NAVIGATING THE

ESG REPORTING
LANDSCAPE
IN EUROPE

APRIL 2024
AUTHORS
Aine Crossan David Bobker
Director Senior Managing Director
Governance and Sustainability, UK and Europe Corporate Services

Limor Bernstock Ellen Schultz

Managing Director Director
Governance and Sustainability Governance and Sustainability

WITH DATA
SUPPORT FROM:
Jim Peebles Jenn Peterson
Executive Vice President Chief Research Officer

COPYEDITING
AND DESIGN BY:
Lars Battle Taylor Hughes
Copywriter Designer
Governance and Sustainability Corporate

2
KEY TAKEAWAYS

01
European ESG regulations continue to move at a rapid pace,
escalating disclosure requirements for both investors and
companies. Eighty percent (80%) of European corporate
respondents report that their companies have already begun
preparing for compliance with the European Union’s (EU)
Corporate Sustainability Reporting Directive (CSRD).

02
Companies continue to establish strong sustainability governance,
expanding the ESG roles and responsibilities of board members.
About two-thirds of European corporate respondents say their
companies provide ESG education sessions to the board, and among
these, eighty-one percent (81%) report that ESG is a full board agenda
item at least once annually.

03
Disclosing sound risk management processes around material
ESG topics is increasingly required by regulations. By developing
these processes, companies can build resilience to sustainability
risks and future-proof their business. Eighty-eight percent (88%)
of European corporate respondents note that ESG is integrated
into the risk management processes of their company.

04
Companies must build robust data collection processes to meet the
growing demands of regulators and wider stakeholders, as well as
ensuring their disclosures are accurate and trustworthy. Sixty-five
percent (65%) of European corporate respondents currently secure
third-party assurance for environmental metrics.

3
INTRODUCTION
Stakeholder expectations on sustainability reporting continue to rise across
Europe with the EU’s introduction of regulations for mandatory ESG disclosures.
Aiming to facilitate the transition to a decarbonised economy, the granularity
required to comply with emerging regulations represents a significant milestone in
sustainability reporting across Europe and further afield.

For many, the tight requirements may present challenges, adding to an ever-
growing list of demands from wider stakeholders in what can only be described as
the age of ESG data. To understand and evaluate evolving attitudes on ESG, Rivel
interviewed 63 investors across North America and Europe as part of its annual
study. At the same time, Rivel surveyed 49 EU and UK corporate respondents, as
well as 158 North American corporate respondents representing a range of market
caps and industries to uncover evolving corporate processes and best practices.

This report explores how companies navigate the increasing demands of current
and emerging ESG reporting requirements, monitor and set metrics and targets, as
well as develop robust processes to mitigate risks and capitalise on opportunities.
We assess the attitudes from corporate and investor respondent surveys on the
following topics:

Understanding Current and Emerging Regulation

Governing ESG and Providing Oversight

Developing a Resilient Business Strategy

Strengthening ESG Data and Reporting

Enhancing Engagement and Communication

4
 Understanding

01 Current &
Emerging
Regulation

5
01
Understanding Current and
Emerging Regulation
In a bid to be the first carbon-neutral continent, the European Union’s Green Deal policies propose to outline a
roadmap to a resource-efficient and resilient economy by 2050. As part of this wider mission, ESG regulations
are moving at a rapid pace, escalating disclosure requirements for both investors and companies.

Several significant European policy measures include:

STATUS: ADOPTED
The SFDR aims to increase transparency surrounding sustainable
Sustainable investment products, with financial institutions required to disclose their
Finance Disclosure ESG risks, policies and performance. The enhanced transparency makes
Regulation (SFDR) it easier to compare financial products through a sustainability lens. Since
[Investors] the regulation’s early 2023 implementation, 27% of European corporate
respondents note they have experienced increased investor engagement.

The EU taxonomy for sustainable activities is a classification system used

EU Taxonomy to help investors make informed sustainable decisions. In doing so, the
for Sustainable taxonomy places increased disclosure obligations on companies, with over
Activities [Investors half (59%) of European corporate respondents reporting that they calculate
and Companies] their revenue, capital expenditures and operational expenditures associated
with the EU taxonomy.

Replacing the Non-Financial Reporting Directive (NFRD), the CSRD requires

Corporate companies with a significant EU market presence to include granular
Sustainability
sustainability disclosures alongside their financial reporting. Eighty percent
Reporting Directive
(CSRD) [Companies] (80%) of European corporate respondents report that their companies have
begun preparing for CSRD compliance.

Aiming to enhance the protection of the environment and human rights

Corporate globally, the CSDDD will require companies to report on the actual and
Sustainability Due potential environmental and social impacts of both their direct and indirect
Diligence Directive operations. Companies will be required to conduct environmental and social
(CSDDD) [Companies] due diligence across their operations and value chains, introducing granular
data collection and engagement processes.

