Five Steps to Good Sustainability Reporting A Practical Guide for Companies
Five Steps to Good Sustainability Reporting 1 Five Steps to Good Sustainability Reporting A Practical Guide for Companies NOVEMBER 2020
ABOUT THIS REPORT The report is based on BSR’s long experience working on sustainability reporting with companies, a literature review, and interviews with member companies. Any errors are those of the authors. Please direct comments or questions to [email protected].
This report was researched and written by Nina Hatch and Adam Fishman, with input from Dunstan Allison-Hope. The authors wish to thank the companies featured in case studies for sharing their perspectives and for participating in this exercise.
DISCLAIMER BSR publishes occasional papers as a contribution to the understanding of the role of business in society and the trends related to corporate social responsibility (CSR) and responsible business practices. BSR maintains a policy of not acting as a representative of its membership, nor does it endorse specific policies or standards. The views expressed in this publication are those of its authors and do not reflect those of BSR members.
Five Steps to Good Sustainability Reporting 2 Contents
Introduction 4
Step 1: Set Priorities and Develop Strategy 7 1.1 Materiality: Conduct/Review 8 1.2 Set Strategy, Pillars, Ambition, and Goals 11 1.3 Benchmark: What Are Peers Doing 14
Step 2: Build the Structure and Gather Data 15 2.1 Identify Key Audiences for The Report 16 2.2 Assess Gaps against Standards and Frameworks 18 2.3 Develop High-Level Content Outline Organized around Material Issues and Strategic Priorities 22 2.4 Set Reporting Governance 22
Step 4: Finalize and Communicate 33 Step 3: Develop and Revise Content 24 4.1 Liaise with Communications for Production 34 3.1 Collate Data 25 4.2 Publish and Communicate Internally and Externally 35 3.2 Draft and Iterate 27 3.3 Apply Necessary Standards—Create an Index 29 Step 5: Review Learnings and Iterate 37 5.1 Review the Process: How Did You Do? 38 3.4 Garner Final Approvals 31 5.2 Set a Longer-Term Reporting Approach/Plan 38
Concluding Thoughts 40
Five Steps to Good Sustainability Reporting 3 Introduction
Sustainability reporting and disclosure on meet these expectations, it underlines the prospect Standards Board (SASB), International Integrated Environmental, Social, and Governance (ESG) of lower cost of capital tied to sustainability Reporting Council (IIRC), and Taskforce on Climate- issues is increasing globally. Twenty percent of performance. related Financial Disclosures (TCFD). The principles S&P 500 companies published sustainability apply throughout the reporting process and are reports in 2011, and eight years later, that number Internally, sustainability reporting can clarify and tagged where especially relevant. Using this five- reached 90 percent in 2019. Sustainability improve a company’s performance on sustainability step guide and implementing these principles will reporting has moved from a “nice to have” issues. Reporting helps crystallize strategic help you achieve a best-in-class report. to an expectation of all companies. BSR sees priorities, demonstrate how these priorities are sustainability reporting as achieving two embedded in business priorities, and pinpoint compelling outcomes: informed decision-making areas where change, continuous improvement, or by stakeholders and improved sustainability innovation is needed to set strategies, meet goals, performance by companies. Companies that or align with peers. Disclosure against reporting disclose information in a sustainability report do frameworks’ requirements demands identifying so because it provides clear external and internal key sustainability risks and opportunities, which benefits. helps to increase awareness and management of vulnerabilities. Reporting can alert companies Externally, disclosure expectations are increasing. to emerging issues or trends, allowing for early Sustainability reporting helps companies meet management of risks and improved performance disclosure requirements—whether regulatory, on opportunities. Finally, highlighting strong insurance-related, or customer-specific—and sustainability programs attracts new purpose-driven improve relationships with stakeholders who talent, improves retention, and increases employee expect, or would like to review, the company’s motivation. sustainability data. Reporting provides critical information for stakeholders to evaluate So how can you produce a good sustainability performance and make decisions (e.g. whether to report? BSR’s experiences, as consultants and invest). Reporting also helps companies enhance researchers, suggest that best-in-class sustainability their reputation and perceived trustworthiness. reporting follows 10 principles on content and Finally, investors are increasingly calling for quality. The principles combine and draw on companies to make their sustainability risks and features of several prominent reporting standards opportunities transparent in a standardized way. and frameworks, namely GRI (formerly Global Not only does sustainability reporting aim to Reporting Initiative), the Sustainability Accounting
