foodservice (HaFS) sector, reducing carbon emissions and water footprints have been key focus areas. Menu management systems can be used as an evidence base onto which environmental data points can be layered, providing concrete estimates for a baseline that can progress over time. In addition, these systems can also identify areas for improvement across your supply chain, allowing businesses to understand where they need to invest to help reduce their environmental impact.
Sounds like a big job – how can businesses start to tackle this?
ESG reporting is certainly a complex landscape. As climate action and investor pressure has increased, so has the need to find the expertise to help develop a company’s ESG strategy and to analyse, develop and track their progress.
However, the challenge faced by many companies is finding the talent to help them do this, while confronting a huge sustainability skills gap. Consultants can provide leadership and structure on an ad-hoc basis, but may not be within the budget for a number of companies, and while initiatives such as the United Nations Climate Ambition Accelerator programme offer educational materials and structured workshops and assignments, the time and resources required to complete the courses can come at a cost for businesses. Furthermore, new regulations mean companies are facing a dynamic regulatory landscape with limited support frameworks.
There’s no quick-fix solution to these problems, but there are some important steps businesses can start taking such as, implementing better knowledge and data sharing frameworks and investing in upskilling workforces on their sustainability knowledge and skills.
In the hospitality and foodservice sector, new educational services and content can provide a solution in raising the baseline knowledge of employees and executives. As well as this, it improves the confidence of a business in maintaining compliance with new regulations and in answering questions from customers and clients, as well as internally from management.
PART TWO
In the first part of our ESG explainer, we looked at what ESG reporting is and why it should be an important consideration for hospitality and foodservice businesses. Let’s pick up again with Laura Kirwan PhD, Sustainability Lead at Nutritics, to discuss what tools can help you with your reporting and why this process can give you a competitive advantage.
What tools are out there to help businesses with ESG reporting?
Competition drives innovation. Technology has been proven to provide important data over time on which strategic climate action can be developed, and has been successfully used to streamline and automate calculations and outputs that otherwise would be too heavy on time and resources to complete.
An example of this in the hospitality and foodservice (HaFS) sector is the demand for automated eco-labelling on menus, supply chain data insights and scope 3 emission reporting. Nutritics, an established menu management system, has developed one such solution called Foodprint, a pioneering, fully automated environmental impact scoring system.
Using a patented technology, environmental data on foods and recipes were layered into the existing data menu management framework to complement important data insights on nutrition, allergens and cost. The use of technology allowed over three million food ingredients to be assigned environmental data from peer-reviewed scientific sources with extensive input from foodservice clients, chefs and catering staff. This use of technology shows how companies across the HaFS sector can use existing data frameworks such as menu management systems, to streamline information for consumers and form a solid basis for ESG reporting, menu reformulation and responsible sourcing.
What additional benefits are there to ESG reporting?
Supply chain disruption is expected to continue to increase this year, as a result of both climate change and the Russian invasion of Ukraine. In 2019, Russia and Ukraine together exported more than a quarter (25.4%) of the world’s wheat*. By implementing data structures and systems, businesses can have a better oversight of the entirety of their operations and supply chain. This can help forecast potential issues such as shortage of product, and ensure these risks are mitigated early.
A renewed emphasis has also been placed on food quality, and supply chain accreditation logos such as Red Tractor, organic, free range and RSPCA Assured are central to the transition to responsible sourcing, and subsequently ESG reporting.
Companies achieving these accreditation marks aren’t currently getting the credit, but minimum catering standards and company policies will ensure that these marks are not only central to their supply chain but will be communicated more effectively to consumers and stakeholders through menus, digital screens and company policies and reports.
We have seen a massive demand for this through our HaFS clients and have since integrated it into our Nutritics system.
Another benefit of data access and transparency is that it allows businesses to determine how well their strategy or solution is working. By collecting data on areas such as consumer preferences or what products are selling well, businesses can understand whether their approach is working or needs to be altered in order to become more effective. Optimising menus based on data insights from sales and menu management systems can have solid financial and ethical returns through increased sales and customer satisfaction, as well as reduced food waste.
Should I be voluntarily reporting on ESG?
There is a competitive edge currently in the market for those willing to prioritise ESG reporting and take climate action. It is increasingly becoming more apparent that regulation is shifting towards mandatory food waste and emission reporting; through new directives such as the Corporate Sustainability Reporting Directive (CSRD), companies will have to provide these datasets and reports by law.
As for now, before it becomes mandatory, voluntary ESG reporting provides companies with an opportunity to leverage consumer and investor demand for climate action, as well working towards the need to save the planet.
Any final thoughts on the world of ESG?
There is a new sense of community across the market for sustainable business practices, and this sense of camaraderie has been supported by voluntary initiatives such as the Courtald Commitment, run by the Waste Resources Action Program (WRAP), and the Zero Carbon Forum.
Given the pressure on businesses to report on their environmental impact, it’s important that companies don’t start from scratch, as this will only set them back. Organisations should use the data they can access already, and report on the things they know they can measure and against which they can benchmark. If possible, businesses should also look to streamline the data through a single system for transparency and consistency, and to reduce operator burden.
This will allow for more accurate and consistent reporting and help identify areas for improvement. A single-system approach also facilitates tracking of changes over time, as changing between systems can result in inconsistent measuring and reporting of progress.