The Complete Guide to Sustainability Reporting

Sustainability reporting can be traced back to the inception of the environmental movement during the 1970s and 1980s. It has grown from an anomaly in the corporate world to a requirement by some governments, and an expectation by consumers and major stakeholders. 

Sustainability reporting is here to stay, but that doesn’t mean it has to be a burden on your company or team. With the right processes and technology, sustainability reporting can help attract new investors and additional capital, gain market share in the growing environmentally-conscious consumer markets, increase positive PR, and so much more. 

To help you understand sustainability reporting, its origins, and its evolution, this article will dive into one of the early standard setters for sustainability reporting, the main pillars of sustainability reporting, four common reporting steps, strategies to mitigate challenges in the reporting process, and key ESG frameworks and regulations. 

What Is a GRI Sustainability Report?

The Global Reporting Initiative (GRI) is an international organization pioneering sustainability and ESG disclosures through transparent sustainability reporting according to globalized standards. The global standards provide a framework for organizations around the world to compare, benchmark, report progress, and work together towards a common goal: taking meaningful action to create social, environmental, and economic benefits for all stakeholders.

GRI is significant because it caters to companies and organizations of all sizes and industries. It guides global organizations in creating ESG reports with its Universal Standards as well as specific standards in different topics and sectors. Notably, GRI also provideds guidance for reporting on the United Nations’ Sustainable Development Goals (SDGs), laid out in 2015, which give detailed goals, targets, and indicators for progress on the material issues our planet faces. 

The GRI standards are presented in three parts: universal standards, sector standards, and topic standards. This three-pronged approach to sustainability reporting allows a diverse set of companies and organizations to incorporate industry-specific and universal reporting disclosure topics, and creates a materiality guide to manage their reporting expectations. 

• Universal standards are applicable to all organizations writing a sustainability report under GRI guidance; they encompass topics such as human rights and environmental due diligence and responsibility. 
• Sector standards address ESG disclosure topics and challenges specific to industry categories. Sector standards ensure ESG reporting has a tailored approach to the unique materiality of all companies. 
• Topic standards provide reporting guidance on specific sustainability issues, such as greenhouse gas emissions, supply chain, human rights, water, waste, and more. 

The goal of a sustainability report is to increase transparency about an organization’s internal mechanisms supporting sustainability, and communicate their goals, contributions, challenges, and impact to the larger community. By creating a sustainability report leveraging guidelines from GRI, companies can expect better management of disclosure topics, reduce material risks, strengthen their stakeholder relationships, and improve business opportunities. ESG is more than a buzzword; investors, clients, employees, and consumers expect real progress towards sustainable business practices and a GRI report can showcase ESG stewardship activities which can be compared to peers, globally. 

What Are the Three Pillars of Sustainability Reporting?

Sustainability reporting focuses on three pillars to ground the reporting framework and major disclosure topics: environmental stewardship and responsibility, social impact, and sustainable economic development. This can also be referred to as the “Triple Bottom Line” in which companies focus on profits, with the addition of “people and planet” as the end goal of business operations. ESG reporting is similar; environmental, social, and governance topics are disclosed in accordance with a company’s materiality assessment. Governance topics address ethical business practices, leadership, and high-level oversight which directs sustainable business practices. 

Pillar 1: Environmental Sustainability

Environmental sustainability encompasses the environmental responsibility and stewardship activities of an organization. This means managing and disclosing the impact, or footprint, of a business’ operations through carbon emission calculations, GHG inventorying, water use, waste, biodiversity loss or regeneration, and more. These quantitative data points help benchmark across industries, and compare over time which enables organizations to make concrete goals around impact reductions. 

One major environmental sustainability goal is Net Zero; the Paris Agreement laid out a call to action for governments around the world to aim for a 45% reduction in emissions by 2030, with the goal of Net Zero emissions by 2050 to limit warming temperatures. Net Zero has been adopted by many organizations as their main environmental sustainability goal. Net Zero means reducing all emissions to zero through carbon capture technologies, emissions reduction efforts, and energy transition plans. This is different from “carbon neutral” goals, in which emissions are offset through the purchase of carbon credits or verified carbon offsets to ensure an organization’s emissions are neutral. However, the lasting impact of a “carbon neutral” goal is that companies are allowed to continue carbon-intensive operations as long as they can afford carbon offsets. 

