As sustainability continues to take center stage in today’s business landscape, companies are increasingly recognizing the importance of communicating their sustainability performance and initiatives to customers and stakeholders.
Enter: sustainability reports, a tool for organizations to demonstrate their commitment to people and planet, and differentiate themselves from their competitors.
The definition of sustainability reporting is simple: “a way for companies to report on matters relating to both environmental, social and ethical factors in the work they do.”
But like most things, abstraction is far more black and white than in practice.
How sustainability reports are cut and what corporate sustainability metrics are actually included is critical to the veracity of the content.
There are many ways to skin a data set after all. To that end, standardized corporate sustainability reports underscore why sustainability reporting is important— more so than ever—in today’s world.
Exploring Sustainability Reporting Definitions, Benefits, & Examples
- What is sustainability reporting?
- What are the types of sustainability reporting?
- What are sustainability metrics used in ESG sustainability reporting?
- What is the purpose of sustainability reports?
- Advantages and disadvantages of sustainability reporting
- Problems with sustainability reporting
- Companies with sustainability reports and examples
What Is Sustainability Reporting?
Sustainability reporting—sometimes called impact reporting or CSR reporting—is the practice of communicating an organization’s economic, social, and environmental impacts and initiatives to its stakeholders, using established sustainability reporting frameworks and standards.
A company sustainability report, then, is a document that details its economic, social, and environmental impacts, risks, and opportunities, providing stakeholders with information about the company’s sustainability goals and targets, and progress towards meeting them.
The report typically includes information about the company’s governance, strategy, policies, management systems, company performance indicators, and initiatives related to sustainability.
Ideally, this information is presented in a structured and transparent manner, using a set of recognized sustainability reporting frameworks, such as the Global Reporting Initiative (GRI) or the Sustainability Accounting Standards Board (SASB).
However, how a company chooses to present this information—and even what information they choose to present (and withhold)—is not prescribed.
What should a sustainability report contain?
There’s no one answer as to what is in a sustainability report, though there are a few common denominators they should all speak to.
- Goals and targets: Specific, measurable goals and targets that the company has set for reducing its environmental impact (i.e. waste, emissions, resource use), improving its social performance, and enhancing its economic sustainability.
- Performance data: Quantitative data that shows how the company is performing against its goals and targets, as well as industry benchmarks and standards.
- Stakeholder engagement: Evidence of engagement with a range of stakeholders, including employees, customers, suppliers, investors, and communities, to understand their sustainability concerns and to integrate their feedback into its sustainability strategy.
- Transparency and disclosure: Evidence that the company is transparent and forthcoming in its sustainability reporting, including information about its environmental, social, and economic impacts, risks, and opportunities, as well as its efforts to address them.
Overall, a good sustainability report should provide a comprehensive and transparent view of the company’s sustainability performance, as well as its efforts to improve its social, environmental, and economic impacts.
It should also demonstrate the company’s commitment to sustainability and its willingness to engage with stakeholders to address any concerns and to achieve sustainable development across a wide variety of business aspects.
Where can I find sustainability reports?
You can find sustainability reports on the organization’s website, usually located in the “Corporate Responsibility,” or “Sustainability” section.
You can also search for certain sustainability reports using an online sustainability reports database, such as:
What Are The Types Of Sustainability Reporting?
There are several types of sustainability reporting organizations can use to communicate their sustainability and financial performance and initiatives to stakeholders. These include:
- Standalone report: This is a comprehensive report that focuses solely on the organization’s sustainability initiatives and progress.
- Integrated report: This combines financial and non-financial reporting information to provide a holistic view of the organization’s performance, including its sustainability performance, though sustainability metrics tend to be secondary to financial performance in such reports.
- Annual report with sustainability section: This is a traditional annual report that includes a section on sustainability performance and initiatives.
- ESG report: Corporate ESG sustainability reporting focuses specifically on the organization’s environmental, social, and governance (ESG) performance.
- Carbon disclosure report: This is a report that focuses on the organization’s carbon emissions and efforts to reduce them.
- GRI report: GRI reports follow the Global Reporting Initiative (GRI) reporting framework, which provide guidelines for sustainability reporting across a range of topics and indicators.
- SASB report: CSR reports that are created following the Sustainability Accounting Standards Board (SASB) standards, which provide guidelines for sustainability reporting on specific industries and specific metrics for sustainability.
- TCFD report: This is a report that follows the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which provide guidelines for disclosing climate-related risks and opportunities.
Each type of sustainability report has its own strengths and weaknesses, depending on the organization’s needs and priorities. Note how some are classified by the utilization of special, standardized sustainability reporting services, while others aren’t based on preset metrics for sustainability, allowing for more general (though less verified) use.
