Governments, companies, investors, and NGOs use sustainability reporting (and reports) to share and understand performance and impacts on a wide range of sustainability topics, including greenhouse gas (GHG) emissions, biodiversity impacts, materials and resource use, and supply chain sustainability. Sustainability reports are the primary way organizations publicly communicate their environmental risks, opportunities, and practices to stakeholder groups like investors, regulators, partners, employees, and customers, so each can make informed decisions.
For anyone working in sustainability, ESG, and, increasingly, corporate finance, sustainability reporting and disclosure has become the fastest-growing type of non-financial reporting over the last ten years. 96% of the largest 500 companies by market cap published a sustainability report in 2022, up from 86% in 2018. Many more companies have adopted sustainability reporting in the past two years.
Last Updated: 2021
Source: GRI (Global Reporting Initiative)
Today, there are approximately 10-15 internationally established sustainability reporting standards. While their relative importance depends some on where your organization conducts business (or is publicly listed), generally all sustainability practitioners should be aware of the following standards:
There are also country, state, and stock-exchange specific sustainability reporting standards like Australia's upcomingclimate disclosure law, sustainability reporting requirements from the Singapore, Hong Kong, and Dubai stock exchanges, California's Climate Corporate Data Accountability Act (SB 253), and the SEC's proposed rule on climate disclosure.
Unlike traditional financial accounting, sustainability reporting doesn't (yet) operate with the same transparency, consistency, and interoperability. Today there are more than 600 different sustainability reporting standards, industry initiatives, frameworks, and guidelines around the world, which can make sustainability reporting a complex, research-heavy, and repetitive process. As a result, most companies follow sustainability reporting laws set out by their local government(s) where applicable, and/or voluntarily select the standards they use for reporting - and, to some extent, how they report sustainability performance.
The push for standardization is finally under way among many governments and standards orgs like CDP, GRI, EFRAG, and the IFRS Foundation's ISSB (more on these below) - which will hopefully move the industry closer to universal standards for sustainability reporting.
For organizations, selecting which sustainability reporting standards and frameworks to use is an important early step on the path to improving your environmental performance. Generally, it's better to focus on doing a few things well instead of trying to do everything, so we recommend starting with a few established standards to prioritize. Using established, independent sustainabilty standards can help your organization set goals, establish priorities, measure performance and progress, anticipate risks, and managing change. Increasingly, many companies, including Amazon, Walmart, Nike, Disney, and Target survey their vendors and suppliers for sustainability information about their business. While most of these surveys are voluntary today, sustainability reporting standards are becoming legally mandatory in regions in the European Union.
Sustainability reporting example from Walmart. Source: Walmart
It's also important to use sustainability standards that:
For organizations that are new to sustainability reporting - or looking to broaden their ESG metrics, disclosure, and target-setting - we recommend researching, learning, and considering the following seven sustainability reporting standards. Each one is globally recognized, widely adopted, thoughtfully-designed, and appears likely to evolve in future versions in a direction consistent with universal reporting standards convergence and international regulatory changes.
The EU Corporate Sustainability Reporting Directive (CSRD) is an update to the Non-Financial Reporting Directive (NFRD) which takes effect in 2024 and broadens mandatory EU sustainability reporting standards for most companies. The goal of CSRD is to make corporate sustainability reporting more common, standards-based, and closer to financial accounting and reporting.
The IFRS Sustainability Disclosure Standards were created in 2022 by the International Sustainability Standards Board (ISSB) to serve as a global format for sustainability and climate reporting that meets the needs of CFOs and investors. The first IFRS S1 and S2 standards were released in June 2023. While newer, given the IFRS's influence role in financial reporting, these standards should help connect sustainability reporting information with a company's financial statements and accounting. Companies are advised to start following ISSB standards and making relevant disclosures in 2025.
The Task Force on Climate-related Financial Disclosures (TCFD) guides companies on disclosing climate-related financial risks to investors, lenders, insurers, and other stakeholders. TCFD is primarily a theme or pillar-based recommendations framework, one that is increasingly being used throughout the finance and banking sectors, and championed by the US Securities and Exchange Commission (SEC), UK Financial Conduct Authority (FCA), the National Association of Insurance Commissioners (NAIC), and the Singapore Exchange (SGX). In 2024, TCFD will be integrated into the ISSB standards.
CDP (formerly the Carbon Disclosure Project) manages a global environmental disclosure system used by more than 23,000 companies. Companies disclose by completing any or all of the three CDP questionnaires of climate change, forests, and water security. CDP also includes an optional 4th supply chain reporting module. CDP publishes the scores of reporting companies on its website.