6
 UNDERSTANDING CURRENT AND EMERGING REGULATION

Strengthening and Standardisation

of ESG Reporting
The EU has introduced the CSRD in an attempt to harmonise
ESG reporting, requiring companies to include granular
sustainability disclosures alongside their financial reporting.
With the adoption of the European Sustainability Reporting
Standards (ESRS)—the set of standards companies must
report against to comply with CSRD—over 50,000 companies,
both EU and non-EU, will disclose information on a range of
environmental, social and governance topics.

The enhanced guidance aims to strengthen and standardise ESG

reporting by increasing transparency and producing consistent,
comparable, and decision-useful disclosures.

Scope of Coverage is Staggered

FY24 | Large companies already subject to NFRD regulation

FY25 | Large companies that meet two of three thresholds:

Net Turnover (sales) Balance Sheet Total Employees

>€50m >€25m >250

FY28 | Non-EU companies will be required to report under ESRS at a consolidated level

Given its wide scope, this regulation represents many companies’

first and most comprehensive mandatory sustainability reporting
effort. While the initial process may present some challenges,
the changing landscape in Europe creates a positive incentive
for companies to prioritise ESG. By integrating sustainability into
the wider business model, companies can utilise the processes
developed to enhance risk management and identify opportunities,
ultimately strengthening their market position within a future
decarbonised economy.

7
 UNDERSTANDING CURRENT AND EMERGING REGULATION

80% of European corporate

While the regulation will be phased in over time, it
respondents report that
is important for companies to begin preparing as their companies have
soon as possible, given the rigorous requirements. begun preparing for CSRD
To develop a plan, companies are encouraged to compliance. Among those
first conduct a review of their business to identify volunteering specific aspects
gaps in data, processes and resources. of their preparations:
These preparations are already ramping up,
with 80% of European corporate respondents

36% 36%
reporting that their companies have begun
preparing for CSRD compliance. This practical
response demonstrates an eagerness amongst
EU companies to get ahead of emerging
Plan to or have Have started
regulations, and to integrate the requirements
conducted a gap conducting a
into their developing ESG program and assessment double materiality
company-wide processes. assessment

We have successfully identified our

ESRS points and developed a double
29% 21%
Are allocating Are engaging
materiality to ensure a solid ESG dedicated resources with a third-party
internally consultant
reporting structure.

–Head of Investor Relations, Mid-cap

In comparison, over one-third of North American corporate respondents report that their companies have
begun preparing for CSRD compliance. This slow-moving approach may suggest a reluctance to be an early
actor, given the associated high costs and uncertainty. Until specific guidance is finalised, we can expect only
precautionary action from non-EU companies as they seek to avoid unnecessary risk and expenditure.

While not all companies will feel the direct impact of these regulations, their effects ripple throughout markets,
increasing the expectations of baseline disclosures. Companies risk falling behind market norms, peers,
and stakeholder expectations if they fail to incorporate elements of emerging regulation into their external
messaging and disclosures.

8
UNDERSTANDING CURRENT AND EMERGING REGULATION

Materiality
Understanding of a company’s most material topics from multiple
stakeholder perspectives is paramount when executing an ESG
strategy and developing impactful disclosures.

By conducting a materiality assessment, companies can ensure

their material topics are effectively integrated into their strategies
to a degree deemed appropriate by the company and wider
stakeholders, and that their disclosures are suitably aligned.

Both companies and investors recognise the value of assessing

ESG strategy and understanding stakeholder perception, with 78%
of European corporate respondents having already conducted
a materiality assessment, and over half of investor respondents
agreeing that conducting a materiality assessment is important.

Has your company conducted a materiality assessment?

78% Yes, we have conducted

a materiality assessment

12% No but we plan to in the

14%
next 12-18 months
No
(net)

2% No, we do not plan on

conducting one

8% Uncertain

N=49

57%
of European investor respondents say it
is important for companies to conduct a
materiality assessment

9
 UNDERSTANDING CURRENT AND EMERGING REGULATION

Double Materiality
The CSRD requires companies to conduct a double materiality
approach—a process that builds upon the well-established “single
materiality” process. In a departure from single materiality,
companies must review sustainability topics on both impact and
financial dimensions:

Impact materiality — sustainability-related impacts

on the environment and wider society, associated with a
company’s direct and indirect operations
(the “inside-out” perspective).

+
Financial materiality — the sustainability-related
risks and opportunities which may affect a company’s
business performance over time
(the “outside-in” perspective).

Double materiality assessment results, in turn, determine which

topics companies must report against to comply with CSRD. This
process enables companies to identify and assess the impacts of
their operations as well as the risks and opportunities which may
affect their business performance over time.

