What do leading companies know about sustainability reporting that you don’t?
February 5, 2025
You may be a manager, CEO, data analyst or have a role such as Human Resources Director. You may have heard about sustainability or ESG reporting and thought, “I should look into that one day.” Before you know it, another year has gone by.
Meanwhile, other companies in your city and industry have been reporting on sustainability for years. They’re not only thriving, they’re helping reduce pollution, improve the local economy, reduce carbon emissions, and more. In fact, sustainability is part of their core business strategy. Sustainability reporting is a key process for improving sustainability.
But, what does “sustainability reporting” mean exactly? How does sustainability reporting help organizations be more successful?
What is sustainability reporting?
Sustainability reporting is the process of managing and reporting on data related to environmental, social, and governance topics. An example of an environmental topic is how much energy your company uses. An example of a social topic includes how equitable your hiring practices are. An example of a governance topic is whether you have anti-corruption policies and training. This is related to “ESG reporting,” a type of sustainability reporting that is more focused on providing information for investors. Sustainability reporting is used for many reasons and many audiences, from customers to business partners.
Credible and trustworthy sustainability reporting involves the use of globally accepted Standards such as the Global Reporting Initiative (GRI) Standards. Using Standards ensures that each organization’s data is reported in a similar and consistent way worldwide. This helps our global community to know what progress is being made to solve urgent issues such as the climate crisis and economic inequality.
True sustainability reporting includes transparency regarding impacts on sustainable development. This includes both positive and negative impacts. Transparency also enables us to make better decisions about where and how to focus our global (and local) efforts.
However, reporting can be time-consuming and expensive. It can be complex and require expertise that your organization does not have. It’s difficult to even know whether or what regulations apply to you. Despite these difficulties, sustainability reporting is critical for all organizations, even small and medium enterprises, in 2025 and beyond.
Here are 7 reasons leading organizations make sustainability reporting a priority:
1. The number of jurisdictions mandating sustainability reporting continues to grow.
While the U.S. has poor leadership on this under the current regime, other countries and regions are stepping up. Many jurisdictions are expanding their reporting requirements. One recent headline from Sustainability News blares,”EU’s corporate sustainability reporting rules: The net widens for global business.”
Soon, due to the European Union’s (EU) Corporate Sustainability Reporting Directive, thousands more companies will be mandated to disclose environmental and other impacts. This applies to those headquartered inside of the EU and multi-national corporations that do business in the EU. Where a company sources materials, where it manufactures products, where it employs workers or contractors, and where it sells its products are also relevant. While small and medium-sized enterprises (SMEs) will not come under the reporting directive until after 2026, leading companies are putting their processes and systems in place now. The longer that organizations wait to do this, the harder it will be for them to catch up.
In addition to the E.U., regulations are becoming more stringent in other countries and regions. Canada has expanded requirements for reporting on climate impacts, beginning with sectors such as financial services. This extends to their clients. According to ESG Today:
“Financial institutions [are expected] to collect and assess information on climate risks and emissions from their clients…the government is committed to move towards mandatory [climate-related] reporting ‘across a broad spectrum of the Canadian economy.’ ”
As global regulations expand, more and more businesses will be required to report.
Want to stay up-to-date on ESG and sustainability regulations around the globe?
Check out the ESG Regulatory Tracker from S&P Global.
2. Supply chain requests are increasing.
Increasingly, smaller companies will be asked by supply chain partners to prove that they’re conducting business in a sustainable way. Even if your company isn’t subject to requirements or experiencing pressure to report YET, companies that do business with you likely are.
According to the CDP Global Supply Chain Report 2020, the number of requests for supplier disclosure from CDP Supply Chain members increased by 19% in 2020. This was because of new members, and also because of “existing members deepening their engagement with their supplier bases.” These members are committed to driving action by integrating data into their purchasing processes. In 2019, 73% of CDP Supply Chain program members, when surveyed, said they expect to deselect suppliers based on inadequate environmental performance.
“Laggards that fail to take responsibility for supply chain impacts and risks will fall behind, while leaders who manage and reduce environmental risk through supply chain collaboration will not only be more competitive today, but will be more resilient for the economic shifts of tomorrow.”
CDP Global Supply Chain Report 2020
More and more, technology makes it more difficult for companies to hide questionable or unethical activities in their supply chains. According to a report by KPMG, Looking Ahead: ESG 2030 Predictions, a block-chain-like tool called Distributed Ledger Technology is being used in sectors such as food and agriculture to help with improving quality and traceability in global supply chains.
If you are part of a supply chain, the clock is ticking. One day you will be asked to provide data regarding your sustainability practices. Being prepared now will help ensure that you don’t lose contracts or partners.
3. There is increasing public scrutiny around sustainability data.
According to the aforementioned KPMG report, 58% of global CEOs are experiencing increasing demand for sustainability and ESG reporting.
“Purchasing decisions will become increasingly sophisticated, swayed by more than just the ‘Made in X’ label. Consumers will demand proof of ethical procurement, renewable energy use, appropriate waste management and recycling best practices before committing to purchases. ESG priorities will transform supply chains, with organisations moving to more open and transparent production, underpinned by principles of circularity.”