Whatever the format of the report though, it must be comprehensive, transparent, and aligned with established sustainability reporting frameworks and standards to ensure a level of veracity.
What Are Sustainability Metrics Used In ESG Sustainability Reporting?
In order to create a company’s sustainability report, the company must have some form of sustainability performance metrics in mind by which to judge their performance.
Here are some ethical and environmental sustainability metrics examples commonly included:
- Energy consumption and greenhouse gas emissions: Energy use, renewable energy use, energy-saving efforts, and overall carbon footprint of a company’s entire supply chain.
- Water use and wastewater management: Water use and/or reuse, water intensity, and wastewater discharge.
- Waste management: Waste generated, waste recycling and diversion rates, and hazardous waste management.
- Diversity and inclusion: Workforce diversity (particularly in management roles), gender and racial pay equity, and diversity and inclusion initiatives.
- Community engagement: Charitable giving, social programs, volunteer hours, and community impact assessments.
- Employee health and safety: Lost-time injury rates, employee wellness programs, and occupational health and safety performance.
- Supply chain management: Supplier sustainability assessments, supplier diversity, and responsible sourcing practices.
Overall, sustainability metrics help organizations to measure and track performance over time, identify areas for improvement, and communicate their progress.
What Is The Purpose Of Sustainability Reports?
The purpose of sustainability reporting is to demonstrate an organization’s commitment to sustainability—of environmental, social, and economic actions—and to provide stakeholders with information that enables them to make informed decisions about the organization’s impacts.
It also provides a platform for the organization to engage in dialogue with its stakeholders about its sustainability efforts and to identify areas for improvement.
Why is sustainability reporting important?
Being able to convey company policies and actions from an ESG lens is becoming more and more integral to brand success.
To put it simply, sustainability sells—so much so that some have called sustainability “a strategic imperative for brands”.
While experts and results differ on the final number, various consumer surveys have shown one third to over two-thirds of consumers are willing to pay more money for sustainable products and go the extra mile to support sustainably-minded companies.
Another “Strength of Purpose” study revealed consumers are four to six times more likely to support companies with a strong purpose.
No matter which way you cut that corporate responsibility cake, the trend of consumer demand toward more eco-conscious and ethical goods and services is clear.
This is partly due to growing concern over the climate crisis, and partly due to a shift in shopper demographics. Millennial and Gen Z consumers have officially outpaced their Gen X and Boomer predecessors. By 2030, Gen Z will hold 27% of the world’s income, with it holding far more progressive purchasing inclinations than any generation before.
Some businesses are certainly stepping up to the planet-minded plate.
According to NYU Stern’s Center for Sustainable Business, the number of sustainability-marketed products grew by 50% between 2013 and 2018. Those with visible sustainability marketing grew 5.6 times faster than others and overall, more than 90% of sustainably-marketed products had better market growth than conventional counterparts.
However, as demand for sustainability grows, so too does consumer awareness of false sustainability marketing—AKA greenwashing.
53% of Americans never or only sometimes believe sustainability claims, and 45% say they need a third-party validating source.
This is where sustainability reports for companies can be a source of truth. When done right, they satisfy consumer desires for a clear sense of purpose, sustainable actions, and more reliably vetted claims regarding the former two.
Proper sustainability reporting practices provide customers with transparent and reliable information about an organization’s environmental, social, and economic impacts, as well as its sustainability initiatives and performance.
For the savvy company, efforts toward corporate social responsibility and sustainability reporting should be intrinsically linked, because without the latter, the message of the former won’t get delivered to the most important party involved: the customer.
Advantages & Disadvantages Of Sustainability Reporting
For companies wishing to grow and continue to stay relevant in today’s conscious consumer market, the benefits of sustainability reporting are clear.
From a purely altruistic perspective, the biggest benefit of environmental sustainability reporting is reduction in impact. By measuring the impact of products and practices, brands can immediately formulate a strategy for reducing them.
However, altruism alone rarely turns basement brands into Fortune 500 companies.
Fortunately, environmental sustainability reporting holds numerous other advantages in the corporate world—ones that lead to product sales and, in turn, profit—through building consumer trust and loyalty.
Advantages Of Sustainability Reporting
- Improved stakeholder engagement: Help brands engage with a broader range of stakeholders (customers, investors, employees, and communities) by providing transparent and reliable information about their sustainability progress and initiatives.
- Enhanced reputation: Help organizations to build and maintain a positive reputation by demonstrating their commitment to sustainability and their efforts to reduce their environmental and social impact.
- Improved risk management: Help identify and manage sustainability risks, such as supply chain disruptions, regulatory changes, or reputational risks, more effectively.
- Competitive advantage: Help brands differentiate themselves from competitors by demonstrating leadership and innovation in sustainability practices and initiatives.
