Done well, sustainability reporting has the power to drive transformational change. It is the language that will bridge the trust gap between business and society and allow the market to allocate capital where solutions have the most impact. It is an essential tool for engaging stakeholders, persuading investors of the value of sustainability, and even improving internal processes.

Unfortunately, many companies today are failing to tap into the potential value of reporting. Based on our experience, we believe there are five guiding principles which will enable you to take your sustainability reporting to the next level, improving awareness and engagement with your core stakeholders.

Understand your company’s and stakeholders’ needs

It is important to first make sure your sustainability report is focusing on those issues which are most important to your stakeholders and business. However, with the wealth of sustainability topics and issues that a company may face, this can be easier said than done.

Materiality, or the process of identifying and prioritising issues, provides an invaluable tool for making sense of the sustainability landscape and understanding those issues which are of highest priority to the business. See our recent materiality insights for more detail on how best to undertake a robust materiality assessment and identify your most pressing business priorities. A good report will focus around these priority issues, with those identified as most important being given more space in the report.

Monitor and measure performance

Monitoring and measuring your performance is a key part of robust sustainability reporting, and wherever possible this should be quantified. First, and in order to measure performance effectively, you will need to identify the right metrics and KPIs for your organisation. These should underpin your strategy and align with the key priorities and impact areas identified. You may then consider setting targets and goals to begin reviewing your performance year-on-year. These should be ambitious, with short-, mid- and long-term targets to drive your objectives.

It is important also that when reporting on your performance, you do so in a balanced way which is reflective of your key impacts. Cherry-picking the KPIs which only show the good news, but failing to report on those areas where you are not excelling will bring into question the robustness and transparency of the entire report. In our experience, including a performance table at the end of your report which covers all of your impact areas enables clear and consistent measurement and comparison with previous years and is a great way to report on performance.

Consider reporting frameworks and wider context 

Sustainability is fundamentally contextual – and the key is to present performance in your report in relation to the broader limits and demands placed on the environment and society. What, for example is your role in a Net-Zero world? How do you uphold human rights and lessen inequalities where you operate?

Luckily, there are a number of frameworks which can help companies do this. All companies can and should use the Sustainable Development Goals (SDGs) to assess how their business can contribute to a better world. Another example is setting greenhouse gas emission reduction targets in line with climate science through Science-Based Targets, to make sure you’re playing you part in keeping global warming below 1.5 degrees.

You may also want to consider aligning with the Global Reporting Initiative (GRI), the most widely used sustainability reporting standards globally. GRI Standards help organisations understand and communicate the impact of business on critical sustainability issues. They also require reporting performance in the wider context of sustainability, for example by communicating its impacts and contributions in appropriate geographic contexts.

Show real commitment, not just compliance

The fact that a company has a sustainability report does not guarantee a real commitment to sustainability, and this can be obvious when reading a report. How then, can you show real commitment to sustainability beyond regulatory compliance, and a purpose beyond financial returns?

To begin with, sustainability needs to be linked to the vision and mission of the company and the business strategy. Integrating sustainability within the core business not only builds credibility in your reporting, but it also enables this agenda to support commercial and strategic objectives.

Sustainability should sit at board level, with clear commitment from management. An opening statement by the CEO or a senior decision maker in your report is a great way to showcase this, but responsibility should also be built into the relevant governance structures to ensure this commitment lives out in practice.

Environmental and social risks and opportunities should also be explored in your report, including an explanation of how the company is managing these risks and any financial implications. Ten years ago, the top global risks in the World Economic Forum’s (WEF) annual risk report didn’t include social or environmental issues but today, ESG-related risks account for nearly all of the world’s top risks in terms of impact and likelihood. It is clear that ignoring or underestimating the impact of these risks can be very damaging for business, and your reporting should recognise this.

Choose the right channels for your audiences

Lastly, it is essential to consider who you are trying to influence and engage with your reporting and which channels will be most appropriate. Whilst a stand-alone sustainability report may be a key part of your communications, integrating your messaging and stories of achievement across wider channels – including your website, annual report, social media, and internal memos – will enable you to reach a wider audience of stakeholders, improve engagement and bring your report to life.

Most importantly, it is vital to remember that reporting is not just about the booklet which comes at the end of the year. The entire process from start to finish – from identifying priorities and recognising risks, to gathering KPIs and align with frameworks such as the SDGs – will hugely strengthen your approach to sustainability and responsible business, whilst also increasing transparency and trust with key stakeholders.