What is sustainability reporting?

Sustainability reporting is a type of reporting in which companies analyze, measure and report on their progress toward pre-determined sustainability goals.

Companies need sustainability reporting procedures that offer complete transparency into their environmental impact to meet consumer and shareholder expectations. Effective sustainability reports should include environmental risks and opportunities, their costs, and how they align with the company’s CSR goals.

Here, you'll discover:

• The importance of sustainability reporting
• How corporate sustainability reporting relates to your organization’s ESG effort
• What should be included in a sustainability report
• Sustainability reporting examples

Why Does Sustainability Reporting Matter?

Sustainability reporting matters because it can have serious financial ramifications. 48% of investors have decided not to invest in a company because they lacked a clear stance on social and environmental issues, while another 38% have sold shares for that same reason.

ESG may not be quantifiable in the short term, but even if it’s not understood and anticipated, it will become financially material. — Kristen Sullivan, Partner, US Sustainability and ESG Services Leader, Deloitte & Touche LLP

Sustainability reporting is an opportunity to reassure consumers and shareholders and chart a path forward that accounts for environment-related risks and opportunities. Companies that regularly report on their sustainability can proactively mitigate ESG risks, cut costs and ultimately bolster performance.

ESG and Sustainability Reporting

Sustainability reporting satisfies the reporting requirement for “E” in ESG: environmental. ESG sustainability reports are an important way that companies can fulfill ESG requirements. To do so, companies should include how their progress stacks up against any benchmarks and goals they already have in place.

CSR and Sustainability Reporting

CSR, or corporate social responsibility, is another powerful motivator for sustainability reporting. 70% of American consumers expect companies to make the world better, while 73% of investors say that a company’s environmental efforts impact their investment decisions.

While CSR isn’t the only reason to report on sustainability, it’s a powerful reason why companies should be transparent about their environmental impact and motivated to improve year over year.

What Should a Sustainability Report Contain?

There is no one “right” format for corporate sustainability reports. What your sustainability report contains depends on your company size, industry, regulations, software and operations, among other factors.

Generally speaking, though, most ESG sustainability reports will include the following:

• The company’s environmental, social and governance (ESG) goals
• The progress the company has made toward those goals
• Risks the company may face
• Opportunities the company may have
• Financial details, including potential costs associated with the goals, risks and opportunities

Sustainability Reporting Standards

Sustainability reporting doesn’t have a universal standard. Companies do, however, have to follow any relevant reporting regulations, like those in the UK that require organizations to share their greenhouse gas emissions.

Though many governments and companies are pushing to centralize their sustainability reports, as it stands, there are more than 600 different standards, initiatives and frameworks that guide sustainability reporting. Companies ultimately need to pick the standard they’ll adhere to.

Types of Sustainability Reports

There are many types of sustainability reports, but they usually follow a specific standard that the company selects. Below are examples of sustainability reporting standards your organization may pursue:

• EU Corporate Sustainability Reporting Directive (CSRD): The CSRD standards take effect in 2023 and require that EU companies submit sustainability reports. Its goal is to make sustainability more standards-based and akin to existing financial reporting.
• Task Force on Climate-Related Financial Disclosures (TCFD): The SEC, among other regulatory bodies, supports the TCFD’s standards, which focus on disclosing the financial risks of climate change.
• IFRS Sustainability Disclosure Standards: These are international standards that create a greater relationship between sustainability reports and a company’s finances. The IFRS standards are particularly useful for CFOs and investors.
• Global Reporting Initiative (GRI): While GRI has no central oversight, it does offer environmental-specific standards that it recommends for companies to report on.
• Sustainability Accounting Standards Board (SASB): Different industries have different standards, but they all focus on conveying ESG performance and metrics to investors.
• CDP: Nearly 10,000 companies adhere to these standards, which focus on disclosures relating to climate change, forests and water security. CDP also maintains an additional standard for supply chains.

Set ESG Goals for Effective Sustainability Reporting

ESG goals set the stage for sustainability reporting. They are the goalpost for all metrics, risks, and opportunities a sustainability report will include. A company’s ESG goals will help sustainability efforts shine if set strategically. ESG goals can set a company up for big financial and reputational losses if chosen poorly.

Not sure how to set ESG goals that will work for your organization? Read Diligent’s guide to setting data-led ESG goals that drive success.