Of the European corporate respondents who already have or plan

to conduct a materiality assessment, 77% intend to pursue double
materiality. Companies who previously conducted a materiality 77%
assessment are encouraged to update and align their methodology
with double materiality moving forward, to ensure compliance with
intend to
current and emerging regulations. pursue double
materiality*

* of European corporate respondents who already

have or plan to conduct a materiality assessment

10
02
Governing ESG
& Providing
Oversight

11
02
Governing ESG and
Providing Insight
Board-level Oversight
Where faced with more stringent requirements, companies continue
to establish strong sustainability governance, expanding the ESG
roles and responsibilities of their board members. “ESG training seems like it
would be pretty important.
To successfully fulfill their role of oversight, many boards of directors
The onus of this falls on the
seek ways to enhance their understanding of ESG issues and their
board and I would think
impact on the company’s operations. In order to keep directors
that every board member,
updated on the latest ESG trends and company-relevant areas of
but especially those that are
risk or opportunity, 63% of European corporate respondents report
focused on committees that
that their company provides ESG education sessions to the board. Of
relate to ESG, would want
those, 22% provide sessions to the full board only, while 35% present
to go through some type of
to the full board and the committee(s) with ESG oversight. The most
training just to understand
common committees to receive education sessions are Audit, Risk,
where the industry is at and
Nomination and Remuneration Committees respectively.
how it is evolving.”
ESG skills among directors have been a topic of focus for many –North American Buy-side Analyst
investors as they look to ensure that all relevant risks and
opportunities receive effective board oversight.

14%
Does your Uncertain 35% Yes, full board and
committee(s) with
company provide ESG oversight

ESG education 4%
sessions to the Other 63% 22% Yes,
full board only
Yes
full board or
committee(s)?
18%
No
6% Yes,
committee(s)
with ESG
N=49 oversight only

12
 GOVERNING ESG AND PROVIDING OVERSIGHT

As part of their duty of care to mitigate risk and maximise value creation for their company, directors
are increasingly expanding their considerations to include the potential impact of their decisions on
sustainability matters over time. As well as this, directors also have the responsibility of pressure testing
management to ensure they are carefully considering and integrating ESG into strategic decision making
and financial planning.

As these responsibilities develop, there is a potential for sustainability experience to become more influential
and relevant when nominating and assessing possible new company directors. Amongst European corporate
respondents, 45% indicate that their company’s Nomination Committee considers ESG expertise and
knowledge when identifying board candidates.

Companies are working to ensure their long-term business strategy remains robust and resilient to a changing
climate by considering sustainability in the board’s actions, and through management’s financial planning,
risk mitigation efforts, and clear disclosures. To achieve this, it is important that meaningful discussions about
sustainability-related risks and opportunities take place in the boardroom.

Eighty-one percent (81%) of European corporate respondents, whose companies provide ESG education to
their boards, indicate that ESG is a full board agenda item at least once annually. As board-level oversight
expectations increase, members should be appropriately updated on sustainability progress to understand
where it is reflected in company strategy.

HOW OFTEN IS ESG A FULL BOARD AGENDA ITEM?

10% 52% 19% 6% 13%

Once a year Two or three Every board Other Uncertain
times a year meeting

N= 31

13
GOVERNING ESG AND PROVIDING OVERSIGHT

Executive Responsibility
WHICH ESG TOPIC(S) ARE Traditional key performance indicators (KPIs) used
EXECUTIVE REMUNERATION to evaluate executive performance now regularly
LINKED TO? extend to non-financial metrics, including sustainable
products and packaging, renewable energy, diversity,

61% Greenhouse gas

emissions
and, most commonly, greenhouse gas emissions.

The decision to tie ESG metrics to executive

remuneration is likely made to demonstrate

50% Diversity that sustainability is taken seriously internally, to

accelerate progress against publicly set targets
or to meet expectations from investors and

24%
wider stakeholders.
Renewable energy
While buy-in from executives is important in
successfully achieving goals, companies should take

18% Sustainable products time to deliberate on whether linking ESG metrics to

and packaging remuneration is appropriate for their business, and
where they are on their data collection journey, to

47%
avoid simply following the trend.
Other

78% of European corporate

8% Uncertain
respondents tie ESG metrics
to executive remuneration
N= 38*

*Among companies that link executive pay to ESG metrics

ESG Management
With mounting pressure and looming regulatory deadlines, companies continue to grapple with the allocation
of ESG responsibilities internally, as management roles differ from company to company. There are many
factors which influence a company’s approach to ESG management—whether size, industry, and structure, or
the topic’s all-encompassing nature.

While departments with primary responsibility for ESG range from investor relations to risk management,
many companies are responding to growing demands from stakeholders by establishing fully dedicated
teams or individuals.

Sixty-five percent (65%) of European corporate respondents report that their company’s ESG program and
strategy is primarily managed by an internal sustainability or ESG team, compared to 35% of North American
corporate respondents.

14
 GOVERNING ESG AND PROVIDING OVERSIGHT

78%
of European corporate
The need for dedicated resource is clear, however strong respondents have
communication is required to reduce the risk of efforts becoming established a dedicated
siloed. Despite having a dedicated team, cross-departmental
internal ESG working
engagement is necessary to ensure ESG is fully embedded into
group or committee
existing business functions.

