Insights

How combining ESG and impact reporting is driving better value.

If your organisation exists for purpose, you may have already embarked on your Impact reporting journey – developing impact-led strategies, Theories of Change and Outcomes Measurement Frameworks – and are now wondering how ESG and Impact reporting fit together.

Or you may be a for-profit organisation that produces a sustainability report, but you also want to measure and report the unique social and environmental value created by your organisation.

This article provides a practical approach for bringing ESG and Impact reporting together that could be transformative for understanding and growing value in all its forms.

We call this approach ‘ESG+’ and it represents a new horizon in performance reporting.

ESG, Sustainability and Impact reporting: What’s the difference?

ESG, sustainability and impact reporting are distinct yet equally important approaches to reporting, each with their own purpose, audience, methodologies and frameworks.

Sustainability reporting has existed for decades and continues to evolve to support companies to disclose their sustainability performance, and for stakeholders to understand and assess this performance. These reports focus on a balanced account of impacts, both positive and negative, on the planet, people, communities and the economy through business activities or independent initiatives. Frameworks include the Global Reporting Initiative (GRI), ISSB and the much-anticipated ASRS (Australian Sustainability Reporting Standard) which is expected to be released imminently.

ESG reporting focuses on the disclosure of quantitative and qualitative data, against a set of standardised and comparable metrics to provide an overview of financial risk and opportunity of investing in a given organisation, based on the organisation’s performance in managing Environmental, Social and Governance topics. The primary audience of ESG reporting are investors, funders and other stakeholders seeking to assess a company’s performance on environmental impact, social practises and governance structures.

Impact reporting is an evolving practice particularly in the for-purpose sector where success cannot be measured by financial performance or the scale of an activity alone. An impact report should draw on qualitative and quantitative evidence of social and environmental outcomes experienced by stakeholders, and should answer some key questions including: What difference and value are we creating? Who or what experiences this value? How can we do better?

The scope of an impact report may be organisation-wide, for an initiative or policy and should appeal to a broad audience of stakeholders including investors, funders, customers, partners, government and community.

So how do these reporting approaches fit together?

ESG+: what it is and why it is needed

An ESG+ approach ensures Impact is considered alongside ESG metrics. The ‘+’ represents an Impact dimension that should articulate an organisation’s intended impact on people and report this impact through stories and data.

When an organisation exists for purpose, it is critical this purpose is at the core of public reporting. ESG reporting doesn’t replace Impact reporting and both approaches are needed to drive investment that enables the growth of social and environmental value.

The community housing sector provides a current example of how a for-purpose sector can adopt ESG+ approaches.

Showcasing ESG+ in the Community Housing sector

In 2019, many community housing organisations wanted to better understand what difference their housing was enabling in the lives of tenants. At the time, many organisations could quote the number of tenants housed, length of tenancies and rates of service satisfaction. However, they did not know beyond individual case studies how secure and affordable housing was enabling other outcomes in tenants’ lives including safety, health, financial wellbeing, and community connection and participation.

2019: CHIA Vic sector outcomes framework

To support the community housing sector to measure these outcomes, Think Impact worked with the Community Housing Industry Association (CHIA) Vic and their members to develop a sector outcomes framework. This framework was developed drawing on the stories of tenants from across the sector, resulting in consistent measures and a survey tool that could be used by Community Housing Organisations (CHOs) to quantify tenant outcomes.

2023: An ESG Reporting Standard for Australian community housing

In 2023, CHIA National launched a voluntary ESG Reporting Standard for CHOs. The Standard has been developed to promote a stronger pipeline of investment and raise investor confidence that ESG risks are being appropriately managed and community housing organisations are ready for investment. The standard has 41 criteria (with measurement units and notes) classified by theme and type, and provides a common set of metrics to promote data transparency, consistency and comparability between CHOs.

Taking an ESG+ approach provides an opportunity to centre tenant voice in reporting, alongside ESG metrics. It also provides an opportunity for CHOs to articulate their unique strategy that will drive investor and tenant value.

Haven Home Safe and ESG+

This is what Haven Home Safe (HHS) have done. They are a progressive community and affordable housing provider delivering housing and homelessness services across Victoria. HHS believe they have a responsibility to create social value for people vulnerable to housing instability and want to leave a positive legacy for future generations.

In 2024, Think Impact supported HHS to develop their 2022–23 ESG + Impact report and establish a baseline for performance using the CHIA ESG Reporting Standard, being one of the first Victorian community housing providers to adopt the standard.

Think Impact facilitated a rigorous materiality assessment process, engaging with HHS stakeholders, partners and clients to identify the issues most important to them. The process of examining sustainability, ESG and impact performance holistically can highlight an organisation’s strengths and areas for improvement. Crucially, it seeks to integrate data with an organisation’s broader mission and operational context, providing a comprehensive view of its overall impact and progress.

How to get started on ESG+ reporting

If you want to get started on ESG+ reporting, you can take the following steps.

• Firstly, clarify why you are reporting, including the audience for your report and identify any relevant ESG reporting frameworks for your sector.
• Conduct a materiality assessment to identify and prioritise topics to report based on relevance and significance. Remember to look at both the inside-out and the outside-in perspectives, i.e. double materiality.
• Articulate your intended impact in a Theory of Change to support you to move towards Impact reporting.
• Apply the Social Value Principles to assess your impact – recognising value is contextual. Understand where value is created or diminished from your stakeholders’ perspectives. Respect their voices and understand their context.

We are actively supporting organisations to manage for better impact and ESG + is an approach that can be used by organisations in any sector. If you want to know more please get in touch, we'd love to hear from you.