Introduction and Relevance of ESG Reports in Mexico
ESG (Environmental, Social, and Governance) reports have become a crucial factor for the competitiveness and viability of Mexican businesses. According to Roland Berger, 84% of the country’s top 100 companies now publish sustainability reports, highlighting that the market now focuses on the robustness and strategic utility of this information.
Current State of ESG Reporting in Mexico
While the majority of large companies in Mexico have embraced ESG reporting, there are still significant gaps in the depth of these reports. Only 24% of reporting companies provide comprehensive information about their value chain (Scope 3), a critical aspect given the increasing regulatory and commercial demands in international markets. This gap is also evident in the management of strategic natural resources, such as water.
Water Consumption and ESG Reporting
Only 10% of the 84% reporting companies include information about their water consumption as a material issue, despite water being crucial for social impact in the Mexican context. This limited measurement of water consumption presents both a risk and an opportunity.
- Risk: Lack of information complicates the management of physical risks associated with water stress and hinders the ability to demonstrate positive impacts on communities and territories.
- Opportunity: Integrating clear indicators on water efficiency, reuse, and circularity can help companies anticipate regulatory risks, improve stakeholder relationships, and strengthen their competitive positioning.
International Implications of ESG Reporting
Robust ESG reports are increasingly vital for accessing markets and capital. The EU’s Corporate Sustainability Reporting Directive (CSRD) introduces the concept of double materiality, requiring companies to assess both their environmental impact and the risks posed by the environment to their business.
In the US, California’s SB253 law mandates emissions reports of scopes 1, 2, and 3 for companies with significant activities in the state, directly affecting Mexican companies with operations or clients there.
Diego Ibarra, principal partner at Roland Berger, stated that “an ESG report becomes a methodology for managing company risks.”
Risks of Inadequate ESG Reporting
The absence of solid ESG reports implies clear risks, including loss of access to international markets, increased costs due to delayed adoption of measurement and auditing systems, difficulties in accessing financing, and reputational risks associated with greenwashing.
In an environment of increased scrutiny, ESG reports enable companies to open markets by demonstrating to potential clients that they are a better partner, provider, and risk manager with clear visibility of their risks.
ESG Reporting for SMEs in Mexico
For SMEs, which constitute nearly 93% of Mexico’s business fabric, ESG reporting presents both a challenge and an opportunity. As part of larger corporations’ Scope 3, SMEs must provide basic information on emissions, water consumption, and social practices to remain in supply chains.
However, the use of digital technologies and AI significantly reduces the cost of data collection and validation, enabling these companies to meet reporting requirements.
