Sustainability has emerged as a crucial strategy across industries striving for reduced carbon emissions, improved customer and investor trust, better long-term growth, and lower costs.
Companies have started to acknowledge the increased environmental concerns and expectations of consumers, investors, governments and employees, and are adopting environmental, social, and governance (ESG) best practices.
By adhering to the UN Sustainability Development Goals, COP26 declarations, and the 2015 Paris Agreement, companies aim to achieve a lower carbon footprint while also increasing operational efficiencies and resilience.
What is Sustainability Reporting?
Sustainability reporting is a form of non-financial reporting that enables companies to convey their progress toward goals on a variety of sustainability parameters, including environmental, social and governance metrics, as well as risks and impacts they may face, at the moment or in the future. The primary objective of sustainability reporting is to drive concrete actions toward efforts. Sustainability reporting helps companies communicate both positive and negative impacts of their actions on the environment, society as well as economy, and accordingly set priorities.
To provide complete transparency in communicating the progress and efforts in sustainability, the reporting format could include photographs, numbers, charts, infographics, etc.
In the long term, sustainability reporting helps companies assess risks and opportunities and helps them drive green operations, align with CSR goals and increase cost saving opportunities.
What Should a Sustainability Report Contain?
Sustainability reporting has no set format, but broadly involves disclosure of a company’s environmental, social, and governance (ESG) goals and communicating the company’s progress and efforts to reach those goals. Along with ESG initiatives, sustainability reporting includes financial elements. Sustainability reporting provides stakeholders, such as investors, valuable information about a company’s performance beyond just traditional financial measures.
What is the Purpose of Sustainability Reporting?
Sustainability reporting is valuable not only because it enables a business to identify risks and opportunities that may impact its long-term performance, but also because it can help improve transparency and enhance brand image. By reporting on sustainability, companies can mitigate impacts from potential ESG risks, reduce waste and thereby increase cost savings, ensure they are in compliance with regulatory requirements and make more effective strategic decisions.
What are the Requirements for a Sustainability Report?
A company’s sustainability report must demonstrate it is in compliance with any applicable mandatory reporting regulations – for instance, the EU requires certain large companies to disclose information on environmental and social matters, while the UK requires companies to disclose annual greenhouse gas emissions. In addition to regulatory compliance, sustainability reports should be aligned with a trusted set of standards, such as GRI or SASB to ensure that data are complete and consistent and to avoid greenwashing.
What are the Types of Sustainability Reporting?
Several different types of sustainability reporting standards exist. Some of the more widely used frameworks for reporting on sustainability and ESG impacts include the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD) and Carbon Disclosure Project (CDP).
Essential Sustainability Reporting Standards
An essential part of the sustainability reporting process involves setting new goals.
The goals should be based on an analysis of current operations, environmental impact, and available resources. Businesses can use this information to develop new strategies to reduce their carbon footprint while improving efficiency and profitability.
Why is Sustainability Reporting Useful for Businesses?
Organizations can use sustainability reporting to manage risks, improve operations, build relationships with customers and suppliers and reduce CO2 emissions from their operations. Here are some more reasons:
Helps Set New Goals and Manage Changes
A sustainability report helps identify new opportunities for growth and development by setting goals aligned with existing business strategies. By communicating business and sustainability goals to all stakeholders, enterprises can better manage company changes and grow sustainably.
Optimizes Costs and Savings
The most important aspect of the company sustainability report is cost optimization while improving efficiency. The report can help identify areas where unnecessary expenses are incurred, or inefficiencies are observed and adjust the value chain accordingly. This adjustment improves the bottom line by reducing costs, which in turn helps the business grow faster and generate higher profits.
Helps Achieve Operational Efficiency
Sustainability reporting provides valuable insights into how the company can increase its efficiency and performance. This fosters innovation in improving processes, financial models, and products. It helps identify new opportunities and technologies for growth, thus ensuring better operational efficiency and commitment to overall improvement and growth.
Challenges in Sustainability Reporting
Many Stakeholders and Reporting Standards
It isn’t easy to provide a report that caters to diverse stakeholders having different expectations or priorities. In addition, the wide range of ESG issues that companies need to cover in their reports makes it even more difficult. Finally, due to myriad sustainability reporting standards and structures, reporting across corporates is inconsistent.
Collecting Data from Multiple Sources
It is difficult to collect and analyze data from various organizational departments due to silos and lack of coordination. It is challenging to analyze and gain actionable insights from compartmentalized data received on a piecemeal basis from various departments.
Data Overload
Due to increased visibility in their supply chains, businesses are swamped with data on all aspects, including their supplier’s information. Segregating the required information from the dump for arriving at insights is downright challenging, if not impossible.
Key Benefits of Sustainability Reporting
Sustainability reporting is a tool for businesses to communicate their performance and build stakeholder trust. Sustainability reporting enables companies to:
Streamline Performance
Sustainability reporting improves a company’s decision-making processes to be more relevant and efficient, resulting in reduced risk across the supply chain. A reduced risk ensures a reduction in waste and savings in energy and costs and promotes resilience.
Achieve Sustainability
By adopting sustainability reporting, a company can decide on its sustainability goals aligned with its overall objectives. This alignment helps devise a strategy to adopt standards and framework for identifying the various sources of emissions in its supply chain, resulting in the creation of a plan to manage and reduce these emissions.
Increase Stakeholder Engagement
By adopting sustainability reporting, an organization can increase stakeholder engagement by collaborating closely and sharing information on all aspects of sustainability. This fosters a relationship with all stakeholders built on respect and transparent communication.
Attract More Customers
Today’s customers increasingly choose companies displaying strong social or environmental values while purchasing. Therefore, a company’s sustainability accounting gains it customers with whom it can develop a bond enabling loyalty and trust.
The Next Steps on Sustainability Reporting
First, ensure your suppliers know your sustainability goals and expectations. Second, implement supply chain visibility systems in all business operations—from procurement to delivery—to ensure the various production parts run smoothly with minimal waste or damage caused by poor practices. This will help improve efficiency while reducing costs incurred.
Also Read: Differences Between Sustainability and ESG
Frequently Asked Questions
CSR sustainability reporting is a document that covers all initiatives undertaken as CSR projects oriented towards community development and environmental conservation.
Sustainability reporting practices are reports on various sustainability/ESG issues a business has undertaken for improvement. It is as much corporate reporting as the business’ financial reporting.