Sustainability Reporting Explained: What, Why and How

Today, businesses are not gauged through their financial performance alone.

Instead, stakeholders weigh in more on the sustainability aspect of the business than just the profitability.

Hence, sustainability reporting with a focus on ESG has gained momentum, with more and more businesses reporting on the environment, social and governance aspects.

What is Sustainability Reporting?

Sustainability reporting is based on two underlying fundamentals of a business – trust and transparency. It is a broad concept and covers various parameters such as environment, social and governance of business performance.

Unlike financial performance, sustainability reporting standards cover the impact of business on various environmental resources, steps the companies are taking to cut down on carbon footprint and socially how they are engaging with the workforce. It also sets standards on the governance aspect of the business and how well the companies are performing on it.

Sustainability Reporting As A Better Risk Management Tool

Sustainability and integrated reporting are, any day, a better risk management tools than pure financial reporting. This is because it is indicative of how well the business environment is in terms of people, environment and leadership, and also provides a mirror to companies on the areas where are they lacking and where they need improvement.

Embedding ESG Sustainability Reporting into Business Strategies

It is critical at this juncture to embed ESG sustainability reporting into the business strategies to better control the external and internal environment.

For instance, during the pandemic, while the external environment was uncertain, companies with strong leadership and a focus on people did better than those that kept the ESG aspect out of their strategies and only looked at profitability.

The 5 Steps Toward Good Sustainability Reporting

The following steps can enable businesses to master the fundamentals of decision-making and usage, and in turn, achieve positive sustainability outcomes:

• Step 1: Identify your priorities and work towards developing a strategy
• Step 2: Build a robust plan and gather relevant data
• Step 3: Review the data collected
• Step 4: Finalise the data collected and communicate effectively
• Step 5: Review the learnings and make necessary additions

Why Is Sustainability Reporting Important for Businesses?

Better decision-making:

Sustainability reporting helps make the decision-making processes of businesses more effective and relevant.

Achieving operational efficiency:

The analysis of the business impact on sustainability issues enables companies to better plan their resources, people and other materials to achieve enhanced operational efficiencies.

Optimizing costs and savings:

Corporate sustainability reporting provides a comprehensive analysis of business and its impact areas. It also highlights areas where the funds are required and where they need to be restricted. Therefore, it gives a holistic picture of the business indicating where to optimize costs and savings, and where to reduce the spending.

Also watch: Beyond the Sustainability Pledge

Key Benefits of Sustainability Reporting

Sustainability reporting is a litmus test of a business on what has been its progress on sustainability.

Achieving sustainability:

One of the key benefits of sustainability reporting is that businesses get onto the track of sustainability and do not keep it on the back burner. A sense of commitment and accountability sets in once the business decides to bring out the company sustainability report.

Attracting more customers:

Today, customers are much more aware of the sustainability aspect of a business. Their buying behavior is inclined towards sustainability issues. The stakeholders and investors make investment decisions depending upon the ESG disclosures by companies. ESG sustainability reporting is equated to credibility and trust in a business by its stakeholders, customers and investors.

Streamlining business performance:

Sustainability reporting also leads to streamlining of the company’s performance and improving stakeholder value. The value creation story depends on how well a business performs on the sustainability aspects.

Also read: Five Data Roadblocks To Overcome in the Journey to Net-Zero Emissions

Conclusion

Sustainability reporting keeps you ahead of the curve both in terms of identifying the risks, preparing for legislative requirements and creating a business on a strong foundation. Corporate sustainability reporting plays a dual role as both an enabler and beneficiary. It gives a sense of purpose and pride to the company and the industry as a whole.

FAQ

What Are the 6 Key Steps in Sustainability Reporting?

• Identify your priorities
• Developing a sustainability reporting strategy
• Set a team and gather relevant sustainability data
• Review data collected
• Communicate effectively
• Make note of learnings and improvise sustainability reporting standards

What is CSR sustainability reporting?

CSR sustainability reporting is a comprehensive document covering all initiatives undertaken in CSR towards community development and environmental conservation.

How To Choose a Sustainability Reporting Framework?

While choosing a sustainability reporting framework, keep in mind that it should include information that matters to your stakeholders and is relevant to the business environment.

What Are Sustainability Reporting Standards?

GRI Sustainability Reporting Standards (GRI Standards) are sustainability reporting standards for all companies, irrespective of their size, to disclose both positive and negative impacts of their business on the environment, social and governance aspects (ESG).

What Are Sustainability Reporting Practices?

Sustainability reporting practices are today an integral part of corporate reporting. Like financial reporting, businesses report on sustainability aspects concerning how it deals with ESG issues.