65%
Sustainability/ESG

Which department 14%

Investor Relations
has primary
responsibility for 8%
Other
the company's
ESG program and 8%
Uncertain
strategy?
2%
Marketing
N= 49

2%
Risk Management

Many companies are establishing a dedicated internal ESG working group or committee. These working
groups allow businesses to implement and monitor the initiatives required to achieve long-term goals, while
harnessing diverse skill sets and perspectives from across the company. Further, these groups help coordinate
the data collection processes and ensure all parts of the business are appropriately represented.

Does your 78% Yes

company have a
dedicated internal 14% No
ESG working group/
committee? 8% Uncertain

N= 49

15
 Developing

03 a Resilient
Business
Strategy

16
 03
Developing a Resilient
Business Strategy
Integrating ESG into Long-Term Corporate Strategy
As ESG grows in importance, it is increasingly integrated into existing processes and
business strategy. For many companies, sustainability issues are naturally considered in
decision making and financial planning, including through developing and engaging with
employees, upholding strong ethics and governance practices, and improving efficiencies
to reduce costs and boost productivity.

Environment-focused Initiatives 84%

Governance and compliance 53%

Where is your Social-focused initiatives 42%
company increasing
Other 0%
investment?
Uncertain 5%
N=19*
*Among European corporate respondents reporting an increase in ESG initiative investments

53%
Despite this connection to traditional business drivers, European
corporate respondents present a mixed bag of responses when assessing
the effectiveness of communicating the integration of ESG into their
corporate strategy. Thirty-five percent (35%) of European corporate
respondents believe their company is very effective at achieving this, with
a mid-cap Head of Investor Relations stating, “We have a fully integrated ESG of European corporate
strategy, where ESG not only defines the purpose of the company, but where all respondents believe
targets contribute to the achievement of the company’s strategy.” that, while they have
made some progress
On the other hand, over half of European corporate respondents
when it comes to
believe that, while they have made some progress when it comes to
communication, there
communication, there is still opportunity for improvement. "I think we are
is still opportunity for
quite good at this, but there is definitely potential to communicate better, and
improvement
get our message out there," says Head of Investor Relations, mid-cap.

17
 DEVELOPING A RESILIENT BUSINESS STRATEGY

Conversely, a mere 11% of investors believe companies are

effective in communicating how ESG is integrated into their

11%
long-term corporate strategy. This is up from 5% in 2022,
but nonetheless, a small figure that shows the gap between
companies’ perceptions and those of investors.

This uncertainty between corporate and investor views is

of investors believe
likely due to the lack of comparable and comprehensive
ESG disclosures—an area that regulators and frameworks
companies are effective in
aim to address. Similar to traditional information used by communicating how ESG is
capital markets, when it comes to ESG, investors want to see integrated into their long-
quantifiable metrics and targets, their impact on financial term corporate strategy
performance, and a roadmap to achieving long-term targets.

Quantifiable metrics and targets 19%

Areas Companies Human Capital 16%
Fail to
Disclose When Impact to financial performance/outlook 11%
Communicating Roadmap to achieve long-term targets 10%
about ESG Practices
Carbon emissions 8%
N= 63 investor respondents

ESG Risk Management

Though a sound risk management process is increasingly
The majority of ESG strategies that
required from a regulatory perspective, it is also an
I see are generally very big, broad
effective way for companies to build resilience and
statements and include mission
future-proof their business. Sustainability-related risks
statements and all that sort of stuff.
and opportunities have the potential to impact business
In reality, there's often very little
performance, whether through regulatory restraints,
discussion about how it works on a
physical climate risks, changing consumer expectations
practical basis and how it's actually
or increased supply chain challenges. For investors, the
woven in the workplace.
importance of understanding the impact of sustainability-
- Portfolio Manager, Europe related risks and opportunities has grown significantly
and become an important quantifiable factor for
assessing company value and allocating capital.

18
 DEVELOPING A RESILIENT BUSINESS STRATEGY

To ensure strategic resilience, companies must identify and assess the impact of ESG-specific risks and
establish dedicated management processes. In fact, nearly nine in 10 European corporate respondents note
that ESG is already integrated into their risk management process.

88%
While almost one in 10 (9%) North American corporate
respondents note that their company categorises ESG
as a standalone risk, this is not the approach for any
European corporate respondent. Instead, over half
of European corporate respondents note that their of European corporate
company integrates ESG into risks that are already respondents note that ESG is
managed throughout the business. This approach integrated into the risk management
enables companies to clearly connect ESG to business processes of their company
risk, translating into strategic initiatives and resiliency.

