What is Sustainability Reporting?

/What is Sustainability Reporting?
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What is Sustainability Reporting?

Sustainability reporting is a form of non-financial reporting that enables companies to convey their progress toward goals on a variety of sustainability parameters, including environmental, social and governance metrics, as well as risks and impacts they may face, now or in the future. The primary objective of sustainability reporting is to drive concrete actions toward efforts. Sustainability reporting helps companies communicate both positive and negative impacts of their actions on the environment, society as well as economy, and accordingly set priorities.

To provide complete transparency in communicating the progress and efforts in sustainability, the reporting format could include photographs, numbers, charts, infographics, etc.

In the long term, sustainability reporting helps companies assess risks and opportunities and helps them drive green operations, align with CSR goals, and increase cost saving opportunities.

The sustainability report unlike the Annual Report, it doesn’t show detailed audited accounts. Instead, it may show costs for energy consumption and savings. It may also show investment in the health and welfare of staff. It may reveal tables showing CSR investment and their returns. Sustainability content is about recording activities related to sustainable goals and objectives. These goals may align with an industry authority with whom it associates them. As part of the membership, they might have to comply with regulations to qualify for accreditation.

The International Financial Reporting Standards Foundation has formed the International Sustainability Standards Board (ISSB) to develop sustainability reporting standards. The ISSB’s proposals on sustainability and climate disclosures could bridge the gap between traditional financial measures and sustainability-related financial information. The ISSB plans to move beyond climate reporting to encompass other areas of sustainability next year.

The International Sustainability Standards Board (ISSB) has already issued its inaugural standards—IFRS S1 and IFRS S2—ushering in a new era of sustainability-related disclosures in capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions.

IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2 sets out specific climate-related disclosures and is designed to be used with IFRS S1.

Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

WHAT SHOULD A SUSTAINABILITY REPORT CONTAIN?

Sustainability reporting has no set format, but typically includes information about a company’s environmental, social, and governance initiatives, including progress and efforts to reach ESG goals. In addition to ESG information, sustainability reporting often includes financial information that goes beyond traditional financial measures. Stakeholders like investors can benefit from this information.

 

WHAT IS THE PURPOSE OF SUSTAINABILITY REPORTING?

Sustainability reporting is valuable not only because it enables a business to identify risks and opportunities that may impact its long-term performance, but also because it can help improve transparency and enhance brand image. By reporting on sustainability, companies can mitigate impacts from potential ESG risks, reduce waste and thereby increase cost savings, ensure they are in compliance with regulatory requirements and make more effective strategic decisions.

 

IMPLICATIONS FOR BUSINESSES:

  1. Improved Comparability: The ISSB’s standardized approach enhances the comparability of sustainability information across companies, industries, and jurisdictions. This fosters a more transparent and competitive landscape, encouraging businesses to benchmark their performance against industry peers.
  2. Enhanced Investor Confidence: Investors are increasingly factoring ESG considerations into their decision-making processes. The ISSB’s sustainability disclosure standards provide investors with consistent and reliable information, fostering greater confidence in the sustainability performance of the companies in which they invest.
  3. Stakeholder Engagement: By offering a comprehensive framework for sustainability reporting, the ISSB’s standards facilitate meaningful engagement with stakeholders. Companies can use this as an opportunity to build trust, address concerns, and demonstrate their commitment to responsible business practices.

The ISSB’s new sustainability disclosure standards represent a significant step forward in the journey toward a more sustainable and transparent global economy. As companies navigate the evolving landscape of ESG reporting, adherence to these standards not only meets regulatory requirements but also positions businesses as leaders in sustainable and responsible corporate practices. Embracing these standards is not just about compliance; it is a strategic move that aligns businesses with the growing expectations of investors, customers, and society at large. The ISSB’s vision for a standardized and comprehensive sustainability reporting framework marks a pivotal moment in shaping the future of corporate transparency and accountability.

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