- Reputation: Helps companies build and maintain a positive reputation by demonstrating commitment to sustainability and efforts to reduce their environmental and social impact.
- Accountability: Hold organizations accountable for their performance and to measure their progress towards sustainability goals.
- Cost savings: Help companies identify cost-saving opportunities, such as reducing energy and resource use, improving supply chain efficiency, and minimizing waste.
Disadvantages Of Sustainability Reporting
Sustainability reporting benefits are numerous, but are there any downsides to the practice?
While “downsides” might be a strong term, there are factors that may dissuade companies from issuing environmental sustainability reports or may dilute their effectiveness if they are:
- Time and resources: Can be time-consuming and resource-intensive, especially for smaller organizations that may not have dedicated sustainability teams or reporting systems in place.
- Complexity: Can be complex and difficult to understand, especially for stakeholders who are not familiar with sustainability reporting frameworks and standards.
- Lack of standardization and inconsistency: Despite the existence of recognized sustainability reporting platforms and frameworks, there is still a lack of standardization in metrics of sustainability. As such, sustainability metrics for companies can vary widely in both indicators, and methodologies used, which can make it difficult to measure across different organizations.
- Greenwashing: Sustainability reporting can be used to present an overly positive or misleading view of the organization’s true sustainability, known as “greenwashing,” which can undermine the credibility and trustworthiness of sustainability reporting.
On that note, let’s move on to discuss some potential problems in auditing sustainability reports.
Problems With Sustainability Reporting
Far from a revelation that many companies focus on highlighting their positive corporate social responsibility and progress in their sustainability reports, while downplaying or ignoring negative impacts or areas where improvement is needed.
This skews a company’s actual environmental performance and is a form of greenwashing, where companies make false or exaggerated claims about their sustainability practices to gain a competitive advantage.
Additionally, sustainability reporting tends to focus on a narrow set of issues, such as climate change, while overlooking other important social or environmental challenges, such as biodiversity loss, social justice, and human rights.
Even climate commitments and goals outlined in corporate sustainability reports tend to be limited in scope.
For example, common sustainability ESG metrics involve carbon reduction targets, but are almost always limited to Scope 1 and 2 emissions (direct and indirect emissions from sources that are owned or controlled by the company, respectively).
However, the majority of company emissions are Scope 3 emissions—or value chain emissions.
These are all other indirect emissions that occur outside direct company owners in the upstream and downstream activities of the company, including their suppliers and the emissions generated by products through use and end-of-life outcome.
That’s a LOT of unaccounted emissions and unknown variables. While tools and guidelines to help evaluate Scope 3 emissions exist, their accuracy is still largely unknown.
What is fairly certain is that Scope 3 emissions are greater than both Scope 1 and 2, which begs the question as to how much point there is in addressing these in a sustainability report without so much as mentioning the elephant in the room.
Other potential problems with sustainability reports of companies include:
- Lack of mandates, defined sustainability ESG metrics, and auditing sustainability reports.
- Lack of comparability: Even using a sustainability reporting framework, such as the Global Reporting Initiative (GRI), are often too flexible and lack clear standards or metrics for measuring sustainability, which can make it difficult to compare the performance of different companies.
- Opaque or untraceable supply chains: A company can’t accurately report on its impact and all entities involved if they aren’t even aware of everything related to their business.
- Complexity and confusing information that is meaningless to consumers.
- Specious targets based on company goals and aspirations (instead of planetary boundaries).
In “Overselling Sustainability Reporting” published in the Harvard Business Review, Kenneth P. Pucker argues, “Reporting is not a proxy for progress. Measurement is often nonstandard, incomplete, imprecise, and misleading.”
Backing up his reasoning with insider examples from his years spent working as Timberland’s COO, Pucker goes on to claim, “[C]orporate sustainability efforts have not, in the aggregate, made much difference for society or the planet.”
That’s not to say they’re not effective at increasing profit. On the contrary, sustainability reports can be an effective sustainability marketing tool—which may actually be one of their biggest flaws.
In addition to marketing opening the door for all kinds of empty promises and greenwashed statements, successful marketing leads to growth, which isn’t always a good thing. Despite good intentions, company growth is usually accompanied by an inevitable growth in impact.
While these limitations alone aren’t reason to disregard the value and potential of sustainability reporting, it’s important for brands and consumers alike to be aware of them and evaluate them appropriately.
Companies With Sustainability Reports & Examples
Some companies have been more successful than others at leveraging the full power of them to broadcast their eco efforts.
However, writing a successful sustainability report is not necessarily to be confused with true sustainability.
Among the less-than-sustainable companies with the best sustainability reports, H&M is a case in point.