Pillar 2: Social Sustainability

Social sustainability is a wide and complex category of disclosure topics. Social sustainability refers to the societal impact an organization has on its stakeholders, and often the global community. This disclosure category was often reported in a separate document called a CSR report, or a Corporate Social Responsibility report. Now, it is commonly encompassed into the three pillars of a more holistic approach to sustainability and/or ESG reporting.

Social impact refers to the policies, practices, and impacts of an organization on the people and communities in which it operates through human rights policies; responsible supply chain management; fair and equitable pay and opportunities; diversity, equity, and inclusion (DEI) of employees in leadership, management, and other employees; training and professional development; and more. This sustainability disclosure category is complex because it encompasses internal employees, outside stakeholders, implications on the local and global community, and upstream and downstream effects of its operations and supply chain. This disclosure category strives to create transparency on the successes, failures, and opportunities for improvement in the social impact space. 

Pillar 3: Economic Sustainability

Economic sustainability refers to the sustainable development of organizations through the reduction of adverse environmental and social impact, while creating long-term economic growth to support the global economy. Also referred to as governance, economic sustainability is an exceptional example of how the three pillars of sustainability work together and are core to the success of an organization. Economic sustainability in an organization ensures the financial longevity and continuation of business by analyzing material risks to the organization and addressing them through policy changes. 

For example, material risks can look like a reliance on finite resources and fossil fuels to develop a main product line; this is a direct threat to the longevity of the business and prompts the company to seek alternative, regenerative resources to replace current dependencies. The downstream effects of this policy change generally include less waste, emissions, and resource intensity. Investors are also looking at key sustainability topics to direct their investment decision-making; by adhering to a sustainable business model, organizations will attract ESG investors and have access to a growing pool of capital. 

What Are the Four Steps in the Sustainability Reporting Process?

Four common steps to creating a sustainability report include planning and preparation; data collection and analysis; compiling and drafting the report; and publishing and communication after the completion of the report. Each step is crucial to the creation of a robust and impactful sustainability report, and each poses its own challenges, such as cross-departmental collaboration, leadership buy-in, data analysis in a global context, and more. 

Step 1: Planning and Preparation

A sustainability report is no small task. These reports aim to disclose every material topic, policy, practice, and accomplishment an organization has over the course of the reporting period, generally a single year. The first challenge is usually getting leadership on board through sustainability education, powerful reporting value propositions, and stakeholder demand for transparency. Sustainability reporting can only be done if leadership is on board with the goals of a reporting project. These goals may change from industry to industry, company to company, and even within the company over time. Common sustainability reporting goals include attracting sustainability and ESG investors, gaining market share, achieving a competitive advantage in a saturated market, and now more than ever, ensuring compliance with regulations. 

The second challenge in the planning and preparation stage is to decide what to include; this is often done through a materiality assessment. A materiality assessment is a survey that collects data on the most important, or material, environmental and social topics to the business and to stakeholders. Sustainability reporting is not one-size-fits-all, which is why material disclosure is so important; reporting on the topics that are most valuable to the company’s stakeholders is what makes a sustainability report or an ESG report robust and meaningful. 

Step 2: Data Collection and Analysis 

In order to even begin reporting on the material topics determined by a materiality assessment, an organization must gather the right data for disclosure. This step in the process can be the most time and labor intensive, as ESG data is generally spread across the organization. Tracking down the right data under the right person can be a daunting task, and it may take buy-in from responsible parties involved in data collection, as this is generally not the highest priority task on their to-do lists. Best practices for data collection implementing a consistent and repeatable process to collect and maintain data year over year – and technology can help with a solution. Data management software enables organizations to keep track of a wide array of pertinent data, both quantitative and qualitative, to streamline the reporting process and ensure the timely delivery and quality of ESG data.

Data analysis highlights the opportunities for improvement and successes for an organization, and can direct the organization’s sustainability efforts. For example, diversity of board members or leadership can be represented through gender, ethnicity, or background and experience KPIs. Looking at industry standards or investor diversity requirements will dictate whether this is a major area for immediate improvement for an organization. 

Likewise, calculating greenhouse gas emissions and benchmarking against peers can dictate where sustainability funding and resources need to be funneled. If peers have all committed to a Net Zero target by 2050, the company could be at risk of becoming an industry laggard and will need to come up with an energy transition plan. Data analysis will clarify sustainability goals for the organization, and it is important to remember that robust sustainability reports do not only disclose successes and highlights, but have a balanced approach in which there is transparency in all areas of sustainability: environmental, social, and economic. 

