Organizations and businesses can clearly and effectively showcase their social responsibility initiatives through the drafting of a sustainability report.
— News
The concept of sustainability has radically transformed how companies operate and present themselves to the world. Increasingly, organizations are finding the Sustainability Report to be an essential tool for illustrating, in a structured and transparent way, their corporate social responsibility (CSR) activities. This document is not just a window into a company’s positive environmental and social practices – it is a true statement of values, increasingly influencing how companies are perceived.
What is a Sustainability Report and why Is It Important?
In accounting practice, the sustainability report is an annual non-financial statement that allows companies to communicate their environmental, social, and governance (ESG) goals and actions, as well as their progress toward those goals.
The European Commission’s green paper (2001) defines it as: “The voluntary integration of social and environmental concerns by companies into their business operations and stakeholder relations.”
The importance of this reporting tool has gained global recognition. With Directive 2014/95/EU on non-financial disclosure, the European Union has mandated that large public-interest companies with over 500 employees include detailed information on sustainability practices in their annual reports.
Regulatory Updates: The Corporate Sustainability Reporting Directive (CSRD)
On April 21, 2021, the European Commission introduced a major regulatory update: the Corporate Sustainability Reporting Directive (CSRD). This directive greatly expands the scope of companies required to report on sustainability, introducing new standards and requirements.
Who is the CSRD for?
The CSRD applies to all large EU companies and listed entities, excluding micro-enterprises. Companies subject to the directive meet at least two of the following criteria:
- More than 250 employees
- Revenue over €50 million
- Total assets over €43 million
The directive includes a four-year rollout plan:
- From January 1, 2024: applies to public-interest entities with over 500 employees (already covered by the previous regulation).
- From January 1, 2025: extends to large EU companies with over 250 employees and/or €40 million in revenue and/or €20 million in total assets.
- From January 1, 2026: includes listed SMEs.
- From January 1, 2028: extends to non-EU companies generating over €150 million in net revenue within the EU.
What Are the Three Pillars of a Sustainability Report?
Sustainability reporting is based on the three pillars of sustainable development:
ENVIRONMENTAL
This focuses on addressing environmental challenges such as climate change, greenhouse gas emissions, and biodiversity loss. Companies can reduce environmental impact by shifting away from finite resources like fossil fuels and embracing renewable energy.
SOCIAL
The social pillar of ESG assesses an organization’s internal culture and its external impact on communities. It prioritizes human rights and recognizes that the well-being of all people directly influences the longevity, effectiveness, and sustainability of a society.
ECONOMIC (GOVERNANCE)
Economic sustainability relates to internal management practices. Good governance is essential to long-term success and includes risk management, decision-making, transparency, compliance, and ethical behavior.
How to Create an Effective Sustainability Report
There is no single method for sustainability reporting—multiple frameworks exist to meet different organizational needs.
Creating a solid sustainability report requires careful planning and a methodology that ensures data reliability and relevance. The Global Reporting Initiative (GRI) standards offer a set of indicators and guidelines that apply to organizations of any type. The process includes six steps:
- Identifying stakeholders: determine relevant stakeholders and the information most important to them—employees, clients, suppliers, local communities, investors, NGOs, etc.
- Internal materiality assessment: focus on sustainability issues prioritized by company leadership. “Materiality” refers to elements that are concrete and measurable.
- External materiality assessment: conduct interviews, focus groups, and surveys with key stakeholders to identify areas of shared interest between the company and its community.
- Defining the indicator dashboard: the company must establish a set of indicators to assess economic, social, and environmental performance, in accordance with GRI or new ESRS standards.
- Data collection and analysis: use tools and software to systematically collect data throughout the fiscal year, ensuring accuracy and completeness.
- Report drafting: develop the report content, highlighting both achievements and areas for improvement, maintaining a balanced and transparent approach.
What Are the Benefits for Companies?
In an analysis of the business and strategic implications of preparing a sustainability report, several benefits for companies emerge. First of all, it promotes transparency by providing stakeholders with a clear and detailed overview of the company’s activities, not only financially, but also socially and environmentally.
This clarity reinforces the trust of customers, investors and communities, helping to strengthen corporate reputation. This type of reporting also proves to be an effective tool for optimizing internal decision-making processes, reducing risks along the supply chain and containing waste, resulting in significant cost savings. This 360-degree perspective helps to create long-term value, both for the company itself and for society and the surrounding environment, promoting sustainable development and providing a major competitive advantage.
For Iglom, the sustainability report is a strategic choice that reflects their long-term commitment to a greener and more sustainable future. Through this practice, the company not only communicates its commitment to stakeholders and customers but also sets a model for other companies in the industry.