As ESG is integrated in
the company's strategy HOW ESG IS INTEGRATED INTO A
and operations, it is COMPANY’S RISK MANAGEMENT PROCESS
also included as a

55%
natural part of the risk
Considered as a driver of various individual risks
management process. that are managed throughout the organisation

22%
–Head of Investor Relations,
Each component of ESG is considered as a
Mid-cap
standalone risk (e.g., a risk for E, S & G)
ESG risk identification
follows the same
methodology as other risks, 0% ESG is categorized as a standalone risk

with a description of causes

and consequences and an
assessment at Group level. 4% We don’t have a formal ERM process

10%
–Head of Investor Relations,
Other
Mega-cap

8% Uncertain

N= 49

19
 DEVELOPING A RESILIENT BUSINESS STRATEGY

Case study - Climate risk

Climate change is a complex global issue, making WHEN ASSESSING CLIMATE-
it an essential disclosure for companies spanning a
RELATED RISKS, WHICH AREAS
range of industries and sizes, with many continuing
to report against the Task Force on Climate-related
OF THE FINANCIAL STATEMENT
Financial Disclosures (TCFD) framework under the WHERE IMPACTED THE MOST?
encouragement of investors. The TCFD, which has
now been incorporated into the IFRS S1 and S2, has
also been used to develop a range of aligned reporting
33% 27%
requirements, including within the EU CSRD, UK Operational Capital
climate-related financial disclosures and SEC Expenses Expenditures
climate disclosure rule.

By utilising TCFD-aligned guidance, companies can

integrate climate change into their management
27% 7%
processes, identify and assess climate-related risks Revenue Assets
within, and in turn, develop disclosures as required.

One-third of European corporate respondents, the

majority of which are large-cap companies, state 0% 7%
that they have assessed the financial impact of Liabilities Uncertain
climate-related risks.
N= 15
This response to the more complex areas of TCFD * Among those who have assessed financial impact associated with
climate-related risk
demonstrates an unwillingness to be an early adaptor
amongst smaller companies, as well as the challenges
associated with additional resource and technical requirements. This is likely to change as TCFD-aligned
reporting requirements are rolled out to more companies. Implementing all aspects of TCFD processes will aid
companies in forecasting risks and preparing for emerging regulation globally.

Effective communication of climate risk resilience can also

significantly impact market success—particularly through investor

14% of investors decision-making. Two-thirds (65%) of investor respondents say they

say that climate incorporate climate change risks into all models, even non-ESG
information funds. Yet only 14% of investors report that climate information
currently disclosed currently disclosed by companies is useful for confidently analysing
by companies is climate risks and opportunities.
useful to their ability Climate risk is most often considered in qualitative analysis, but
to confidently analyse it also has implications on traditional financial modelling, such as
their climate risk and
impacts to forecasted cash flows or the growth rate. Communicating
opportunities
the integration of climate change into risk management processes
should be viewed as a tool to link climate impacts to financial drivers.

20
04
Strengthening
ESG Data &
Reporting

21
04
Strengthening ESG
Data and Reporting
Measuring and managing data
With the introduction of enhanced reporting
requirements, companies face the burdensome
task of collecting, understanding and publishing an
abundance of data. At the same time, they must
ensure all data is auditable and verifiable, and
provides a complete picture of relevant operations, all
in a timely manner. This undoubtedly adds pressure
as internal stakeholders balance already heavy 73% of
workloads with even more resource requirements.
corporate
CSRD disclosures require a level of never-before-seen responders
granularity, which will likely transform how companies
collect and store sustainability data moving forward.
manage their
Of European corporate respondents, 73% report that ESG data
their company manages ESG data internally, both
through a combination of Excel and internally built
internally
management tools.

Internally (Net) 73%

Internally manage (e.g. Excel) 47%

How does your Internally built management tool (not Excel) 27%
company primarily
manage ESG data? Use an external platform 10%

Other 12%

Uncertain 4%

N=49

22
STRENGTHENING ESG DATA AND REPORTING

Interestingly, 25% of North American corporate respondents currently manage

their ESG data through an external platform, compared to only one in 10
European corporate respondents. This is likely to increase as the demand for
greater transparency and assurance of ESG data strengthens across the EU.

The ESG software industry is expected to experience an explosion in

providers as support for companies collecting more complex data, including
Scopes 1, 2 and 3 carbon emissions, is on the rise. Using a data management
software can enable companies to develop processes aligning with those of
traditional financial reporting. However, while companies can collect, store and
manage information in a centralised manner, there is still a long way to go to
advance the infancy of ESG data.

When asked how their ESG data management processes align with financial
reporting, a North American Mid-Cap Small ($1B to 2.49B USD), Industrials
respondent* noted, "At this point, it aligns very minimally. We have a few ESG stats,
but our current report is primarily qualitative, framing our ESG initiatives. I suspect,
over the next few years, we will share several target metrics and greater alignment
with our financial reporting."

We use [external provider] to gather ESG data for

reporting purposes. While data is collected through many
internal systems in the company, [external provider] is
used to house data that ends up in our ESG report.

- Mid-Cap Small ($1B to 2.49B USD), Industrials, North America*

We've only used the service for one reporting period. It's
okay so far, but there are still some kinks to work out.

- Mega-Cap ($25B to 49.9B USD), Health Care, North America*

*Qualitative feedback is sourced by Rivel’s Corporate Governance Intelligence Council as part of its Rapid
Action survey series. Results of these surveys are representative of members’ thinking on key governance and
sustainability issues.