Five Steps to Good Sustainability Reporting 4 Five Steps to Good Sustainability Reporting
5.1 Review the Process: How 1.1 Materiality: Conduct Review Did You Do? 1.2 Set Strategy, Pillars, Ambition, and Goals 5.2 Set a Longer-Term 1.3 Benchmark: What Are Peers Doing Reporting Approach/Plan STEP 5 STEP 1 Review Set Priorities Learnings and Develop and Iterate Strategy
FIVE STEPS TO GOOD SUSTAINABILITY 2.1 Identify Key Audiences for STEP 4 STEP 2 REPORTING the Report Finalize and Build the 4.1 Liaise with Structure 2.2 Assess Gaps against Standards and Communicate Frameworks Communications for and Gather Production 2.3 Develop High-Level Content Outline Data 4.2 Publish and Organized around Material Issues and Strategic Priorities Communicate STEP 3 Internally and Externally 2.4 Set Reporting Governance Develop and Revise Content
3.1 Collate Data 3.2 Draft and Iterate 3.3 Apply Necessary Standards—Create an Index 3.4 Garner Final Approvals Five Steps to Good Sustainability Reporting 5 BSR’s 10 Principles of Good Reporting
Report Content
PRINCIPLE 1 PRINCIPLE 2 PRINCIPLE 3 PRINCIPLE 4 PRINCIPLE 5
MATERIALITY AND STRATEGIC AND SUSTAINABILITY KEY PERFORMANCE COMPLETENESS CONCISENESS FORWARD-LOOKING CONTEXT INDICATORS AND NARRATIVE
Reporting is focused, succinct, Similar to financial reporting, Readers are able to understand Good reports provide key Report addresses all material and guided by material issues sustainability reporting and interpret company performance indicators issues with appropriate depth/ determined via regular, multi- provides both a snapshot performance in the broader (KPIs) and key performance detail based on importance stakeholder assessments. of the reporting period and sustainability context, such as narratives (KPNs). The KPNs to the business and stake- Information is presented in a clear indication of future the achievement of Sustainable are directly linked to the KPIs holders. The reporting period the format and cadence most strategy, goals, programs, and Development Goals, the two- and explain past and future and boundary are clearly appropriate for its audience(s), direction. degree pathway on climate trends in performance. stated and are wide enough to referencing relevant standards change, and the realization allow accurate assessment of (IIRC, SASB, GRI, etc.) for of international human rights. economic, environmental, and consistency and comparability. Depending on the company, the social performance. The report describes where sustainability context could be in the value chain the issue is relevant at the local, national,
BSR Vision material. regional, or global level.
Report Quality
PRINCIPLE 6 PRINCIPLE 7 PRINCIPLE 8 PRINCIPLE 9 PRINCIPLE 10
STAKEHOLDER BALANCE ASSURANCE CONSISTENCY AND CONNECTIVITY OF ENGAGEMENT COMPARABILITY INFORMATION
Key internal and external The report provides Sustainability information should Reports are issued on an annual The company’s overall sustainability stakeholders are identified balanced discussion of be handled with the same level basis in formats that allow disclosures adhere to BSR’s triangle and engaged on a regular and successes, challenges, and of rigor as financial information. comparability between years so of reporting (page 19). The top of structured basis. The results shortcomings. Good reports Quantitative data and relevant that readers can ascertain the triangle comprises succinct of these engagements are also share learnings, best company statements should be company progress over time. information relevant for multiple communicated transparently, practices, and plans for assured by objective third parties Metrics should also align with audiences, and as one moves down and company responses to improving performance in where possible. The report clearly industry and global best practice the triangle, the target audience
BSR Vision feedback are clear. the future. and accurately describes any to allow comparability across narrows to those with expertise in external review it received. companies. Frameworks and a specific field. Individual reports standards, such as the IIRC, serve different audiences yet are SASB, GRI, etc., provide useful connected to each other as part of guidance. a greater triangular whole.
