Is reporting against the ESG Standard compulsory, especially for smaller organisations?
The ESG Reporting Standard is voluntary disclosure framework for all community housing providers. As a sector-wide Standard, organisations of all sizes are invited to adopt or support the Standard to demonstrate their commitment to improving environmental, social and governance outcomes.
CHIA will be closely supporting the implementation phase throughout 2023-24. Look out for updates on the CHIA website on how to become an Adopter or a Supporter and for details on upcoming events.
Have housing sectors in other countries adopted ESG reporting?
Australia is second to the UK in developing a sector-specific ESG Reporting Standard for the community housing sector. The UK’s Sustainability Reporting Standard (SRS) was launched in November 2020. Since then, the value of the SRS to housing providers and funders has fast become apparent.
Is this separate to any existing regulation or compliance- eg NRSCH?
Yes. The first edition of the Standard launched in March 2023 is separate to existing regulatory and compliance processes. In time, it is hoped that widespread uptake of the Standard by community housing providers, lenders and investors, regulatory bodies and governments will establish a strong culture of ESG reporting.
What benefits will this bring our organisation, and conversely will there be an impact if we don’t use ESG reporting?
The Standard is a robust collection of measures relating to the sector’s environmental, social and governance performance. Reporting against the Standard provides you with a consistent, credible, and recognised way to articulate organisational value to your stakeholders.
ESG factors increasingly shape the investment strategies of lenders and investors worldwide. Embedding ESG reporting should therefore be regarded as an investment in the future growth of your organisation – not a business cost. Failing to embrace ESG issues as part of your strategy may risk being overlooked by leading investors who seek quality evidence of opportunities, risks, and long-term value creation. ESG is more than disclosure; it can mean the difference between being poised for operational sustainability and falling behind in a sector that is actively driving progress on environmental, social and governance stewardship.
Will using ESG improve access to finance and lending?
Over time, ESG is expected to improve access to capital. As noted above, lenders and investors are increasingly adopting well-defined ESG targets, with implications for the allocation of capital to community housing providers who can demonstrate continual improvement on and active engagement with ESG outcomes.
Should we involve our customers- tenants and residents- in our reporting?
This is not a formal requirement, however it is possible that in gathering the data for some of the criteria relating, for example, to Resident Voice and Resident Support (among others), you may wish to include quotes or other material that showcase the human story behind the data.
Do staff need training to be able to work with ESG?
Staff do not need training to begin reporting against the Standard: the current version of the Standard is voluntary and self-certifying. Community housing providers are encouraged to familiarise themselves with the criteria and measurement method, and to consider becoming an early Adopter or Supporter.
- Can CHIA help with implementation?
CHIA, SGS Economics and Planning and RITTERWALD are overseeing the implementation phase to mid-2024. Our priority during this phase is to build the sector’s reporting capacity and to promote its uptake by the lender and investor community.
A program of briefings, tutorials and events is being planned and the details will shortly be communicated on the CHIA website. Later this year, we will also release reporting guidance for early Adopters in preparation for the inaugural Annual Report (2023/24).
What are some trends in the UK community housing sector’s experience of ESG reporting and beyond that may apply in the Australian context?
Wider trends that will shape ESG reporting in the years to come include:
- ESG is no longer additive, it is increasingly a business imperative. ESG’s profile is growing in all sectors and among companies of all sizes.
- Refinement of criteria to meet evolving needs of the community housing sector and requirements of the lender and investor community. Version 2.0 of the UK’s SRS achieves a greater focus on: housing stock quality, net zero strategies, and employee equality, diversity and inclusion. Find out more about the consultation here.
- The need for external verification. ESG is no substitute for sustainability, it is a framework that encourages transparency, consistency and credibility of an organisation’s claims to sustainable practices. External verification demonstrates the veracity of these claims as a safeguard against inaccurate or unsubstantiated claims.
The Sustainability Reporting Sector (SRS) Adopter survey also highlighted that ESG reporting is driving increased internal alignment on ESG issues, especially at senior management and board levels.
Why was ESG selected in favour of the SDGs as the reporting avenue?
Both ESG and the United Nations Sustainable Development Goals share a motivation to address social and environmental challenges for a more sustainable future. A key distinction is in their primary audiences: ESG has evolved in the investment context whereas the SDGs are global goals are set by the UN.
ESG measures the non-financial risks to a company in its operation and supply chain. ESG ratings are used by investors to gauge relative risk as an input to investment decisions.
Thus the CHIA-led ESG Reporting Standard for Australian Community Housing was developed to recognise the benefits of having a sector-specific reporting standard that highlights the issues of greatest importance to the sector and which would help to strengthen the evidence for community housing as a compelling investment.
Will CHIA’s project to implement the standard consider standard tools that may expedite CHO capacity to report against the standard?
The Steering Committee is considering tools that may support ESG reporting. There is a growing number of ESG softwares that help business to compile ESG data within their organisation, track year on year progress and produce ESG reports. We will explore some of these tools in future seminars.
There is no requirement for CHOs to use these tools to report against the standard. In preparing the first year Annual Review, SGS will invite Adopters to submit their ESG data in the CHO’s preferred format. This includes via the ESG workbook.
What will be the financial and operational impact of implementing ESG reporting? Can we use reports from the larger CHPs in the UK as an example of what data to collect and processes they will need to implement to do so? Are there exemplary reports to guide our reporting?
The criteria that Adopting CHOs of the Australian ESG reporting standard will need to reporting against are contained in version 1 here.
We encourage CHOs to become an Adopter or a Supporter even if you know you will not be able to report against all the criteria. This is because an early ESG commitment will no doubt set in place some of the processes – organisational buy-in and positive cultural change, cross-functional reporting – that will benefit your organisation for future reporting.
ESG reports from UK community housing organisations are a useful starting point. They illustrate that among Adopters, there is variation in the report structure, level of detail, and the criteria that are reported. Their reports may also describe internal processes for coordinating data collection, as does the 2nd Annual Review of the UK SRS, which highlighted that some Adopters were creating new sustainability roles, cross-department ESG working groups and Board committees to shape reporting.
What are some examples of value creation arising from ESG reporting?
The UK Sustainability Reporting Standard’s second Annual Review identified the following examples where a community housing association’s ESG reporting had spurred value creation at the organisational level:
- Aligning the housing association’s focus around sustainability and the gaps to be addressed
- Accelerating progress on resource and waste management and measurement
- Highlighting where ESG factors could be embedded in procurement strategies
- Expanding employment opportunities for ESG and sustainability roles
- Strengthening relationships with potential investors
These changes at the organisational level have wider ripple effects for regional economies, environments, and the population: this is the wider value that is created when quality ESG data supports more informed decision-making.
Measuring the value that is created – whether for individual CHOs, Adopting lenders and investors, or the wider community – is core to the field of impact measurement and management. Impact measurement is a fast-evolving field whose tools and techniques seek to reveal the links between purpose, actions, and outcomes.