23
 STRENGTHENING ESG DATA AND REPORTING

Value chain
Assessing and understanding direct and indirect operational
impacts is an important step for developing a strategy and
prioritising efforts. As reporting expands, so too do expectations
that companies monitor and manage social and environmental
impacts across their entire value chain, especially under the newly
adopted CSDDD.

Many companies have already started collecting value chain How often do you collect
information on social and environmental issues, with those data across your value
who do not expressing an aim to do so soon. This represents chain on both social and
a substantial shift in the transparency and traceability of environmental issues?
value chains, likely driven by the regulatory requirements and
stakeholder expectations. Environmental Metrics
Social Metrics
Quarterly
N= 49
14%
14%
Annually

45%
27%
Ad hoc basis

8% We do not currently, and we do not

plan to do so within the next 2 years
16%
4%
We do not currently (net)
6%
18%
We do not currently, however we aim
18% to do so within the next 2 years
Uncertain 14%
14% 12%
24%

24
 STRENGTHENING ESG DATA AND REPORTING

We currently secure third-party assurance

65%
37%

Which of the following We don't currently seek third-party assurance (net)

most accurately depicts 22%

how your company 51%
approaches gaining
We don't currently seek third-party assurance but plan
independent, third-
to in the next 1-2 years
party assurance for both
18%
environmental metrics
and social metrics? 24%
We don't currently seek third-party assurance and
have no plans to do so
Environmental Metrics
Social Metrics 4%

N= 49
27% 50% of European
Uncertain investors find
12% external assurance
of ESG metrics
12% important to their
investment decision

Assurance of data
In a bid to enhance the accuracy and trust of data, the EU has introduced a requirement for third-party
assurance under CSRD. This is a significant expansion of traditional ESG reporting, requiring the development
of strong data collection and internal audit processes.

While assurance has historically only been undertaken by companies

65% of European
with a mature sustainability program, European corporate respondents
corporate respondents
commonly secure third-party assurance for both environmental (65%)
and social metrics (37%). Although the data shows an enhanced focus on currently secure third-
the collection of environmental metrics, companies should also consider party assurance for
and plan to secure assurance for all metrics determined to be material. environmental metrics

25
 STRENGTHENING ESG DATA AND REPORTING

ESG Target setting

DOES YOUR COMPANY Measurement alone is no longer enough—
HAVE TIME-BOUND, companies must demonstrate strategic ability to

QUANTITATIVE ESG GOALS? manage increasing risks to their business and reduce
their impacts, as expectations for companies to
N= 49
commit to clear targets continue to grow. As a result
12% of these expectations, 86% of European corporate
Yes, internal respondents have set time-bound, quantitative ESG
86%
goals only
goals, with the majority of those without targets
Yes (net) 73% aiming to set them within the next six months.
Yes, external goals
Environment-focused targets remain the most
common amongst companies, with 93% of European
corporate respondents who have set or plan to set
6% time-bound quantitative ESG goals, having set an
No, but we are environment-focused ESG goal. Of these goals, the
8% looking to set them in
the next 6 months most common are climate targets, such as Scope
No (net) 2% 1, 2 or 3 emissions reduction, net zero, or carbon
No, and we do not neutral targets.
plan to set any

While setting a target is a valuable step on one’s

ESG journey, it is important that companies truly
understand the full implications of doing so. For

6% targets to be useful, they must be appropriate and

achievable for the company size, location, and
Uncertain
nature of operations.

Companies should always take time when committing

to targets, leaning on internal expertise as well as
industry guidance and recommendations. Setting
Which category best describes targets requires careful planning and execution and
your company's time-bound, should be driven by several years of comparable data
quantitative ESG goals? to ensure the company fully understands its direct
Environment-focused 93% and indirect impact.

86%
Social-focused 76%

Governance-focused 38%

Uncertain 2%
of European corporate
N=45
respondents have set time-
bound, quantitative ESG goals
*Among companies with or plan to introduce time-bound ESG goals

26
05
Enhancing
Engagement &
Communication

27
05
“On a regular basis, we ask
investors which data providers
and ESG indices they use.
This helps us assess which
providers and indices are the
Enhancing Engagement most important ones. We are
inundated with requests but
& Communication have limited time.”
–Head of Investor Relations,
European Mid-cap
ESG data requests
Companies have seen a recent rise in ESG data
Does your company respond
requests from third parties. Of the requests received, to the following third-party
the majority of European corporate respondents surveys/requests for ESG
report that they most commonly dedicate time to information?
responding to rating agencies, investor-specific
surveys and ESG indices. Any (net) 90%
Rating agencies
With the influx of requests, many companies find 82%
(e.g., MSCI, ISS)
it difficult to allocate and dedicate resources, and
Investor-specific surveys
therefore must prioritise their responses.
(e.g., surveys from individual 76%
European corporate respondents consider many investors)
factors when deciding which third-party surveys to ESG indices (e.g., Dow Jones
65%
respond to, including most commonly by evaluating Sustainability Index)
the relevance of the data request, both to the Investor coalitions
company and wider stakeholders. Many also note (e.g., Workforce Disclosure 29%
the source of the request and time commitment also Initiative, etc.)
contribute to their decision to participate. Data providers
22%
(e.g., ESG Book)
One mid-cap North American Senior Board Liaison
None of the above/
and Subsidiary Compliance Officer acknowledged 10%
Uncertain
their company, “determine[s] if there is a benefit to us,
our shareholders, or our customers by participating.” N=49

