By Ariane Hofstetter - cometis AG | April 4 2024
In today’s corporate landscape, sustainability is more than a buzzword; it’s a critical component of business strategy. As concerns over climate change and social inequality escalate, companies are pushed not only to implement sustainable practices but also to report these efforts transparently and meaningfully.
We often picture the sustainability report as some sort of formal necessity – just another document to be filed away. But it’s way more than that. It’s a possibility for companies to tell the world – or at least their stakeholders – about how they’re tackling sustainability challenges and working on their overall resilience in a changing world. It’s where they lay out their sustainability game plan, their strategy, the moves they’ve made, and the wins they’ve scored in making their operations more sustainable.
In this way, the sustainability report is much more than just a document. It serves as a key tool through which companies comprehensively inform their stakeholders about their sustainability policy, objectives, actions taken, and progress achieved.
It also reflects the effectiveness of sustainability management and the strategic orientation of the company towards sustainability.
Since its inception in 2019, the Global ESG Monitor has been at the forefront of operationalizing the concept of quality in sustainability reporting. By setting benchmarks and identifying best practices, the Global ESG Monitor aims to guide companies in enhancing their sustainability practices. Through a scientifically based methodology, it evaluates the transparency and quality of companies’ sustainability disclosures, aiming to simplify the complexities of sustainability reporting. This process involves providing clear guidance to improve both the reporting process and the sustainability practices it reflects. An analysis of over 1,300 reports has allowed the Global ESG Monitor to pinpoint the core elements that lend depth and authenticity to a company’s sustainability report.
In 2024 the Global ESG Monitor will honor outstanding sustainability reports with the prestigious Integrity Star Award – the first objective award designed to provide valuable, data-driven insights and promote true thought leadership in sustainability. But what makes a good sustainability report?
A good sustainability report is distinguished by several key features that significantly influence its quality and effectiveness: Transparency, a focused and contextualized curriculum and clarity of information prepared.
Transparency stands at the forefront of these characteristics, encompassing not just the open communication of information but also ensuring a balance between different report aspects, data comparability, accuracy, timely publication, reliability, relevance, and the accessibility of information for all interested parties. The balance within a report demonstrates an acknowledgment of both positive and negative aspects, informing about risks and opportunities for a comprehensive assessment. Comparability, achieved through adherence to frameworks and the provision of metrics and comparisons, alongside accuracy in detailing indicators and methodologies, enhances the report’s credibility. Timeliness and reliability, underscored by external audits and clear accountability, alongside relevance and accessibility, ensure that the report meets the needs of all stakeholders and is easily obtainable and understandable.
The principles guiding the compilation of information in the report are equally crucial. These include double materiality, which assesses the mutual impacts of ESG impacts, risks, opportunities, and their financial implications, a clear strategy detailing values, priorities, and objectives, alongside clear responsibilities and adherence to standards, and the right contexts, which frames the disclosures, provides additional information for stakeholders, and covers impacts and dependencies across economic, ecological, and social spheres.
The preparation of information within a sustainability report is a critical step that demands careful attention to ensure clarity, credibility, and usefulness. This phase involves presenting transparent evidence rather than resorting to misrepresentation or sugarcoating, which can mislead stakeholders about the company’s true sustainability performance. It’s about setting and communicating achievable milestones instead of distant, unattainable goals that may never be realized, thereby maintaining stakeholder trust and demonstrating progress. Compliance with the full framework, rather than selective disclosures, ensures a comprehensive view of the company’s sustainability efforts, avoiding the pitfall of highlighting only favorable outcomes. The inclusion of verified third-party certifications as opposed to unsubstantiated claims lends authenticity and reliability to the report, reassuring stakeholders of the company’s commitment to verified standards of sustainability. Quantifiable data should be prioritized over ambiguous assertions, providing a clear, measurable account of performance and impact. Lastly, the use of consistent terminology rather than vague language is essential for the clear communication of sustainability initiatives and outcomes. This approach not only enhances the report’s integrity but also facilitates a better understanding among stakeholders, enabling informed decisions and engagements based on a solid foundation of trust and transparency.
Understanding the quality of their reports is crucial for companies as it enables them to remain proactive in the driver’s seat, meet due diligence requirements, and anticipate as well as manage risks effectively. This understanding allows companies not just to react to challenges but also to actively take steps to minimize potential risks and seize opportunities in the realm of sustainability.
By taking the quality of their reporting seriously and continuously seeking improvements, companies can not only minimize potential risks but also strengthen the trust of investors, customers, and other stakeholders.
To learn more about reporting and the upcoming Integrity Star Awards, listen in on this week’s episode of PRGN Presents.
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