KPMG Looking Ahead: ESG 2030 Predictions Report
Providing verifiable sustainability data will increase trust with your customers. The key word is “verifiable.” Sustainability reporting provides a process by which you follow accepted principles and protocols for reporting. This results in data and processes that can be verified by other sources. This reduces risks of “greenwashing” accusations.
Learn more about sustainability reporting
4. A well-executed sustainability strategy can drive innovation and growth
Leading companies have long known that tracking sustainability data is about more than complying with regulations. It gives them a competitive edge. In her book, Chief Sustainabililty Officers at Work, Chrissa Pagitsas shares what she learned from interviews with 24 managers responsible for sustainability reporting at their companies. They see it as an opportunity to improve sales and operations.
“Sustainability for us is about innovation. It allows us to rethink and redesign the future of packaging, the future of agriculture, the future of logistics, etc. We see sustainability as the ‘ultimate design brief.’ ”
Ezgi Barcenas, Chief Sustainability Officer, Anheuser-Busch InBev
Businesses in every industry from Food & Beverage to Information Technology and Manufacturing can use this same approach to sustainability. Chrissa spoke with the Sustainability Officer at HPE, a company that provides information technology solutions to businesses worldwide. They discussed the company’s “holistic” approach to ESG.
“We believe our ESG strategy is critical to growing and evolving our culture and providing value to all our stakeholders. The integration of ESG issues into our business strategy increases the competitiveness and resilience of our business and differentiates us in the marketplace.”
Brian Tippens, Chief Sustainability Officer at HPE
The process of reporting will help your organization to find ways to increase efficiency, improve employee well-being, and reduce negative impacts. These are just a few of the benefits. Yes, these are large global corporations; however, the same is true for smaller companies at a corresponding scale.
5. A stellar sustainability profile can attract and retain talent.
Companies that have robust ESG and sustainability reporting have an edge over laggards when it comes to hiring and retaining the most sought-after workers. According to the Deloitte 2024 Sustainability Action Report, 39% of companies surveyed stated that their employees provide the most amount of pressure when it comes to having clear and effective sustainability policies. It is expensive and time-consuming to replace, hire, and train staff. By commiting to sustainability, it’s easier for potential and current employees to say “yes” to working for your organization.
“Employees are more likely to be engaged and committed to a company that they believe is making a positive impact in the world…Companies with good ESG scores are often perceived as more reputable and trustworthy. This can help retain employees and attract new employees who want to work for a company that is aligned to a positive sustainability priority.”
Sherry Madera, Navigating Sustainability Data
6. Companies with excellent sustainability credentials have improved financial performance.
Numerous studies and years of data show that companies with better sustainability credentials have improved financial outcomes. In a McKinsey & Company podcast titled, “Why ESG is here to stay,” one of the panelists, Robin Nuttall, responds to a question by saying, ” …there have been more than 2,000 academic studies and around 70% of them find a positive relationship between ESG scores on the one hand and financial returns on the other.”
Reasons for this include lower cost of capital, lower risk, and increased efficiencies. An example given is that if a company becomes more efficient with resources (uses less water and packaging, etc.) then it will have a lower cost per product unit.
On the other hand, ignoring sustainability may lead to negative consequences, including heightened risk. Investors are well aware of the hazards of risky investments, as Ms. Pagitsas shows in her book, Chief Sustainability Officers at Work:
” Investors started asking themselves, who will get left holding the bag when climate change threatens investments? Nobody wants stranded assets on their books…You couple that with social unrest, a widening skills gap, and labor shortage, all of which impact profitability and restrict revenue. This …destabilizes the economy and further deteriorate[s] profitability and revenue.”
Sophia Mendelsohn, Chief Sustainability Officer and Head of ESG at Cognizant
7. Sustainability data is increasingly used by insurance companies for underwriting.
Insurance companies must scrutinize the sustainability profiles of companies because otherwise they are exposed to greater risk. Paying huge amounts for losses from wildfires and other natural disasters is just one example. This extends to their investments as well. Per a survey by PricewaterhouseCoopers:
“85% of global insurers believe ESG will affect all aspects of their businesss with 91% reporting it will bear on their investment portfolios and 88% reporting it will play into their underwriting policies.”
NH Business Review
Other studies, such as one by Howden Group Holdings mentioned in the NH Business Review article, have also shown strong correlations between high ESG scores and lower loss ratios. Sherry Madera echos this in her book by explaining that regulators look at sustainability data as a way to manage risk. She states that financing unsustainable businesses leads to instability in capital markets and could lead to stranded assets.
Don’t wait until your insurance company asks before managing your organization’s sustainability.
These 7 benefits and potential perils are why leading organizations not only report on sustainability, but incorporate it into their core strategies:
- Complying with increasing regulations around the globe
- Cooperating with supply chain partners
- Attracting positive public opinion
- Driving innovation and growth
- Attracting and retaining talent
- Improving efficiencies and financial performance
- Managing risk for insurance reasons
There is one more incredibly important reason for reporting on your impacts to sustainable development. Unless you’ve been hiding under a rock, you know that our world is facing unprecedented challenges, including the climate crisis. While you may sometimes feel helpless, this is one important way to do your part for sustainability. You just need to take the first step. Don’t wait another year – don’t even wait another day. Your future self will thank you!
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