Environmental, social and governance policies are becoming an increasingly important topic for businesses as they face growing pressure from investors, regulators, customers and other stakeholders to disclose their climate impact and risks posed by their operations on society and the environment.
Despite the demand for increased transparency, collecting and reporting data on ESG comes with its fair share of obstacles, like the need to educate leadership and subject matter experts on how and why disclosing these metrics is necessary. At eBay, we established a cross-functional ESG Council to help our global leaders become more familiar with the ways environmental, social, and governance disclosure connects to so many aspects of corporate business.
As a chief sustainability officer, I am well acquainted with the challenges and opportunities being faced by business leaders that want to be responsible and sustainable. There are three key ESG trends that businesses should be prepared to face in 2024.
Disclosure, disclosure, disclosure
One of the most prominent trends in ESG operations is the increasing demand for disclosure from various regulatory bodies. For example, California passed two climate risk disclosure acts last year which require companies to disclose their greenhouse gas emissions. These bills are separate from the impending climate disclosure rule from the Securities and Exchange Commission that would require businesses to disclose their scope 1 and scope 2 emissions, in addition to scope 3 emissions — an inclusion that has sparked much criticism. In the European Union, the Corporate Sustainability Reporting Directive proposes to mandate ESG reporting for all large and listed companies, using a set of common standards developed by the European Financial Reporting Advisory Group.
The goal of these initiatives is to increase the transparency, comparability, and reliability of ESG information, and to create accountability by providing government stakeholders with useful data. However, new reporting requirements can pose challenges for businesses, who must figure out how to collect and report on different types of data, comply with multiple sets of requirements that are occasionally in conflict, and ensure the quality and accuracy of their data.
A challenge eBay has faced as an e-commerce company is collecting accurate data for disclosure on scope 3 emissions, since eBay acts as a marketplace for sales but does not create any products itself. For eBay, the majority of our scope 3 emissions come from downstream transportation of products that are sold by our sellers and delivered to our buyers – all contingent on the fleets of different carriers. While eBay’s control over these emissions is limited, there is an urgent responsibility to tackle this issue, which is why internal and external partnership and collaboration is so critical. For example, we recently partnered with Etsy and Drawdown Labs to commend the United States Postal Service for their decision to exclusively purchase EVs starting in 2026.
To stay prepared, businesses need to take a proactive approach to disclosure by identifying the most relevant and material ESG topics for their sector and stakeholders and investing in processes and data systems — for instance, carbon accounting software — that support their reporting. At eBay, this has included re-commerce and sustainable consumption, data privacy and security, greenhouse gas emissions and supporting entrepreneurs and small businesses.
Reporting requirements aside, the collection and availability of this data should be looked at as a business benefit, offering insights into operations to help identify and avoid possible risks while uncovering hidden opportunities. By digging into non-financial data, businesses can uncover potential risks identified by stakeholders as part of a materiality assessment (e.g. water scarcity or possible impacts to the supply chain), or opportunities from increased disclosure such as inclusion in impact-related funds that can translate into developing relationships with this growing arena of investors.
Investors play a key role in pushing for ESG policies
The growing influence of investors on ESG issues is a trend that is only going to build over time. As the CSO at eBay, I sit within the Investor Relations team, allowing a close relationship with investors and visibility into what they want. Investors are increasingly incorporating sustainable business practices into their investment decisions, as they recognize the materiality of climate adaptation and preparation for the long-term value and performance of their portfolios.
EBay investors and shareholders value sustainable and responsible business practices, and in my time at eBay, there has been a shift in demand for more transparency and disclosure. For instance:
- An increased number of investor calls are focused on corporate governance and sustainability metrics compared to the prior year — this trend has especially grown in the last 5 years.
- Conversations with investors are two-way and an opportunity to give additional context as well as learn from the investors what they are seeing in the ESG landscape.
- Transparency and disclosure on ESG metrics are a requirement to qualify for certain impact funds, and now increasingly regulatory driven as table stakes.
"Businesses that address sustainability are helping to future-proof themselves for a changing climate — not just the physical climate, but also the social climate of consumers who want to support responsible companies."
Renee Morin
eBay's Chief Sustainability Officer
According to a survey by the Global Sustainable Investment Alliance, sustainable investment assets reached $35.3 trillion in 2020, representing 36% of the total assets under management in the five major markets: the U.S., Europe, Canada, Australia, and Japan.
Investors are also becoming more vocal in engaging with companies on climate and social issues, through dialogue, voting, and resolutions. For example, in 2021, shareholders of ExxonMobil, Chevron, and Shell successfully pushed for more ambitious climate action and accountability from the oil giants, in a landmark series of votes that signaled a shift in investor sentiment and effort.
These investor actions reflect the increasing demand for disclosures on corporate responsibility, especially on climate-related issues. Climate risk, goals, and progress tend to be the most common topic up for review, though in recent years there has been an increase in attention toward the social component or “S” of ESG, including gender equity, pay parity, diversity, representation, and more.
Businesses should plan to enhance their ESG reporting, even in advance of the mandatory disclosures noted above, to meet evolving investor preferences. There are many useful existing frameworks such as the Task Force on Climate-Related Financial Disclosures, the Sustainability Accounting Standards Board, and the Global Reporting Initiative, which can provide clear information on executing responsible business strategies, performance, and impact. Businesses should also proactively engage with their investors on sustainability, social, and governance issues by prompting discussion and requesting feedback on corporate governance calls.
Businesses that engage with these issues rather than ignore them will build trust and confidence with their investors, gaining support for long-term business goals.
Consumers care about sustainability
Businesses that address sustainability are helping to future-proof themselves for a changing climate — not just the physical climate, but also the social climate of consumers who want to support responsible companies. Recent studies show that consumers tend to support sustainable products with their spending, and eBay’s latest Recommerce Report found that 93% of sellers said sustainability was “very” or “somewhat” important to them when it came to selling pre-loved goods. Modern shoppers feel good about preventing waste and keeping their carbon footprint low, but see sustainability as more than just a consumer responsibility.
Nine in 10 consumers believe it’s important for businesses to act in a socially and environmentally responsible manner. While there is a vocal minority of people who don’t support sustainable considerations in business, the vast majority of consumers support companies committed to responsible business practices.
Sustainability reporting presents an opportunity for brands to showcase their commitment to positive practices that will keep their business growing into the future, creating a stable foundation for long-term success. Companies can confidently demonstrate the impact of their sustainability efforts with their reporting, keeping in mind data that show the many benefits of ESG reporting and programs: improved reputation, innovation, efficiency, resilience, and profitability.
