A guide to crafting a sustainability report
As the global focus on sustainability intensifies, understanding how to prepare an effective sustainability report is crucial. Let’s explore what makes a good sustainability report, what should be included, and how leading companies are doing it.
What is a sustainability report?
A sustainability report is a comprehensive document that outlines a company's ESG performance, goals, strategies, and progress towards sustainability targets. It serves as a means to transparently communicate the company's impact on environmental and social issues, as well as its efforts to mitigate negative impacts and contribute positively to society.
What makes a good sustainability report?
A good sustainability report is characterised by several key factors:
Transparency: A good report provides transparent and reliable information, backed by credible data sources and methodologies. It discloses both successes and challenges, offering a balanced view of the company's sustainability performance.
Materiality: It focuses on the most material sustainability topics that are relevant to the company and its stakeholders, addressing the issues that have the greatest impact on the business and society.
Strategy alignment: The report clearly demonstrates how sustainability goals align with the company's overall business strategy. It highlights how sustainability initiatives contribute to long-term value creation and risk management.
Measurable targets: The report sets measurable targets and benchmarks to track progress over time. It demonstrates a commitment to continuous improvement and provides a clear roadmap for future sustainability efforts.
Stakeholder engagement: A good sustainability report engages stakeholders throughout the reporting process. It demonstrates how their perspectives have been considered and how their feedback has influenced the company's sustainability strategy.
How to prepare a sustainability report?
Crafting a sustainability report involves careful planning, data collection, and strategic communication. Here are the key steps and design elements to consider.
Define the scope: Determine the reporting period, key sustainability goals, and stakeholders to engage with.
Gather data: Collect relevant data on environmental, social, and governance indicators using robust data collection processes.
Establish materiality: Conduct a materiality assessment to prioritise the content of your report and ensure its relevance.
Develop a structure: Organise the report into sections that cover sustainability strategy, goals, performance, initiatives, and future targets.
Back up your words with data: Use clear and concise language, provide examples and quantitative data to support your claims, and make the report impactful.
Incorporate your brand identity: Incorporate visuals, align design elements with your company's brand identity, ensure readability, and follow established sustainability reporting guidelines.
What is included in a sustainability report?
Having analysed dozens of sustainability reports from both big and small companies, I noticed that there is a common structure and set of elements that should be included. Here is a brief overview of what should be included in a sustainability report.
CEO foreword
The sustainability report typically begins with a CEO foreword, which outlines the company's sustainability strategy and its importance. This section serves as a personal message from the CEO, setting the tone for the report and highlighting the company's commitment to sustainability. Additionally, including a Q&A session with the director of sustainability or other leadership team members can provide diverse perspectives on the company's sustainability efforts.
Company background
This section provides a comprehensive overview of the company, including its mission, vision, values, and principles. It can include information on the number of employees, sales figures, carbon footprint, and details about clients and other stakeholders.
From the point of view of sustainability, it is crucial to disclose the company's impact on various stakeholders, such as customers, suppliers, communities, investors, governments, regulators, media, universities, and/or alumni. This can be illustrated as a value chain impact analysis infographics mapping out the positive and negative influences of the company's operations on each stakeholder group.
Commitments and sustainability strategy
The next step is listing the company's commitments and sustainability goals and outlining their relevance to the business. This section can be presented as a roadmap including the company's long-term vision (“ultimate goal”), ambitions, actions, achievements, and near-future goals. The outline of the sustainability strategy must demonstrate a clear connection between the company's sustainability and business targets.
Metrics and frameworks used
Approved international sustainability standards and frameworks are key to measuring and certifying the company’s sustainability efforts. Therefore, it is fundamental to include a section explaining the metrics and frameworks employed by the company to measure and report on sustainability performance.
Most companies use the United Nations Sustainable Development Goals (SDGs) as a guiding framework, addressing specific global challenges. Many also utilise the Global Reporting Initiative (GRI) as a reference sheet for concrete calculations and reporting guidelines. Additionally, companies may adopt other frameworks such as the Carbon Disclosure Project (CDP) for specific carbon footprint calculations, Task Force on Climate-Related Financial Disclosures (TCFD) for climate risk assessment, and various ESG indices that encompass social and governance metrics as well.
Companies have the flexibility to choose the frameworks that best fit their reporting needs, as there is no universal framework that is mandatory at the moment, although efforts are underway.
Key highlights
Once the goals and metrics are clear, it is time to present the key achievements and progress made during the reporting year. These highlights should demonstrate the company's advancement compared to a baseline year, as well as the ambitions set for the next 5-10 years.
To avoid accusations of greenwashing, it is crucial to emphasise that the highlighted accomplishments represent the company's best efforts, but there is still a lot of work to be done in subsequent years. Both quantitative and qualitative data should be used to support the company's claims and illustrate progress in the chosen sustainability areas.
Achievements in more detail
Many companies expand on the highlights by having a dedicated section for each of the selected sustainability goals (e.g. grouped by UN SDGs). This often makes up around 70% of the body of the report.
These sections provide concrete examples of actions taken, specific achievements, initiatives, and projects. They demonstrate the company's commitment to addressing relevant sustainability issues and provide a deeper understanding of the achieved impact.
Future outlook
Achieving 100% of sustainability targets is not feasible in one year, so a good sustainability report ends with a clear outline of the company's future targets and commitments beyond the reporting period. This section should reflect the on-going commitment to sustainability and set the direction for future efforts.
The more specific it is the better. For example, you can include a timeline with KPIs and methodology the company intends to employ to achieve these targets. This will set the benchmark for future sustainability reports and showcase a proactive approach to long-term sustainability.
Sources, methodology, and data transparency
Similarly to academic papers, sustainability reports should be well referenced, providing information on the sources used for data collection and the methodology employed.
Consider linking to external assessments, internal questionnaires and other credible sources that quantify energy and greenhouse gas emissions, resource use, diversity and equality data, gender split, volunteering, fundraising, donations, as well as general revenue and financial performance data.
Transparency in data collection and reporting methods enhances the credibility of the sustainability report.
Sustainability report examples
To have a better idea of how to structure a sustainability report, I suggest you to have a look at the below examples from leading companies:
Nike's sustainability report highlights their progress towards carbon neutrality, sustainable materials, supply chain improvements, and diversity and inclusion initiatives.
Microsoft - Sustainability Report
Microsoft's sustainability report focuses on carbon reduction, renewable energy investments, accessibility, ethical AI, and digital inclusion efforts.
Unilever - Sustainable Living Report
Unilever's sustainable living report emphasises their commitment to sustainable sourcing, waste reduction, social impact, and promoting gender equality.
Zara's annual report includes sections dedicated to sustainability, highlighting their efforts in circular fashion, supply chain transparency, and worker's rights.
Apple - Environmental Progress Report
Apple's environmental progress report showcases their renewable energy investments, product recycling initiatives, and carbon footprint reduction efforts.
