Sustainability Reporting has started becoming a norm across multiple leading economies. From SGX in Singapore to SEBI in India, from EFRAG in Europe to SEC in the US - this year has seen a series of announcements about Sustainability reporting becoming mainstream for companies within their jurisdiction. With each such announcement, companies will start reporting their sustainability actions and results in the prescribed formats, as applicable. It is important to understand and appreciate that different geographies are at varying levels of maturity, and this will reflect in the expectations laid out by the regulatory authorities in each geography.
At the same time, there is work happening at ISSB (under IFRS) to develop a global baseline of Sustainability Reporting. IFRS has, for long been the torchbearer of financial reporting and has issued appropriate guidance through the IASB. It is in this context that the work currently underway by ISSB gains significance. With the IASB and ISSB working cohesively, we anticipate an integrated framework that drives both Sustainability and Management reporting cohesively. While this will take 3-5yrs to fruition, one has already been noticing every well-researched guidance on Sustainability reporting advocating for conformance to Integrated Reporting principles.
With the known fact that integrated principles are the north star for effective sustainability reporting, this blog highlights the 7 questions to ask while preparing your sustainability report today. These questions are based on the principles laid out by the IIRC.
It is important to highlight the business strategy and roadmap, and demonstrate its alignment with sustainability across the business. This is where management commentary in the report needs to highlight the details significant for its stakeholders. Some of the highlights to consider are as below:
Key stakeholders tend to understand the company’s performance by comparing data – both within the report and across reports. The information across a financial report, management report and sustainability report for the same period should be easy to connect and comprehend. Correlations can also be drawn between 2 different datasets to identify potential dependencies. For example, company sales data vs emissions footprint across geographies will help correlate how higher sales volume intensifies the footprint. Some of the highlights to consider are as below:
The Sustainability report is meant to address a wider audience, unlike the Annual report, which primarily focuses on shareholders. As part of the planning exercises for your sustainability roadmap and initiatives identification, you should have drawn out the stakeholder matrix for your organization. Your Sustainability report should address, at minimum, the requirements of your key stakeholders relevant for your organization. Some of the highlights to consider are as below:
Materiality assessment is a key activity that should have been done during the planning stages along your sustainability journey, to identify topics that are considered significant by your stakeholders. As an enterprise progresses further to draft the sustainability report, it is important to highlight the material topics for your business and ensure that relevant information related to all material topics is disclosed. This helps your stakeholders gather all relevant information and draw their prudent analysis of your sustainability actions. Some of the highlights to consider are as below:
With the details that need to be mentioned in the sustainability report, there is a general tendency to overload the report with extensive commentary. It must be appreciated that the readers of these reports could be looking for different pieces of information, based on what they consider key. The report should be structured in a concise manner so that the reader can find relevant information with minimal browsing. Some of the highlights to consider are as below:
· Provide sufficient context for understanding organization’s strategy, governance, performance, and prospects
· Ensure balancing information between conciseness, completeness, and comparability
· Limit repetition by following logical structure and cross-referencing
· Express concepts clearly with limited number of words
· Use plain language and avoid jargons or technical terminologies
· Avoid highly generic disclosures
The sustainability report should reflect transparency throughout its length. It must be drafted with information that can be trusted by the reader and should help draw an informed analysis for further decision making. It is such reliable data points that builds confidence amongst the stakeholder community and beats down any apprehensions of greenwashing or goodwashing. Some of the highlights to consider are as below:
Finally, the report must help in highlighting not just the final numbers but also how the numbers were arrived at. If the enterprise has arrived at the numbers while being consistent over the years with the methods adopted for measurement, it helps draw comparison across time periods. Trends can be reliably identified by comparing past data with the current data and projections. Some of the highlights to consider are as below:
These questions form the broad basis for efficient and effective sustainability reporting. They should help report all the extensive efforts by your Sustainability/ESG teams with confidence to your stakeholders.