FiveFive StepsSteps toto GoodGood SustainabilitySustainability ReportingReporting 66 STEP 1
STEP 1 Set Priorities Set Priorities and Develop and Develop Strategy FIVE STEPS TO GOOD SUSTAINABILITY Strategy REPORTING
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Step 1 is all about getting the basics firmly in place. Such assessments STAKEHOLDER During this phase, companies should: help a company build ENGAGEMENT • Complete or refresh a materiality assessment internal alignment that takes into account both the impacts of on sustainability priorities, inform decisions around sustainability issues on the business and the program investments, and can serve as the basis business’s outward impacts of resilient sustainability strategies. A materiality • Build or refresh a sustainability strategy and process should involve external stakeholders, who set the vision and ambition for material issues can help identify where the company’s impacts (or • Seek to understand how peers are performing potential impacts) lie and how they manifest. These and reporting engagements also serve to build relationships and For first-time reporters, continue to Step 1.1. buy-in for a company’s sustainability strategy and For companies that have previously written a programs. sustainability report, start the process by looking back at the reporting cycle from prior years. Identify A materiality assessment does not tell a company what worked well and what didn’t work, tweak this how to manage an issue nor how well a company year’s process accordingly, and then skip ahead is performing. These are not “one and done” as needed. The reporting process is a journey of exercises, and they should be refreshed regularly continuous improvement. (every two to three years) in order to address emerging issues and the business context, which— as COVID-19 has shown—can rapidly shift. 1.1 Materiality: Conduct Review A materiality assessment helps MATERIALITY AND CONCISENESS companies identify the sustainability issues on which the business may have an outward impact and those that stand to impact on the business.
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Materiality assessments form the basis of sustainability reporting. Reporters should begin Environmental and social their process by either conducting a materiality material topics: External impacts of the company. assessment or reviewing and refreshing an existing • Audience: Civil society one. • Standard: GRI • Media: Sustainability report
There are multiple ways to conduct a materiality assessment. The most robust materiality assessments incorporate diverse internal and external perspectives and blend qualitative and quantitative analyses. The two preeminent reporting standards, GRI and SASB, take distinct—though complementary—approaches to materiality. These Financially material topics: must be accounted for if you plan to report against Those affecting the one or both standards. valuation of a company.
• Audience: Investors
SASB’s definition of materiality centers on the Threshold • Standard: SASB, TCFD impact of sustainability issues on the company’s • Media: Annual report financial performance, whereas GRI’s centers on the outward impact of the company’s operations
and business activity on the economy, environment, Threshold people, and human rights. We believe that emerging best practice will be a matrix that SUSTAINABILITY TO IMPORTANCE incorporates both dimensions of materiality, also INFLUENCE ON BUSINESS SUCCESS known as dual materiality or double materiality. This will clearly distinguish the two complementary approaches to materiality and illustrate the For additional information on the standards relationship between them. themselves and aligning your reporting with their requirements, see sections 2.2 and 3.3.
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Case Study: Q&A with PayPal
How do you conduct your materiality 3) Topic analysis and prioritization, modeling emerged as priorities from the assessment, assessment? the data to consider five factors: business all 19 are relevant to certain stakeholders and PayPal recently completed its first ESG impact, stakeholder concern, perceived therefore remain a part of PayPal’s broader materiality assessment with SustainAbility. The performance, degree of influence, and societal/ ESG strategy. company undertook a three-phase approach environmental impact. PayPal also conducted to understanding its key ESG risks and an in-person workshop to review the findings Did you incorporate COVID-19 or other opportunities: and incorporate additional feedback. This emerging trends? helped the company identify seven ESG A materiality assessment reflects a snapshot 1) Research and landscape assessment, priority topics that are critical to the business in time. Therefore, considering emerging reviewing peer disclosures, current company and stakeholders. trends that may influence PayPal’s near- to programs, and global ESG standards and mid-term strategy is an important part of the frameworks (e.g. SASB, GRI, TCFD, UNGC) to The results of the materiality process are process. While the project was completed identify 19 key topics. informing the next steps of PayPal’s ESG before COVID-19’s impacts became evident, strategy as well as future disclosures. the company identified a few emerging 2) Stakeholder mapping and engagement, trends relevant to the pandemic that are now engaging over 130 internal and external Why did you decide to present the matrix in progressing faster than anticipated. These stakeholders, including members of PayPal’s the report? include changes to the future of work, the senior leadership team, employees globally, PayPal chose to publish its full