Global Reporting Initiative (GRI) created the first global, third party sustainability and social impact measurement standards in 1997. The newest GRI Standards provide three sets (economic, environmental, and social) of 34 topic-specific standards to help companies report on material ESG issues to their investors and other stakeholders. GRI has no central oversight function – but companies can choose to make their reports available via a database on the GRI website.
The Sustainability Accounting Standards Board (SASB) develops and provides non-financial, sector-specific sustainability reporting standards that track and communicate ESG performance areas and metrics that are most financially-material to investors. SASB standards vary by industry, and are available for dozens of different sectors. In 2021 SASB merged with the IIRC (International Integrated Reporting Council) to create the Value Reporting Foundation with the goal of providing an integrated reporting framework to connect sustainability reporting with financial disclosure. More recently, the ISSB has now taken over SASB, and is in the process of integrating SASB into the new ISSB (IFRS) sustainability reporting standards
B Corp is a private certification and set of standards for corporate social, environmental, and governance performance. The B Corp framework is most widely adopted by smaller, privately-held companies, as well as some notable larger companies like Patagonia and Ben & Jerry's. The B Corp standard is administered by B Lab, a global nonprofit network dedicated to transforming the global economy to benefit all people, communities, and the planet. Disclaimer: We're also a Certified B Corp
Each of these standards is unique, but generally covers a comprehensive set of sustainability topics and reporting themes.
By far the most comprehensive sustainability reporting standards are the European Union (EU)'s new Corporate Sustainability Reporting Directive (CSRD) requirements, which are now being implemented over the next several years. You can read the current documentation around the new EU sustainability reporting standards here.
Sustainability reporting has become increasingly important in recent years as companies and stakeholders seek to understand the social and environmental impact of business operations. By providing transparent and accurate information about a company's sustainability performance, reporting helps build trust, corporate reputation, and accountability, while also serving as a catalyst for positive change and innovation.
For companies, sustainability reporting helps demonstrate a commitment to responsible business practices. Increasingly, it serves as a competitive advantage, de-risking purchasing, procurement, and access to capital. Sustainability reporting lets companies showcase their efforts to reduce their carbon footprint, conserve resources, and achieve operational efficiencies, thereby improving corporate reputation and market trust.
Sustainability reporting can also help companies identify opportunities for operational improvements and cost savings, like reduced energy use. Moreover, sustainability helps companies attract and retain environmentally and socially conscious employees, consumers, partners, and investors.
Sustainability reporting gives investors a means to assess the environmental and social impacts, opportunities, and risks of a company and its operations. This information is critical for informed decision-making, and can help stakeholders understand the potential risks and benefits associated with investing in or doing business with a company. For investors, sustainability reporting provides valuable information that can be used to assess the long-term financial performance and ESG risk of a company. Companies that genuinely prioritize sustainability are statistically better-positioned to manage risks, reduce energy and resource-related costs, limit many types of value chain risk, and create more stable, long-term shareholder value.
While sustainability reporting for the sake of reporting doesn't necessarily help companies decarbonize or become more sustainable, it does help establish awareness and baselines about a company's current sustainability performance that often serves as a catalyst for future investment. By providing information on a company's environmental performance over time, sustainability reporting encourages companies to adopt sustainability targets and circular business practices, which ultimately benefits the environment and society as a whole.
For organizations moving forward with sustainability reporting, we have a few general recommendations, additional reading, and suggested next steps:
Materiality assessment - Before picking standards or writing your first sustainability report, it’s often beneficial to conduct a “Materiality Assessment” to help determine what your sustainability goals, targets, KPIs, and reporting objectives should be. A materiality assessment is a project which determines and ranks the most material sustainability themes for your business based on stakeholder interviews and surveys. For example, a healthcare company might focus on healthcare access, affordability, sustainable innovation, and its supply chain. A technology company could focus on data privacy, security, and STEM education access. A bank might designate financial inclusion and climate finance as its most material themes. Pick and rank the right sustainability themes depending on your organization’s mission, makeup, goals, and ESG maturity.
Sustainability data systems and process - While this might go without saying, in order to report your organization's sustainability performance, you need to know what it is - with a high degree of accuracy. Your materiality process can help guide you toward the main sustainability reporting themes you may need to focus on and collect data around. Is employee travel a big source of your organization's carbon footprint? Facilities? Manufacturing sites? Where does that data exist today, and how will you access or collect it? Many organizations start their sustainability reporting with relatively simple spreadsheets, surveys, and documents, but things can get complex fast - particularly for larger organizations. If you're an organization with a medium-to-large or complex environmental footprint, you likely need dedicated sustainability reporting and data management software, like the kind we design here at Brightest. Ongoing report archiving and governance is also important to think about, since you'll be reporting every year.