As one of the leading players in the environmentally devastating fast fashion industry, H&M’s sustainability leaves a lot to be desired. However, they’ve been using sustainability reports to promote the idea that the company is working towards becoming more sustainable since 2002.
Using GRI reporting, they issue both an annual sustainability disclosure and a sustainability report. Together with the complementary interactive form on their consumer website, these reporting efforts appear to be extremely thorough and thoughtful.
One approach has been to set ambitious sustainability targets, such as becoming 100% circular and climate-positive by 2030. These admirable targets create a perception that H&M is committed to sustainability and taking concrete actions to address environmental and social issues—despite little progress actually being made.
H&M has also emphasized its sustainable product lines, such as its Conscious Collection, which uses more sustainable materials and production methods, creating the impression that H&M is prioritizing sustainability throughout all products, though the Conscious Collection in reality makes up a very limited portion.
The company also conducts stakeholder consultations and discloses the results in its sustainability reports, which can create the perception that the company values input from its stakeholders and is transparent about its sustainability performance.
While anyone who understands the damage wrought by the fast fashion model knows these efforts are meaningless short of H&M overhauling their weekly-season design model. Yet, their slim eco-efforts have resulted in positive press and appeal to the average shopper.
Similar to H&M, Levi Strauss & Co. (Levi’s) has also used sustainability reporting as part of its sustainability strategy since 2007, complete with ambitious sustainability targets, such as reducing greenhouse gas emissions by 40% by 2025 and using 100% sustainably sourced cotton by 2020.
Levi’s annual reports also emphasize its sustainable product lines (such as its Water<Less denim), supply chain ethics (such as its Worker Well-being initiative), and stakeholder engagement (such as its Sustainability Advisory Council).
A downloadable form and a bright, engaging webpage full of easy-to-read figures (like a progress timeline) help further market these efforts to a wide variety of customers—not just those with an understanding of how to read sustainability reports.
However, like H&M, the effectiveness of these efforts in driving real sustainability improvements and addressing the broader social and environmental impacts of the company’s operations is open to debate.
Here are some other sustainability reporting examples of huge companies that have been effective in utilizing sustainability reports as a marketing tool:
- Apple: In addition to their download ESG report, Apple’s website features a dynamic extension designed to make it easy and engaging for customers to explore their environmental innovations.
- Nike: Nike’s sustainability is a far cry from actual sustainability, but it’s hard to argue against how they effectively use their series of sustainability reports to clearly convey some lofty sustainability goals—such as their Move To Zero—backed by enough numerical data to demonstrate to consumers a degree of improvement.
- Adidas: Similarly, Adidas’ sustainability is still a work in progress, but they’ve been effectively using sustainability reporting for years. Annual reports were once downloadable PDFs, but now take the form of an animated web page to boost viewer engagement.
- Nikon: Nikon’s sustainability reports (viewable as far back as 2006) are extensive, featuring pages upon pages of information displayed in charts, graphics, and more. While certainly a little denser than most, they also include some of the best and more thorough transparent information.
- Adobe: Colorful text, bright graphics, engaging photos…just what you would expect in a sustainability report from a company that creates photography and graphic design-based products. Adobe’s report is successful in appealing to aesthetic inclinations and values of their target market.
- Mars Inc.: Mars’ sustainability report (or “scorecard”) comes in the form of both a download or an interactive website, complete with videos that expound upon each of the main categories and future roadmaps for improvement.
- Patagonia: Their Annual Benefit Corporation Report keeps things simple with minimalist graphics and no excessive text blocks. Information and stats are laid out in a clean, easy-to-understand way, complemented by a more in-depth and interactive Environmental & Social Footprint webpage where customers can dive deeper into various initiatives.
- IKEA: Another company in an inherently unsustainable market (IKEA is to furniture as H&M is to fashion) but judging by their sustainability report and climate report alike, you might never know it. They make it more accessible still by summarizing progress in a highlight video.
Closing Thoughts On Company Sustainability Reports
In today’s world of increasingly conscious consumers and growing environmental pressures, sustainability reporting is hardly an optional extra, but a necessary tool by which companies can define and convey their efforts toward more sustainable operations.
Sure, there are flaws in most sustainability reports brands and stakeholders alike must acknowledge. These serve to highlight the importance of transparency and honesty in sustainability reporting, as well as the need for more comprehensive and standardized reporting frameworks that can provide an accurate and realistic view of a company’s sustainable actions.
It’s not a fix for all the problems created by unfettered production and consumption, but it represents progress toward a more sustainable global economy. Just because a company isn’t perfect in their sustainability reporting doesn’t mean they’re not at least marginally better for the act.
And what is the alternative?
To stop reporting and measuring will most certainly not have a more positive effect.
If absolutely nothing else, the practice of sustainability reporting at least makes a company aware of their impact—which is the first step toward minimizing it.