Sustainability Reporting – Failure or Key for Impact?
In spite of 10+ years of corporate sustainability reporting by thousands of companies, the change towards sustainability is still too slow. We are not on track to reach the Sustainable Development Goals 2030 nor the 1.5° Climate Goals of the Paris Agreement. But sustainability reporting started with the promise to turn the ship around. Did sustainability reporting fail? Is it just a marketing format for companies? A dead-end road not leading into transformation? And will new reporting regulations such as the EU CSRD or EU taxonomy create new bureaucracy for companies, but still not trigger sufficient action?
Our viewpoint answer is: it depends. It depends on how sustainability reporting will be changed. Here are 5 thoughts on what to change to make reporting a key impact lever in the transformation.
- Easy to be done and inclusive: sustainability reporting is still too complicated. Reporting needs to be easy and inclusive. If the broad mainstream of the economy incl. SMEs in all countries can do it, then reporting can have an impact for the sustainable transformation.
- Structured, comparable data: reporting must generate structured, comparable data. 70+ pages of text and photos are not meeting this requirement. Only structured, comparable data can be the basis for meaningful analysis.
- Verified data quality: sustainability data quality is not yet sufficient: Data such as CO2 are not yet comparable, incomplete or calculated with different methods. Besides, data is not sufficiently verified and audited. We need effective and efficient reporting data verification, bringing up data quality, ensuring comparability and preventing fraud.
- Meaningful, transparent scores: reporting only leads to impact, if reported data is scored with respect to meaningful sustainability performance, also called “strong” sustainability such as full climate neutrality, 100% circularity, 100% fair supply chains. And scores need to be easily understood and transparently communicated to all stakeholders. With clear and transparent scores, transformative action can be triggered.
- Scores linked to real action, costs and benefit: scores need to have a direct impact on costs and benefits for a company e.g. with customers or public funding programs, in financing with lower interest rates or lower company taxes. Then, sustainability performance translates into true economic, competitive advantage with lower costs and higher revenues.
The new EU CSRD regulation is an opportunity to take reporting to the next level and make it the key impact lever in the transformation.