Step 3: Compiling and Drafting the Report

Whether your company chooses to create an internal ESG or sustainability team, includes ESG reporting as part of an existing teams’ responsibilities, or contracts out ESG consultants, the compiling and drafting stage of the process is where real expertise comes in. Not only does transparent disclosure come into play at this stage, but representing the company’s values, mission, and goals will help dictate the tone of the report and produce a balanced, expertly written sustainability report that can be built on for years to come. 

Technical ESG knowledge is often required to know how to build a report according to the appropriate framework or regulation for your company. The ESG regulatory landscape is extremely complex; there are many reporting frameworks, federal and state disclosure laws, international reporting expectations, and more. The first step in this process is to decide what regulations apply to your company, and what frameworks support your reporting objectives and requirements from investors or regulations. A key step to starting this process is a comprehensive peer analysis; comparing a peer set’s disclosures, ESG ratings, and reporting frameworks can give your company more context and direction for drafting a report and knowing where to start with your sustainability framework. 

Step 4: Communication and Engagement 

The final stage in the reporting process is disseminating the report and engaging with stakeholders. Sustainability reports are meant to be public-facing documents with engaging disclosures to inform and educate stakeholders. This document showcases the company’s policies and practices in order to accomplish the goal set out in the first stage of reporting. By actively involving stakeholders in your organization’s sustainability journey, they’ll likely be more participative and engaged in sustainability efforts moving forward. There will be more dialogue regarding expectations of the company’s sustainability, more clarity for the next round of reporting, and the company will showcase a proactive approach to addressing stakeholder concerns and feedback. 

The final sustainability or ESG report is generally disseminated through the company website, social media channels, and leadership networks in order to create positive PR around the company and address investor and consumer concerns during high-value calendar year stages such as the proxy season. The sustainability report should also be disseminated to employees through internal communication channels which can bolster morale, employee engagement, and create excitement around the company’s performance with sustainability initiatives. 

What Are the Different Sustainability Reporting Frameworks?

An ESG reporting framework is a set of guidelines or methodology developed by experts that help companies report on their environmental, social, and governance (ESG) performance. ESG frameworks provide a structured approach to creating a sustainability report that can be used by stakeholders, especially investors, to compare year-over-year performance and performance across sectors and industries. Selecting the right reporting framework can be challenging, especially in such a rapidly evolving landscape of regional and global frameworks, as well as local, national, and international regulations. Assessing stakeholder expectations, framework coverage, and impact areas, as well as the geography of a company’s operations can be filters for selecting the right framework. 

Major ESG reporting frameworks include the Global Reporting Initiative (GRI), the Task Force on Climate-Related Financial Disclosures (TCFD), Sustainability Accounting Standards Boards (SASB), United Nations Global Compact (UNGC) and the United Nations Sustainable Development Goals (UNSDGs), Science Based Targets initiative (SBTi), Carbon Disclosure Project (CDP), and the IFRS Accounting and Sustainability Disclosure Standards. These are just a few of the ESG reporting frameworks that can be used to publish a report and comply with relevant regulations. 

• Global Reporting Initiative (GRI): The GRI is an international, independent organization which pioneered sustainability standards in order to promote collective progress and competition towards global sustainability goals. It allows for a customized approach to disclosure based on company size and sector. 
• Task Force on Climate-Related Financial Disclosures (TCFD): Created by the Financial Stability Board (FSB) in 2015, TCFD focuses on the disclosure of climate-related financial information to better inform financial markets and investors on financial performance and risks related to climate change. In 2023, the TCFD was disbanded and replaced by the IFRS to continue its work in climate-related financial disclosure. 
• Sustainability Accounting Standards Boards (SASB): SASB is an industry-specific framework that provides disclosure guidance about sustainability-related financial risks and opportunities that could affect the company’s capital structure. Global investors utilize SASB to make informed, comparable investment decisions. 
• United Nations Global Compact (UNGC) and the United Nations Sustainable Development Goals (UNSDGs): The UNGC is a call to action for companies to align their business practices with ten universal principles related to human rights, labor, the environment, anti-corruption, and alignment with the UNSDGs. The UNSDGs are seventeen goals meant to address the global challenges we face in the effort to become a sustainable global community. 

