Sustainability reporting has become a key consideration in determining a company’s long-term value. Investors, together with other key stakeholders such as existing and potential customers and employees, regulators, business partners, NGOs and the media, are increasingly integrating sustainability criteria into their investment strategies. They want to see that a company is aware of its sustainability responsibilities and is capable of managing climate-related opportunities and threats. 96% of the world’s largest companies now report on sustainability or ESG matters.
Sustainability reports necessarily contain a great deal of information. How this information is presented is crucial for communicating key messages and requires careful thinking and planning. It is an excellent opportunity to engage and build trust with key stakeholders and to amplify the brand, so it needs to be a document that a company’s audiences want to read. Here we look at some of the factors to consider in producing a sustainability report.
1. Be aware of the changing legislative and regulatory landscape
Reporting requirements are rapidly changing, with new legislation and regulations directly affecting how companies report their performance. Currently, companies choose from multiple reporting frameworks and standards that best suit their business, enabling them to engage with their stakeholders most effectively. This is complicated by differences in methodologies, regulations and data requirements, especially if multiple stakeholders are involved. The UK Government and regulators are moving decisively to make sustainability reporting mandatory and to streamline reporting frameworks and standards to make them more transparent and consistent for stakeholders to assess and compare performance.
The introduction of Streamlined Energy and Carbon Reporting (SECR) in 2021 requires London Stock Exchange-listed companies and some other large companies to include climate-related disclosures in their annual financial reporting. In 2022, the Financial Conduct Authority (FCA) made the annual Task Force on Climate-related Financial Disclosures (TCFD) mandatory for the UK’s largest registered companies and financial institutions, including AIM companies. Some companies need to comply with both SECR and TCFD annual reporting. Claims made in reports need to be justified to prevent ‘greenwashing’ by linking disclosures to a global reporting framework developed by the International Sustainability Standards Board (ISSB).
In August 2023, the UK Government announced the creation of a set of UK Sustainability Disclosure Standards (SDS), which will be published in 2024 and take effect from 2025. SDS will form the basis for future statutory and regulatory requirements for companies’ sustainability reporting. SDS will be based on the International Financial Reporting Standards (IFRS) sustainability disclosure standards issued by the ISSB. Companies are advised to monitor closely how this will affect their processes and reporting requirements and how these will evolve over time.
2. Integrated or standalone reports?
Despite the drive to integrate sustainability disclosures into their financial reporting to be SECR and TCFD compliant, many companies also produce a standalone sustainability report. The decision depends largely on the stakeholders the company is addressing. In general terms, integrated reporting is geared more to help investors and capital markets understand the effect of sustainability measures on financial performance. The focus is primarily on the facts and figures relating to financial materiality and impacts, usually delivered in an institutional tone.
A standalone report gives the company greater scope to provide deeper context and more information to a wider range of stakeholders. In the company’s tone of voice, there is greater emphasis on narrative, highlighting historical data and the company’s objectives, and using visuals such as images, photos, graphs, and charts to support and provide background to financial figures. To achieve optimal impact, they should all adhere to the company brand.
3. Understand the audience
It is vital to know which key audiences the report is addressing and understand their expectations and areas of interest. Standalone reports vary widely in context but provide a valuable opportunity for the company to communicate directly with each audience and explain the progress the company is making current and future initiatives and how these will affect stakeholders. It is also important to know how audiences wish to consume the information they are interested in and how it should be portrayed: some audiences may react positively to visually appealing graphics and imagery, while it may distract others. Some companies create alternative versions of the report for different audiences.
4. Selecting the medium
Understanding the audience will determine which medium best suits the likely readers of the report. There is no point in producing a report that key stakeholders are unlikely to read. Some audiences may prefer a printed copy: using eco-friendly bio-degradable materials makes a profound statement. Other audiences may prefer to read the report online as interactive digital PDFs, or as a microsite or interactive website, or a combination of any of these formats.
An advantage of interactive PDFs and websites is the ability to update information faster and to embed videos, audio and crosslinks into the report. Links to external sources can add depth to the narrative. Efficient navigation and searching tools are essential to online formats to enhance the readers’ experience. Some readers may be robots, so it can be useful to formulate backend data to accommodate them.
5. Presenting the information
The purpose of a sustainability report is to communicate complex information about complicated concepts in a way that makes stakeholders want to read it and understand what the company is telling them. The two main elements of a successful report are an engaging narrative that will captivate audiences and a visual design that makes it easy for readers to find key information and digest the narrative.
The report design should aim to inform readers, not to confuse or overwhelm them. Page layout and graphical representation of data need close attention. Visuals such as tables, charts, graphs, icons and symbols can depict and elucidate statistics and hard data. Images, photos, highlight boxes, and case studies can help the narrative to breathe and enable readers to pick up key information points quickly. Fonts, headings, and colour palette should follow the brand identity: this is a great opportunity to reinforce the brand and build awareness and recognition.
6. Consistency – how often to report
Integrated sustainability reporting is designed to align with the annual financial reporting cycle. Standalone reports can be produced simultaneously to add greater depth to integrated reporting or as summary reports to highlight key information from the main report, or they can be produced on an independent cycle. Some companies produce ad hoc project-based reports to highlight initiatives they are progressing.
An important consideration is the year-on-year consistency of reports. Investors, analysts, and other stakeholders will want to compare documents over a period of time so keeping layouts similar will help them to do so.
7. Turn to the professionals
Legislation and regulations are determining how companies will manage their sustainability reporting, but there is huge potential to use the report to engage more profoundly with key stakeholders. In order not to miss this communication opportunity, it is worthwhile considering turning to professional help to design and produce the report.
Perivan has great experience in designing and producing sustainability reports and their design team work with many companies to optimise their annual, ESG and sustainability reporting. If you would like to learn how Perivan’s design team can help you, please get in touch.