materiality importance of employee total wellness, and financial health experts, NGOs, customers, matrix in its 2019 Global Impact Report to rising inequality globally, all of which impact business trade groups, and investors. This ensure transparency on both the process PayPal directly. Additionally, the accelerated phase included a governance perception survey and the results. During PayPal’s engagement growth in digital payments and e-commerce with 24 global investors to understand how they discussions, a number of stakeholders noted provides the company with even greater consider ESG factors in their decision making the importance of sharing the materiality opportunities to democratize financial services and their views on PayPal’s current and future assessment process and findings and and support people around the world through ESG program. explaining how they will be used going this unprecedented time. forward. It was also important for PayPal to articulate that although seven ESG issues
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1.2 pillars, companies can determine an appropriate the strategy into a robust reporting approach. This governance structure. These can be grouped by creates alignment among materiality assessment, Set Strategy, Pillars, type (e.g. environmental, social, or governance), sustainability strategy, and reporting approach, thus Ambition, and Goals business unit, level of ambition, or other means. enabling clarity and consistency throughout. There is no “right” way of categorizing. For reporting, however, the sustainability strategy If your company SUSTAINABILITY should inform the report’s structure (as the report does not have CONTEXT should include all material issues) and set a a sustainability path to clear communication. BSR’s work with strategy in place, STRATEGIC AND member companies often starts with a materiality the results of FORWARD-LOOKING assessment, the results of which we use to build your materiality a resilient sustainability strategy that is integrated assessment can be into the business strategy. We then incorporate used to build a sustainability strategy. This strategy will drive your company’s sustainability initiatives: helping to improve sustainability performance Layer 1 on material issues and make the business more Sustainability Vision The company’s vision resilient to future shocks. A strategy will also help to streamline reporting: enabling cohesion and the smooth flow of information, organized by material Theme #1 Theme #2 Theme #3 Layer 2 issue pillars, as well as informing stakeholders on Pertains to WHAT the company should focus on/what it has most progress of sustainability initiatives. Issues under Issues under Issues under impact on/can mostly impact theme #1 theme #2 theme #3 A sustainability vision helps the company demonstrate the relevance of its sustainability Goals and KPIs Goals and KPIs Goals and KPIs Layer 3 Pertains to HOW the company strategy by serving as the top-line message. It is a can/will impact narrative that explains the relationship between the Programs Programs Programs core business and sustainability. Layer 4 The strategic pillars support the vision and Governance, Management, and Reporting Pertains to how the company manages and governs, as well as how communicate which sustainability issues are it communicates sustainability important. By organizing related material issues into
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Case Study: Q&A with AstraZeneca
How did you develop your sustainability at performance in four categories, including strategy? sustainability. Within the sustainability category, Our strategy is informed first and foremost by each material issue is measured through a our materiality assessments. The latest (2018) total of 180 KPIs, which roll up to an overall assessment centered on a robust stakeholder sustainability rating for the business. Most importantly, engagement exercise. The outcome was tracking KPIs is a key a strategy comprising 16 priority material What is the relationship between strategy issues, categorized into three pillars: access and reporting? method for how we to healthcare, environmental protection, and The sustainability strategy forms the structure ethics and transparency. We then worked with of the sustainability report. Within the report, operationalize the AstraZeneca’s Sustainability Advisory Board to three chapters mirror the strategy’s pillars. strategy. hone the ambition level for our strategy. The Within each pillar, we present an identical Advisory Board helped us set an ambitious section for each material topic area, including strategy that brings together a representative the approach, definition, KPIs, associated cross section of functions and integrates with narratives, and challenges faced. Though the core business strategy. we don’t generally include information on emerging issues or hot topics outside of our How do you integrate your sustainability 16 material issues, we do address these on strategy with your business strategy? our website. Most importantly, tracking KPIs is Sustainability is one of four core components a key method for how we operationalize the in AstraZeneca’s business strategy and is strategy. One person within the appropriate an enterprise-wide priority. The business function or business unit drives performance strategy and sustainability components are on a specific material area, helping to aligned on timing for delivery, with goals to implement the strategy. Additionally, since be met by 2025. We track progress quarterly 2018, we’ve incorporated sustainability into using a company-wide scorecard that looks our investor relations team’s quarterly financial reviews.