• Science Based Targets initiative (SBTi): The SBTi is a corporate climate action group that focuses on setting greenhouse gas (GHG) emissions reduction targets to reach net zero by 2050. This framework defines and promotes best practices in emissions reduction, as well as develops science-based targets according to the latest climate research. 
• Carbon Disclosure Project (CDP): The CDP is the world’s largest environmental disclosure platform and is used by corporations, cities, investors, and other stakeholders to measure and manage risks and opportunities related to environmental topics, such as carbon and other GHG emissions, water, forests, supply chains, and more. 
• IFRS Accounting & Sustainability Disclosure Standards: The IFRS Foundation was founded to support better economic and investment decisions through their financial reporting standards and metrics. IFRS incorporated TCFD standards after it disbanded into the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. 

Reporting regulations are government-directed reporting requirements that may utilize one or more of these frameworks. Major reporting regulations in Europe include the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD). In the United States, regulations include SEC Climate regulations, and California’s climate regulations SB 253 (CCDAA) and SB 261 (CRFRA). Depending on your business structure and location, you may be subject to these, or other, reporting regulations. 

Overcoming Common Sustainability Reporting Challenges

Producing a sustainability report can be resource-intensive for any company. Beyond the actual report creation process, keeping up with the rapidly evolving regulations and changes to international reporting frameworks can be daunting, stakeholder management from pre-report to post-report can highlight communication flaws within the organization, and implementing the sustainability strategies and goals laid out in the report can introduce some major growing pains. 

Planning ahead and mitigating these challenges will help your team streamline the reporting process and improve year-over-year, in order to have an exceptional final product and an excited stakeholder base. 

• Keeping up with regulations: Establish a regulatory compliance team within the organization, or designate key personnel on the ESG team. The responsible party will monitor, analyze, and communicate to the ESG team any evolving regulations or changes with relevant frameworks. Create regular auditing procedures for regulatory compliance status.
• Stakeholder management: Identify key stakeholders, their interests, and their level of participation with sustainability projects. Communicate progress, goals, and updates through intuitive communication channels and ensure the communication strategy is aligned with the company culture. 
• Resource constraints: Resources can include time, labor, capital, technology, and even knowledge. Utilize your materiality assessment to prioritize sustainability initiatives for capital and resource allocation. Leverage professional networks for additional expertise and guidance, and keep a record of past challenges and wins in order to streamline SOPs for a leaner reporting process. 
• Integrating and strategy implementation: Identify sustainability improvement areas and goals during the materiality assessment and data analysis phase of reporting. Establish concrete Key Performance Indicators (KPIs) aligned with your sustainability goals in order to give a clear picture of progress. Educate and involve senior leadership to embed sustainability principles with a top-down approach, and consider implementing sustainability-centric incentives to tie performance of the company or individual teams to sustainability performance and progress on goals. 

Setting the Tone for a Sustainable Future

Sustainability reporting can expose challenges in communication, data collection and verification processes, basic and advanced workflows, and auditing capabilities. The right technology can ease these pains, regardless of whether your company contracts out an ESG consulting firm, or creates an internal team. AuditBoard’s ESG management solution elevates and centralizes the entire reporting process — from materiality assessments, to data collection and verification, to stakeholder engagement. Our connected platform allows for audit readiness by bringing audit, risk compliance, internal control, and ESG program management into a single system of record. 

• Streamline Data Collection: Move away from messy spreadsheets and send data requests to key personnel directly. Collect data according to the reporting framework fit for your company. 
• Leverage Materiality Assessments: Centralize your stakeholder’s feedback and analyze important issues that can help you set your sustainability initiatives and goals. 
• Simplify Reporting, Disclosures, and Rating Submissions: Choose ESG topics and metrics according to your ESG framework and ESG rating agency to achieve high-scoring disclosures. 
• Identify ESG Risks and Opportunities: Discover ESG risks, opportunities, and progress through our comprehensive dashboard and reduce any knowledge gaps. 

Learn how AuditBoard’s ESG management software can transform your sustainability reporting processes, and ensure compliance with evolving regulations, frameworks, ratings systems, and so much more. Contact us to schedule a personalized demo today!

Learn how AuditBoard’s ESG management software can transform your sustainability reporting processes, and ensure compliance with evolving regulations, frameworks, ratings systems, and so much more. Contact us to schedule a personalized demo today!