While another North American mid-cap Sustainability

Manager evaluates, “It’s visibility, which stakeholders “Service as well as the time
are requesting, if our peers are also participating.” spent answering, as many
services request far too much
For companies seeking a strategic approach, they
and granular data that is
should consider developing a hierarchy of responses very often not relevant for
or employing a classic decision tree to identify which your industry.”
surveys are opportunities for clarity and which are
–Head of Communication,
more effort than they are worth.
European Mid-cap

28
 ENHANCING ENGAGEMENT & COMMUNICATION

92%
Investor engagement
Companies and investors have long understood that ESG
performance impacts investor decision-making.

Investors crave decision-useful, comparable information about a

company’s sustainability initiatives and performance, with more
than two-thirds (71%) of investor respondents noting they use
ESG information throughout their analytic process.
of European corporate
This represents a substantial increase from last year’s survey, respondents believe that their
demonstrating a shift from their historic use as a secondary company’s ESG performance
screen after financial fundamentals. As one North American buy- affects its valuation
side analyst explained, “It’s part of the initial idea generation and it’s
materiality assessment
throughout our holding we’re looking at a company. It’s not behind or
separate from financial analysis.”

When ESG is Integrated into Company Evaluation

2023 2022
Throughout the analytic process 71% 57%
During the preliminary company analysis 9% 9%
During the secondary screen after reviewing financial fundamentals 9% 23%
Uncertain 5% -
N=63 Investor Respondents, 2022 N=53 Investor Respondents

Investor respondents most often identify a company’s sustainability report as the most useful source for
evaluating ESG risks and opportunities (38%). Investors want to review a company’s metrics, targets and goals,
as well as understanding how these relate to the overall business strategy. These are all important building
blocks for an effective sustainability report.

Inclusion of comparative data within sustainability reports—in particular carbon emissions—can support clear
communication. This is noted by one European ESG/Corporate Governance Specialist who remarked, “Carbon
emissions is pretty useful, basically, because it's a signal number, so it's quite easy to compare one with another.
It depends on the company, of course, but that's something that's relevant to all companies that you can compare
across all companies and where there's good data to make the comparison.”

In addition, investors also welcome the increase in consistent and precise disclosures as TCFD-aligned
frameworks gain global prominence. Companies reporting against the TCFD structure enable investors to
foresee the current and future climate risks and opportunities across their portfolio.

29
 ENHANCING ENGAGEMENT & COMMUNICATION

Along with insights gathered from these reports, a majority of investor respondents (62%) recognise a
company’s Investor Day as an important opportunity to discuss ESG. Investors want to hear about ESG
strategy, goals and metrics in the context of the long-term operational strategy. As companies prepare for
upcoming Investor Days, they should consider embedding elements of their ESG story into an authentic
storytelling narrative.

ESG in Investor Events Not important

to Investors
13%
47%
Companies who
Capital
fully/mostly
Market Day
62% integrate ESG
Important to
43% Investors
Earnings Calls 27%
27% N= 63 Investor Respondents
N= 49 Corporate Respondents

If approached thoughtfully and strategically, engagement

Talking with management is always important
with investors presents several opportunities for companies
in finding out what's going on with the
to highlight strong governance controls and internal expertise,
company. Whether that means that it's a
as well as assisting in overcoming negative stakeholder
positive thing for finding out anything about
sentiment and driving operational development. Eighty-six
ESG is a different matter. It's critical for
percent (86%) of European investors believe engagement
management. What they do is they establish
with a company’s management team is useful when trying
someone called an ESG officer or whatever,
to improve their understanding of the company’s ESG risks
and they're not connected in any way to
and opportunities.
the rest of the company, and it's bland.
Management is vital. However, not all companies experience smooth sailing
–Portfolio Manager, Europe when it comes to engagement. Many European corporate
respondents report limited investor understanding and a
lack of standardisation of ESG requests to be the biggest
challenges when communicating with investors. This
Each investor wants to discuss a different topic
demonstrates that, even where reporting is strong, there
within ESG, and it is sometimes very hard to
is a need for focused ESG engagement between the
arrange an 'ESG' meeting as there is no strict
company and investor.
'ESG blueprint'.
By upskilling and educating existing members of the investor
–Head of Investor Relations, Mega-cap
relations team, companies can level-set understanding
Lack of standardised framework creates extra around ESG priority topics and provide clarity on company
discussion on critiquing adopted approach, initiatives and performance. This, along with analysing
rather than the discussion on progress. investor issues unique to their industry and peers, can help
companies prepare and prioritise effective engagement
–Head of Investor Relations, Mega-cap
and ensure alignment between investor expectations and
company efforts.
30
CONCLUSION
With the new mandates on ESG reporting, pressure on
companies to integrate sustainability into existing processes
is growing. One thing is clear: whether from third-party
requests, regulatory mandates or stakeholder pressure, a
holistic ESG strategy is more important than ever. Companies
must now mitigate emerging risks while attempting to seize
the opportunity to accelerate their market position through a
proactive ESG approach.

