Preparing a sustainability report for the first time is a significant step for any company as it signals a shift toward greater transparency and accountability regarding its environmental performance. Stakeholders are demanding information beyond financial returns to better understand a company’s impact on the planet, its commitment to ethical practices, and contributions to a more sustainable future. This report offers a comprehensive overview of a company’s sustainability efforts, challenges, and goals, providing an opportunity to showcase achievements, while also acknowledging areas for improvement, and a clear vision for future progress.
A sustainability report conveys how a company currently operates, and details how it intends to modify its business and operations, to make them more sustainable in the future. It provides a mechanism for reporting a company’s sustainability initiatives and progress to key stakeholders, including investors, and the outside world. It is intended to create transparency and accountability related to these initiatives and enhance continuing environmental, social, and governance (ESG) goals and strategies.
In the 1980s, particularly within the chemical industry, companies began publishing voluntary “environmental reports”, which were early precursors to today’s sustainability reports, primarily focused on environmental impacts. The Global Reporting Initiative (GRI), founded in 1997, has played a pivotal role in standardizing sustainability reporting by developing frameworks and guidelines that help companies report on a broader range of sustainability issues, including social and economic impacts. In 2000, the first version of the GRI Guidelines (G1) was published providing a significant step toward a global framework for sustainability reporting. The evolution of sustainability reporting involved a shift to a more comprehensive approach encompassing ESG factors.
Preparing a Sustainability Report
A structured process is vital in preparing a sustainability report as it ensures accuracy and reliability through systematic data collection and validation. This will enhance transparency and accountability, building stakeholder trust. Effective engagement is achieved by addressing material issues, while efficiency is gained through organized workflows and standardized tools. Adherence to reporting standards guarantees compliance and global comparability, transforming reporting into a strategic driver for positive change. By following the steps below, companies can create effective sustainability reports that demonstrate their commitment to responsible business practices.
- Conduct a materiality assessment: This crucial step involves determining the most significant sustainability topics relevant to the company and its stakeholders. It includes engaging with stakeholders to understand their priorities and concerns to help the company focus the report on the most impactful areas, such as environmental, social, and economic factors.
- Define sustainability goals and metrics: Establish specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals, along with key performance indicators (KPIs) to track progress toward these goals. This ensures that the report demonstrates tangible commitments and progress.
- Gather and analyze data: It is important for companies to collect accurate and reliable data related to the material issues that have been identified and KPIs in order to analyze the data to understand trends, performance, and areas for improvement to provide the factual basis for the report.
- Draft the report: Organize the report in a clear and concise manner, using a recognized reporting framework. When selecting a framework, consider industry-specific sustainability challenges and opportunities, ensure the framework is manageable for the company’s size and resources, prioritize the information needs of key stakeholders including investors, customers, and employees, and account for local regulations and reporting requirements if the company operates in a specific region. Carefully evaluating these factors will help to identify what best suits the company’s needs, and effectively communicate sustainability performance.
- Review and verify the report: Conduct a thorough review of the report to ensure accuracy and completeness. Consider obtaining third-party assurance, which is becoming increasingly common for sustainability regulations to require as this adds credibility and accountability to corporate reporting. The European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD), which affects both EU and non-EU companies with significant EU operations, requires external assurance of the sustainability information included in the management report. California’s Climate Corporate Data Accountability Act (SB 253/SB 219) also mandates independent third-party verification of greenhouse gas (GHG) emissions (Scope 1, 2, and 3) data for large companies doing business in California.
- Communicate: It is important to share the report with stakeholders through appropriate channels, such as the company’s website and investor relations.
Key Sustainability Frameworks
- Global Reporting Initiative (GRI): This provides a comprehensive framework for sustainability reporting, covering a wide range of economic, environmental, and social impacts. GRI emphasizes stakeholder inclusivity and materiality, helping organizations disclose their most significant impacts, and are widely used globally.
- Sustainability Accounting Standards Board (SASB): SASB focuses on financially material sustainability information, providing industry-specific standards that help companies disclose information relevant to investors. These standards aim to connect sustainability performance with financial performance.
- International Sustainability Standards Board (ISSB): ISSB is relatively new, and is working to create a global baseline for sustainability-related financial disclosures providing standards that give investors the information they need. The ISSB is consolidating many of the existing climate-related reporting standards.
- European Sustainability Reporting Standards (ESRS): The ESRS are mandatory for companies reporting under the EU’s CSRD to bring greater consistency and comparability to sustainability reporting within the EU. They cover a wide range of sustainability topics and are aligned with GRI and other global standards.
Conclusion
The evolution from basic environmental reports to comprehensive sustainability disclosures signifies a fundamental shift in corporate responsibility. Publishing a sustainability report, particularly for the first time, serves as a powerful declaration of a company’s dedication to transparency and accountability. Addressing the increasing stakeholder demand for information beyond financial metrics, these reports offer insight into a company’s environmental performance, ethical practices, and contributions to a sustainable future. They function as a tool for showcasing accomplishments, acknowledging areas for improvement, and articulating a clear vision for sustainability goals. If your organization would like to discuss options for getting started with a sustainability report, please contact Canopy Edge for an initial consultation.
