The first-ever document to bring sustainability to the forefront was the Brundtland Report. Named after the then Norwegian Prime Minister, and made public by the WCED (World Commission on Environment and Development), 1987 was a significant year that determined the course of environmental history.
Close on its heels, in 1999, came the DJSI (Dow Jones Sustainability Index). It guided corporate responsibility exercises and came to be viewed as a champion’s trophy for sustainability compliance. Since then, countless new frameworks have evolved to cater to the changing ESG requirements of a warming world. DJSI, however, has stood its benchmarking ground. It has been instrumental in transforming the investing landscape through a reevaluation of the metrics that determine company value.
Common Mistakes Companies Make in DJSI Submissions
Your company automatically comes to be viewed in a different, loftier light when it is able to comply with DJSI guidelines. However, certain mistakes are commonly observed in ESG reporting by companies aiming to elevate their brand reputation through sustainability practices.
Errors in Disclosure
The challenges to data collection and its systematic organisation for accurate ESG reporting are not unknown to business owners. Flawed data gathering from supplier systems and operational teams impacts the ability of a business to report credibly. Moreover, data related to Scope 1, Scope 2, and Scope 3 emissions are crucial for insights that later on affect business decision-making and sustainability strategies. Lack of a proper data collection and disclosure mechanism can lead to DJSI compliance issues and hamper your business’s reputation.
How To Avoid:
Automate the collection and organisation of data through generative AI wherever possible. Involve technical experts who can offer end-to-end support and provide guidance related to gap analyses, data management, etc.
Greenwashing
In a desperate attempt to enhance their brand image, companies choose to overlook crucial guidelines outlined in DJSI. As a result, they end up projecting their brand to be better aligned with environment, social, and governance criteria than they truly are. Blindsiding investors and customers in the short-term might feel tempting, but greenwashing maligns a brand and quickly erodes the trust stakeholders have in a business.
How To Avoid:
Provide reliable evidence through data, KPIs, and other metrics to back up your claims in the report. Set achievable ESG goals and partake in consultations. Engage with experts who are seasoned in sustainability reporting and can help your business improve scores or comply with DJSI.
Inadequate Weightage of Stakeholders
One wouldn’t build a house without consulting an architect or an interior designer, so why should ESG reporting exclude stakeholder feedback? The same rules apply to DJSI submissions. Each key stakeholder within the three pillars of sustainability reporting is capable of bringing crucial insights and feedback to the table. When companies underplay the value of internal and external stakeholder feedback, they fail to make vital decisions that could enhance their scores. Strategies remain incomplete and fall short in achieving ambitious targets.
How To Avoid:
Engage internal stakeholders like employees, shareholders, and external stakeholders like suppliers, local communities, and regulatory bodies early on in the process. Involve external consultants to turn insights gathered from stakeholders into actionable goals. You can also gain continued advisory through consultations to keep your reports aligned with the evolving global standards of DJSI.
Traceability Issues
Large companies work through multiple teams, both domestic and international. Even when functioning domestically, supply chains are monitored through spreadsheets and external inputs. Proper data reporting, its source, and history become hard to track, especially when Tier 2 and Tier 3 suppliers have to be approached. There are no specific safeguards that one can employ to ensure data consistency and source tracking across all levels. However, when traceability becomes an issue, audits become more prone to failure.
How To Avoid:
Turn to ESG reporting platforms that use AI for maintaining traceability. They help record the lineage of data across supply chains and operational teams, keep datasets updated, and can be used to track distant sources as well. Moreover, welcome inputs from experts regarding readiness in assessments and audits for DJSI. They also aid your business in setting the right ESG initiatives that align with DJSI criteria and make compliance in the future simpler.
Best Practices For DJSI Submissions
Apart from exercising caution and conducting due diligence in ESG reporting as per DJSI, businesses can act proactively and use best practices in their DJSI submissions.
- Familiarisation with criteria
Gain a clear understanding of each criterion across the three pillars as outlined in the assessment framework. Emission limits, community practices, and governance structures specific to your business should take precedence.
- Laser focus on key areas
Highlight areas of focus across the three pillars. This helps set proper goals across the board. Initiatives to reduce carbon emissions, promote a healthier workplace culture, and ethical sourcing of materials can be undertaken based on insights.
- Consistent monitoring and growth
Focus on continuous improvement instead of periodic reviews. Fine-tune the initiative and strategies being implemented to actively keep your business on track and aligned with sustainability goals.
- Consultations & collaboration
Involve DJSI experts and other stakeholders to learn from them. Remain up to date with shifts in reporting and other developments, and get external guidance for enhanced compliance.
The Takeaway
A globally recognised and revered benchmark, the DJSI is a badge of honour for businesses operating in the brave new world. Compliance by a business acts as an indicator of its decision-making capacity and long-term financial health. In fact, this benchmark acts as an investor magnet. When sustainability is a priority, companies are able to differentiate themselves from competitors and improve on their existing ESG goals and strategies.
A range of mistakes can be avoided and better tackled in businesses that are well-informed on reporting trends. Stakeholder engagement, data management, and expert DJSI consultations are the ultimate trifecta for ensuring your business is geared to pass ESG assessments. In the long run, it is also able to comply with fresh ESG regulatory requirements while sustaining investor confidence as well as revenues.
