Have you been asked to prepare your organization’s annual sustainability report, but don’t know what it is or how to start? Perhaps you’ve published a sustainability report before but are now wondering how you can make the process easier or improve the quality of your disclosure. It is no secret that sustainability report development is a complex and evolving process, no matter your reporting maturity… which is why we’re going back to basics. Not sure what the journey entails?

What is a Sustainability Report?

Let's start from the beginning. What is a sustainability report? What is its function, and what should be the takeaways?

A sustainability report is your organization's report card. It's an in-depth document that shows a company's sustainability performance in the areas of environmental, social, and governance, or ESG. The report provides a detailed overview of how your company approaches sustainable development and corporate social responsibility (CSR).

The annual sustainability report was built on frameworks like the Global Reporting Initiative (GRI). Unlike traditional reporting, which primarily focuses on financial information, corporate sustainability reporting includes financial and non-financial data, diving into a company's environmental footprint, like greenhouse gas emissions, social contributions, and governance structures.

One of the primary reasons for a company's sustainability report is to disclose risks and opportunities that might not be evident in regular financial reporting. This gives stakeholders a clearer picture of the organization's overall health, business strategy, and agility.

For investors in the United States and worldwide, sustainability reports have become invaluable tools to gauge a company's performance. As concerns about climate change, social justice, and corporate ethics become more pronounced, companies that neglect to share such comprehensive reports risk appearing out of touch with modern-day challenges.

Also, stakeholders can make more informed decisions when they understand how a company's business model interacts with sustainability issues. Whether it's the amount of greenhouse gas emissions a company produces or its contributions to local communities, this knowledge can influence investment decisions, partnerships, and even consumer choices.

Over the past handful of years, firms both stateside and worldwide have begun providing integrated reports. In fact, 55% of N100 companies in the Middle East and 30% of N100 in the Asia Pacific are now providing integrated reporting (that is, integrating their sustainability report with their annual report).

As the demand grows for companies to be transparent about their impacts and intentions, it's evident that sustainability reporting, backed by frameworks like the GRI, will be at the forefront of how a company reports financial performance and sustainability impacts in the future.

Annual Sustainability Report Process: Step by Step

Now that you know what a sustainability report is and its function, it's time to build one! Not sure what the journey entails? Read on for our ten key steps for efficient, impactful report development.

Step 1: Define Your Reporting Scope

The first step is to define the intended content of your report. The objective is to ensure that your report clearly communicates the environmental, social, and governance (ESG) topics that are the most important to your company and stakeholders – inclusive of your relative performance for each topic and how you manage them.

We recommend that you complete a materiality assessment to inform the content of your sustainability report and strategy. A materiality assessment integrates internal and external stakeholder perspectives to determine which ESG topics are most relevant and impactful for your organization to strategize and disclose. For less mature reporters, we also recommend industry benchmarking to identify which topics, issues, key performance indicators (KPIs), and reporting frameworks are the most prominent within the industry(ies) and/or market(s) in which you operate.

Step 2: Align with Prominent Reporting Standards

Although not mandatory, pursuing alignment with third-party sustainability reporting frameworks and standards (e.g., GRI, SASB) can efficiently guide the preparation of report content by helping report preparers capture and/or crosscheck which disclosure metrics are deemed most relevant for material topics within a given industry. Preparing a report in alignment with reporting standards can help to establish more robust and systematic disclosure processes that not only improve the comparability of reports but also help to ensure that your disclosure is meaningful and useful to your stakeholder audience.

Step 3: Develop a Report Outline and a Data Inventory

Once you've established which ESG topics will be included within your report and which reporting standards are most appropriate for your organization’s disclosure, the next step is to develop a comprehensive report outline.  A good outline organizes key report elements in a coordinated, sequential, and thoughtful manner. Report outlines can be structured around key disclosure themes or pillars of your sustainability strategy and can be used to inform the development of a data inventory, which maps out a list of ideal content and performance metrics that need to be gathered for report development.

Requirements and accounting metrics from the selected reporting standard(s) should be integrated into inventory development to inform data collection and ensure proper alignment. The inventory will serve as a repository of all applicable ESG data within the report and can be a useful tool to identify data gaps for collection and reporting in future disclosures.

Step 4: Collect and Review Data

Once a report outline and data inventory have been developed, it is time to begin the collection of metrics and content that will be featured within the report. We recommend that you convene relevant internal stakeholders and data owners to commence the data collection process and determine which metrics will be subject to internal audits or submitted for external assurance.

Data collection kickoff workshops help to facilitate interdepartmental collaboration, which creates a sense of ownership in data collection and the finalization of the report. It's also an opportunity to communicate the report preparation process and timeline, determine the availability of data, and reflect on the organization’s sustainability journey and supporting initiatives. Depending on your organization’s data management policies, collected metrics should be provided to relevant internal auditors or external assurers to ensure that the data has been reviewed and/or attested for quality and accuracy.

Step 5: Draft Report Content

Once requested information becomes available throughout the data collection process, you’re ready to start drafting report content. Content and narrative should be drafted for each report section, building upon key strategies, initiatives, policies, and data to clearly communicate your organization’s approach, management, performance, and progress for material ESG topics. At this stage, you should ensure the “voice” and messaging are consistent with other public communications and get creative with the integration of infographics or visuals to make your report content more digestible and easier to follow.  

Step 6: Obtain Internal Approvals

Once you have finalized an initial report draft, engage internal stakeholders such as your communications, marketing, legal and/or leadership teams to obtain input and approvals prior to report publication. Wordsmithing and narrative revisions may result from these reviews to ensure that all content, language, and forward-looking commitments are in alignment with other public filings and communications.

Step 7: Complete Report Design and Visualizations

After your final report draft has been approved by internal stakeholders, collaborate with your marketing team or external graphic designers to create a report design, layout, and visualizations that make the content more visually appealing in alignment with your organization’s brand standards. Incorporating meaningful graphics such as charts, maps, and tables can help your audience better understand performance trends and draw insights to inform decision-making.

Step 8: Develop a Communication Strategy

The end is in sight! Once your final report is ready for publishing, we recommend developing a communications strategy to ensure that your key stakeholders can easily access your current report and key messaging. This can include press releases, social media posts, or email announcements that supplement the publication of your report to your company website.

Step 9: Publish Your Report!

Your hard work has paid off – and there is no better celebration of the culmination of those efforts than sharing your accurate, impactful, and well-designed sustainability report. Implement your communications strategy to spread the news, engage with your stakeholders, and solicit their input and feedback. Take pride in your progress and own your commitments for the future—the heaviest lift is behind you now, but it is never too early to begin preparing for future reports.

Step 10: Reflect on Reporting Gaps and Improvement Opportunities

Congratulations on publishing your report! Take time to reflect on reporting gaps as well as the preparation process. What challenges did you face? What obstacles did you encounter?

Plan a report debrief and cooldown session with relevant stakeholders to discuss lessons learned and areas for improvement. Ensure that any forward-looking commitments that were shared within your report are accounted for within your ESG strategy and implement supporting action items to continue driving progress in preparation for your next reporting cycle. Before you know it, it will be time to start again!

Preparing a sustainability report can be overwhelming. Are you still feeling the reporting stress despite this step-by-step guide?

Contact our Corporate Sustainability Reporting and Disclosure team to learn more about our comprehensive reporting services and how we can support your organization.

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