An excellent sustainability report will give the reader an honest and well-rounded portrayal of your company. Done well, it will build brand trust and assure investors that you're effectively managing your company's sustainability impacts.
Be it a standalone sustainability report, the sustainability content of your company's annual report or the sustainability content of your corporate website, there are four steps you should follow to make it great.
Step 1: Define your content.
The foundation of your sustainability report is the content. Every report is unique but you should cover each of the following:
Your business. What do you do in terms of managing social, environmental and economic issues? What do you consider to be your biggest risk and opportunities? What commitments, policies, management systems or procedures do you have in place? What initiatives have you put in place during the year? What data do you collect that will showcase your approach? What governance structure exists to manage your approach? What strategic objectives, targets and plans do you have and how are you performing against them? What are your plans for the future?
Legislative requirements. For UK companies, public reporting requirements can be found in two places, The Companies Act 2006 and The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008. Both are frequently updated so make sure you are familiar with any recent changes. Notable changes in the last couple of years include the requirements to include a 'Non-financial information statement', 'Section 172(1) Statement', and changes to energy and carbon reporting under the government's 'Streamlined energy and carbon reporting (SECR)' policy.
Benchmarks and stakeholder information requests. Investors are demanding more and more information on company sustainability credentials, either through direct requests or by using the many sustainability benchmarks and ratings schemes that exist (e.g. FTSE4Good Indices, Dow Jones Sustainability Indices (DJSI) and ISS ESG Rating). These ratings schemes tend to evaluate companies on their publicly available information in the first instance and so putting as much information as you can in the public domain upfront can reduce your workload between reports. Tip: With rating schemes potentially evaluating thousands of companies each year the easier it is for them to find the information they want the better. If appropriate, use the exact wording they use and make sure any data is in the format they want. For example, if they want greenhouse gas emissions in tonnes, don't just report them in kilograms and if they want emissions normalised by turnover, don't just show them normalised by the number of employees etc. The devil is very much in the detail.
Best practice. Investors and other stakeholders who read your report will most likely also be reading other annual reports so it's important to keep in line with current reporting trends. In the first instance, look at your peer group's reports and see what they're capturing. You should also look at the reports from FTSE 100 or other large companies who are more likely to be at the forefront of reporting best practice. Recent trends in this space are to align reporting to the UN Sustainable Development Goals (SGDs) and to report in accordance with the Integrated Reporting <IR> Framework, Task Force on Climate-related Financial Disclosures (TCFD) and/or the Global Reporting Initiative (GRI) Standards. Finally, you should also consider what's in the news (covid-19, Black Lives Matter, plastic waste, climate change etc.) and if it's relevant to your business include some commentary on it.
Step 2: Obtain the information.
Sourcing the information you need can be difficult and time consuming. Start early. Much of the qualitative information can be gathered prior to year-end. Most likely the information will come from a number of departments across the business. At a minimum, you're likely to need to engage with employees responsible for HR, health and safety, risk, environmental matters and operational directors.
As with the rest of the content of your annual report, ensure you log evidence as you go, ready for review by your auditors.
For specific advice on how to report on carbon offsets read our blog here.
Step 3: Define your report structure
A good report structure improves readability, removes potential duplication and facilitates concise communication. Setting the wider context upfront (governance structures, overarching commitments, key sustainability issues and themes) prior to exploring individual issues in more detail is a sensible approach. The volume of information can make it challenging for readers to understand so use case studies to highlight your most significant achievements. Presenting performance metrics in tabular format as well as weaving them into the text narrative is also beneficial for third parties looking to extract data for ratings and comparison.
Step 4: Integration.
Most companies report their sustainability credentials in a stand-alone sustainability section of their annual report. Given the breadth of subjects covered it's important to link and cross-reference sustainability to other areas of the report as appropriate. Indeed, the most progressive companies in this space are moving towards fully integrated reporting where sustainability is truly considered as business as usual and the relevant content is interwoven throughout the report. Tip: If you'd like to move towards more integrated reporting but you're not sure how, consider including non-financial KPIs and targets in your company's core strategy, highlight the value of sustainability in your business model diagram and reference relevant sustainability success stories in the operational sections of your report.
Authored by Caroline Johnstone
Rawstone Consulting are specialists in corporate sustainability reporting so please get in touch with us here if you need assistance with your report.