Findings from our research highlight today’s sweeping

ESG challenges and provide insights into how companies
address them. Through the development of governance and
risk management processes, companies must expand on
traditional business practices, and develop a robust strategy
for resilience in a 2050 carbon-neutral Europe.

31
ABOUT RIVEL, INC.
Since 1991, Rivel has been advising management teams and boards on how
aligning attitudes and behaviors of key stakeholders can make the difference
between success and failure in their business. Rivel works with two-thirds of the
S&P 100 and over half of the S&P 500, and companies across six continents.

RIVEL HAS TrendLign StoryLign

FIVE AREAS
Investor perception Investor presentations
research conducted and investor day

OF FOCUS within the investment

community
messaging and design

GuideLign Governance and CXLign Banking

Intelligence Sustainability Research conducted
Council ESG consulting, corporate among bank customers
Investor communications governance advisory and and prospects
best practices and advisory Board evaluations

32
RIVEL GOVERNANCE AND
SUSTAINABILITY
Corporate Governance
Intelligence Council • Year-round ESG consulting

SERVICES
The only program of its kind to combine • ESG for Investor Relations
a 360-degree perspective from all your
• ESG gap analysis and risk assessment
constituents to provide year-round strategic
governance consulting, engagement, • Peer, sector and industry benchmarking
benchmarking and research. • Internal ESG structure and reporting

• Materiality and double materiality assessments

Corporate Responsibility
• ESG education and awareness training
Advisory
• Board reporting and education
Corporate sustainability/ESG consulting
and support, providing structure, strategy, • ESG communications strategy
and full-service ESG reporting (design and • Investor and stakeholder engagement strategies
copywriting) to successfully navigate the
• Ratings agency analysis and response
evolving sustainability landscape for the
• Full suite of design and content copywriting and
long term.
creation services

• Global regulatory landscape readiness

Board Evaluation assessment and guidance
Independent, comprehensive, 360-degree • ESG investor perception studies
board evaluations. Fully customized approach
• TCFD and climate risk mapping
will provide actionable and measurable
insights to meet your board’s objectives.

33
Appendix – Acronyms and Terms
Emissions targets: Measurable goals set by an Scope 1: Emissions generated directly by the
organization to achieve specific emissions reduction company on-site, such as through a boiler or vehicle
metrics as a commitment to limiting climate change. fleet.

Net-zero commitment: When, through its Scope 2: Emissions created indirectly through the
operations, an entity does not add to the purchase of electricity from a utility.
concentration of emissions in the atmosphere. Net-
Scope 3: Emissions created indirectly through the
zero is achieved through a balance between GHG
company’s value chain, such as business travel,
emissions produced and emissions taken out of the
logistics, and purchased goods.
atmosphere.
TCFD (Taskforce on Climate-related Financial
GHG emissions: Greenhouse gas (GHG) emissions
Disclosures): A framework designed to help
from human/business activities that contribute to
companies provide decision-useful information on
climate change.
risks and opportunities presented by climate change.

34
Survey Methodology
This paper integrates survey data from three comprehensive studies completed by Rivel during the latter
half of 2023. The studies were designed to provide a comparative framework of ESG attitudes and practices
between issuers and institutional investors and deliver research-based insight to help guide corporate strategy
in this evolving domain.

Rivel surveyed 49 EU and UK corporate respondents, as well as 158 North American corporate respondents.
It is an exhaustive examination of corporate ESG policy, practice and structure. The second study is highly
focused on North American and European institutional investors’ ESG investment criteria and expectations. It
is predicated on 63 in-depth telephone interviews among a broad, purposive sample of buy-side investment
professionals of which 95% are predominantly active managers. Telephone interviewing, conducted by Rivel’s
elite cadre of executive interviewers, was chosen to ensure accuracy of respondent selection as well as to
afford investors the opportunity to expound on their views and evaluations in open-ended discussion.

When examining meaningful differences among corporate respondents according to the size of their
company, they are segmented into three groups by market capitalisation: Large-cap ($10B+), Mid-cap
($2B-$9.9B), and Small-cap (<$2B). Due to questions where multiple responses are acceptable and/or
computer rounding of data, percentages may not always add to 100%.

35
For more information, please contact
the Governance and Sustainability team.