Sustainability has become an inescapable priority and sustainability reporting has become a requirement in many jurisdictions and sectors.
What exactly is a sustainability report? More importantly, how can you create one that is useful and effective?
In this article, we will answer these questions and guide you step-by-step on how to make a sustainability report.
Not only will you learn the essential elements that such a report should contain, but you will also understand the importance of these documents in today’s business ecosystem.
Índice
What is a Sustainability Report?
A sustainability report is a public document that an organisation issues to communicate the impact of its activities on the environment, the economy and society.
This document is a vital tool in the management of sustainability and sustainable development, as it allows the company to demonstrate its commitment to these issues, document its progress and set its future sustainability goals.
In addition, the sustainability report is an essential communication tool between the company and its stakeholders, including customers, employees, shareholders, regulators and the wider community.
It enables these stakeholders to understand the organisation’s sustainability strategies and practices, to assess its performance and risk in these areas, and to form their own opinions and decisions based on this information.
The Mandatory Nature of the Sustainability Report
While sustainability reporting may have started as a voluntary practice by some pioneering companies, today it is increasingly a legal and regulatory requirement in many jurisdictions and sectors.
The question, «Is sustainability reporting mandatory?», no longer has a simple yes or no answer.
Depending on the size of the company, its sector of activity, its geographical location and other variables, it may be legally required for some companies to publish sustainability reports.
For example, the European Union has established rules requiring companies of a certain size to report on their sustainability performance. Moreover, many investors and customers are also increasingly demanding this type of information, adding to the market pressure for sustainability reporting.
It is therefore essential that companies understand their legal and market obligations in terms of sustainability reporting, and prepare adequately to meet these demands.
Why do Companies Produce Sustainability Reports?
Even when it is not legally required, many companies choose to produce sustainability reports for a variety of strategic and operational reasons.
- First, sustainability reporting allows a company to demonstrate its commitment to sustainability and corporate responsibility. This can strengthen the company’s reputation, increase customer trust and loyalty, attract new investors and partners, and improve stakeholder relations.
- Secondly, the process of preparing a sustainability report can help a company identify and manage its sustainability-related risks and opportunities. For example, it can reveal compliance, reputational, operational and financial risks related to the environment, society and governance.
- Thirdly, sustainability reporting can improve a company‘s decision-making and strategic planning. By collecting, analysing and disclosing information on its sustainability performance, a company can gain a clearer understanding of its strengths and weaknesses, set and measure its sustainability objectives, and develop more effective and results-oriented action plans.
Finally, sustainability reporting can facilitate communication and dialogue between a company and its stakeholders. By providing an open and transparent channel for the disclosure of sustainability information, reporting can help a company respond to the questions and concerns of its stakeholders, engage them in its sustainability process and build stronger and longer-lasting relationships with them.
Therefore, despite the difficulties associated with sustainability reporting, the potential benefits it can bring to a company make the effort worthwhile.
What Should a Sustainability Report Contain?
A well-written sustainability report is an essential piece of communication that clearly and transparently presents an organisation’s sustainability activities, results and goals.
While the precise content may vary depending on the context of the organisation, industry and legal requirements, there are several key elements that are generally included in a sustainability report.
Some of these essential components are detailed below.
Information about the Organisation
First, a sustainability report should provide a full description of the organisation.
This includes information on its mission, vision, values, structure, operations, products or services, markets, and the sustainability context in which it operates.
This section can address questions such as: What does the company do? Where does it operate? How is sustainability management structured within the organisation?
Risk and Opportunity Management
The sustainability report should provide a clear view of how the organisation identifies, manages and monitors sustainability-related risks and opportunities.
This includes risks and opportunities associated with the environment (such as climate change, water scarcity, biodiversity loss), society (such as equity, inclusion, human rights) and governance (such as ethics, transparency, compliance).
In this section, the organisation should describe its risk management process, the main findings of its risk assessment and its strategies for managing risks and exploiting opportunities.
Stakeholder Communication
Finally, the sustainability report should describe how the organisation communicates and relates to its stakeholders.
It should identify who its key stakeholders are (such as employees, customers, suppliers, investors, local communities, regulators), what their expectations and concerns are in relation to sustainability, and how the organisation engages with them.
In this section, the results of any consultation or dialogue with stakeholders, as well as any measures taken to respond to their comments and suggestions, should also be presented.
Steps to Create a Sustainability Report
Creating an effective sustainability report can seem like a daunting task, but by following a series of clear steps, you can simplify this process and ensure that your report is comprehensive, relevant and appealing to your stakeholders.
Here is a step-by-step guide on how to make a sustainability report.
Step 1: Senior Management Commitment
The first step in any sustainability initiative, including the creation of a sustainability report, is to secure senior management commitment.
This commitment not only provides the necessary resources for the report, but also sends a strong signal to the organisation and stakeholders about the importance of sustainability.
Step 2: Identification of Stakeholders and their Expectations
Once you have senior management commitment, you need to identify who your key stakeholders are and what their expectations are in terms of sustainability.
To better understand their concerns and priorities, a series of consultations or surveys can be carried out.
Step 3: Identification and Assessment of Relevant Sustainability Issues
The next step is to identify and assess the sustainability issues that are relevant to your organisation.
This process, known as materiality analysis, will allow you to identify the issues that have the greatest impact on your organisation and are most relevant to your stakeholders.
Step 4: Data Collection and Report Writing
Once you have identified your relevant sustainability issues, it is time to collect the data you will need for your report.
This step may involve internal data collection, stakeholder consultation, review of documents and records, among others.
Once you have all the data, you can start drafting the report.
Step 5: Review and Approval of the Report
The last step before publishing your report is to review it and obtain approval. This process will ensure that your report is accurate, complete and in line with your sustainability commitments.
Step 6: Communication and Feedback
Finally, once your report is published, you should communicate it to your stakeholders and collect their feedback. This will allow you to improve your future reporting and your sustainability practices in general.
Conclusion
Creating a sustainability report is an essential task that allows companies to assess, document and communicate their sustainability efforts and progress.
It also provides a valuable means of interacting with stakeholders and demonstrating an ongoing commitment to sustainable development.
Although it may seem a daunting task, by following a clear strategy and a well-defined structure, this process can be much more manageable.
Remember that the key to effective sustainability reporting is transparency, consistency and relevance. It is not only about highlighting the positive impacts, but also about presenting a complete and honest picture of your sustainability efforts.
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