HIGHLIGHTING CORPORATE SUSTAINABILITY
What is a Sustainability Report?
The Sustainability Report is a document that represents the positive or negative impact of a company’s activities on the environment.
Unlike the financial statements, it is not an exclusively accounting document, but aims to inform stakeholders about environmental, social, and economic results.
According to the new CSRD regulation, it must be prepared by large companies and must follow the guidelines set out in the ESRS standards. However, the sustainability report also affects all companies that are part of the value chain of these large enterprises: businesses subject to the CSRD often put pressure on suppliers to align with sustainability regulations, in order to build a more sustainable supply chain.
This has led many SMEs to need either a sustainability report or a simplified sustainability disclosure, so they can maintain strong relationships with their clients.
Is the Sustainability Report an obligation or an opportunity?
Companies that are required to prepare a Sustainability Report
The new CSRD regulation 2014/95/EU on sustainability makes it mandatory for “large groups” to prepare a sustainability report.
Which companies are defined as large groups? A large group is made up of a parent company and one or more subsidiaries that, during the financial year, met the following thresholds:
- More than 500 employees
- Total assets exceeding €20,000,000
- Net turnover exceeding €40,000,000
Companies that can seize the opportunity of the Sustainability Report
All companies that are part of the value chain of businesses subject to the obligation, or that wish to acquire clients of this size, can carry out sustainability reporting.
This allows them to align with sustainability regulations, become more attractive in the market, and gain a competitive advantage over competitors.
What are the characteristics and contents of a sustainability report?
Again according to the CSRD regulation, the sustainability report of large groups must contain information relating to 4 thematic areas.
It is clear that the sustainability report must include the information necessary to illustrate to stakeholders the impact that business activities have on the environment and society.
The information included in the sustainability report must be objective and must be presented in a clear and simple way, so that it can be easily understood by all stakeholders.
Environmental factors, KPIs related to the environment, pollution, and climate:
- Materiality and double materiality
- EU Taxonomy
- Emissions management
- Circular economy and waste
- Energy and water efficiency
- Assessment of the impact of business activities on biodiversity
Social factors, impacts on employees, society, and communities:
- Employee wellbeing and rights
- Relations with the local community
- Responsible supply chain management
- Cybersecurity and privacy
Factors and certifications relating to anti-corruption and bribery:
- Management systems and certifications
- Whistleblowing
- Training on anti-corruption policies and the company code of ethics
Equity and diversity factors within corporate bodies:
- Composition of governing bodies
- Gender pay gap
- Inclusion policies
- Sustainable finance: issuance of green bonds or access to credit lines linked to sustainability goals
The benefits of the Sustainability Report for your business
Why should companies prepare a sustainability report? The sustainability report brings many advantages, especially in terms of market positioning. It has a socio-economic function because it presents social, economic, and environmental aspects in a unified way.
The sustainability report strengthens the visibility and recognisability of the company within its territory by communicating transparently with the public.
Another advantage is increasing trust in the brand and strengthening relationships with stakeholders.
The sustainability report also has an important internal benefit: it fosters a sense of belonging and purpose among all company employees.
Increased brand reputation
Consumers are increasingly demanding environmental sustainability, which is why it is essential for companies to focus not only on the sustainability of processes and products, but also on communicating the actions undertaken in support of sustainability.
This is why the sustainability report is a key tool for all companies that care about environmental wellbeing.
Can the Sustainability Report be prepared internally? Who should you turn to for drafting it?
The sustainability report can of course be prepared entirely in-house: many groups include a dedicated department within their organisation responsible for measuring the impact of business activities and preparing all related documents, including the sustainability report.
In the case of internal preparation, it is essential to hire specialised staff in order to avoid placing a significant organisational burden on unprepared resources and causing a certain delay in timelines.
A consulting firm can provide your company with experts in sustainability, communication, and statistics, creating a collaborative working group capable of producing the sustainability report.
An external firm can complete the report within the required deadlines and also develop a marketing and presentation campaign for the document, allowing your company to gain all the related reputational benefits.