What is Sustainability Reporting?

• Sustainability reporting is a form of non-financial reporting that enables companies to disclose 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. [17]
• Non-financial information is often defined as Environmental, Social, and Corporate Governance (ESG) information, referring to the three central components in measuring the sustainability and societal impact of a company. [20]
• Corporate sustainability reporting communicates information that is relevant for understanding a company’s long-term economic value and contribution towards a sustainable global economy, taking account of the company’s economic, environmental, social and governance performance and impacts. Although expressed in many different ways, the objective of sustainability reporting may be summarised as communicating an understanding of how the flows of material, resources and services between corporations, capital markets, society, the economy and the environment affect the mutual ability of those systems to continue and flourish (As defined in the following report by ACCA & CDSB [21] ).
• The benefits of sustainability reporting include improved corporate reputation ****, building consumer confidence, increased innovation, and even improvement of risk management. [19]
• It enables the company to be more transparent about the risks and opportunities it faces. [18]

Sustainability Reporting Landscape

• The sustainability reporting landscape is comprised of a variety of organisations, a multitude of reporting requirements and a plethora of activities. ACCA & CDSB released a report in which they proposed a list of components that ****describes and places activities within the landscape to navigate it better. [21]

Components of Sustainability Reporting Landscape [21]

• Requirement Developers
  • They are the organisations that issue or influence sustainability reporting requirements by specifying what information a reporting organisation should provide.
  • Main categories of requirement developers -
    • Government/ Regulators
    • Stock Exchanges
    • Intergovernmental organisations
    • Investor or investor coalitions
    • Business groups and associations
    • Non-governmental organisations, think tanks and accountability groups
    • Ratings agencies
    • Consultancies
    • Specialist reporting organisations
• Reporting Requirements
  • They refer to the provisions through which sustainability information is requested.
  • Types of Reporting Requirements
    • Regulation and legislation
    • Standards, protocols, frameworks, codes, principles and guidance
    • Listing rules
    • Rating and indices
• Reporting Content
  • It is the subject matter about which requirement developers demand or request sustainability information through reporting requirements
  • The content generally falls into the following categories-
    • Business context
    • Risks
    • Opportunities
    • Management and Governance
    • Dependencies
    • Impacts and Outcomes
    • Policy, Strategy and Targets
    • Performance
    • Future Outlook
• Reporting Support Mechanisms
  • These are the management and governance approaches, measurement tools, systems and procedures that help a company determine how to respond to reporting requirements and prepare and present appropriate content.
  • They are designed to focus on measurement and behavioral change.
  • These mechanisms could be of the following forms-
    • Management approaches designed to help companies embed sustainability into their strategies
    • Methodologies for measuring environmental and social impacts of business activity
    • Assurance and verification services for sustainability information
• Reporting channels
  • It refers to the mechanisms and places through which information is conveyed to audiences
  • Types of reporting channels -
    • Mainstream reports (Example: Annual Reports)
    • Integrated reports
    • Sustainability reports
    • Online webpages
    • Specialist systems (Example: CDP’s reporting system)
• Audiences
  • They are the intended users of the reported information
  • Some of the possible audiences are listed below-
    • Regulators
    • Investors
    • Civil society
    • NGOs
    • Consumers
    • Special interest groups

Resources

• Mapping the sustainability landscape
  • A report by ACCA & CDSB which analyses the sustainability reporting landscape and proposes terminology, tools and approaches to navigate it better.
• KPMG Annual Sustainability Reporting Survey 2022
  • KPMG releases a report every 2 years examining sustainability reporting trends around the world. These reports give an overview of the state of sustainability of reporting and provide insights on business strategy considerations to meet reporting requirements.

Check out ESG

Check out ESG Ratings Agencies