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For each material KEY PERFORMANCE which accounting metrics can be used to report issue, consider INDICATORS AND on particular material issues or disclosure topics. If what level of NARRATIVE you are unsure what KPIs and metrics you should ambition is be tracking, you can review peers’ sustainability appropriate: is your CONSISTENCY AND reports and/or consult with subject matter experts aim simply staying COMPARABILITY (SMEs). SMEs are particularly helpful to understand legally compliant, new and emerging issues sincce the sustainability achieving parity landscape is constantly evolving. with your peers, or truly standing out as a leader? Within your strategic framework, determine which material issues would be appropriately addressed by ambitious goals and targets. Setting ambitious goals and communicating these in the report enable It’s important to define what is meant by target/goal and to distinguish between accountability for performance improvement. goals, KPIs, and metrics. For each goal, set KPIs and metrics to track performance. Tracking KPIs and metrics associated with each goal not only shows past performance Target KPI Metric data, but it also signals to your audience where An objective that an A directly measurable you aim to improve. Furthermore, consider the organization is aiming to value that demonstrates A standard of measurement the story you are telling in your report through your achieve, often using the performance against a goal. is associated with the activities KPIs. The narratives surrounding KPIs, known as Definition “SMART” framework (specific, that relate to the KPI, a unit of measurable, attainable, measure (e.g. total waste by (e.g. percent age of waste Key Performance Narratives (KPNs), are equally realistic, timebound) weight) reduction, percent age important to develop throughout your report. progress to zero waste)
Assigning KPIs and metrics to targets should Reduce total waste by 50 Current status: reduced 46,418 metic tons of waste be intuitive to the relevant functions and build Example percent by 2020. waste by 30 percent 7.55 metric tons per unit on existing processes where possible. Do you already track workplace safety incidents? Use this as a metric. Do you measure operational waste reductions? Set this as a KPI. Reporting standards such as SASB also offer recommendations on
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You can use the benchmarking process to double 1.3 check your work to date, as well as to understand which Benchmark: What Are Peers reporting standards and frameworks your peers are Doing? using to report. For reporting, we recommend looking at specific criteria:
Benchmarking helps a company compare its performance • Materiality: What material issues does the company to that of its peers according to a specific set of criteria. focus on? Does the process appear robust, or However, you must choose your peers wisely! In this integrated into other systems (e.g. enterprise risk Decisive Decade, we need bold action. In addition to management)? immediate competitors, choose companies that you see as industry leaders to ensure you do not compare yourself to • Strategy: How does the company organize its average performers alone. Benchmarking against leading material issues into a strategy? Is it ambitious? What companies will help drive ambition and avoid convergence are the goals for the strategic material issues? Are to the median, as can be common in sustainability reporting. they SMART? Sustainability is a source of competitive advantage, and • KPIs/Metrics and Narrative: What are the metrics there are numerous opportunities for differentiation. used to measure progress on material issues? How Undertaking a benchmark early in the reporting process does the company report on progress? Are the enables a company to: metrics standardized or common for the industry?
• See what other companies are disclosing (material • Reporting: What reporting standards and frameworks issues) and measuring (KPIs). does the company report against, and to what level of depth? What is the style of the report? Is there a • Compare performance on these issues and metrics. clear target audience?
• Determine what leadership looks like and the level of This wraps up Step 1. You now have all the building investment required to get there. blocks for reporting in place, including a materiality assessment, resilient sustainability strategy with goals • Build an internal business case to colleagues who may and KPIs, and a benchmark to validate your performance be unaware of market dynamics. relative to peers and industry leaders. • Borrow good ideas and find opportunities for innovation.
Five Steps to Good Sustainability Reporting 14 STEP 2
STEP 1 Set Priorities Build the and Develop Strategy
FIVE STEPS Structure and TO GOOD SUSTAINABILITY REPORTING STEP 2 Build the Structure and Gather Gather Data Data
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Step 2 in the reporting process is all about the It may be the case that a particular stakeholder searched, public audiences may find an online organizing and structuring the report. This phase is segment is driving your reporting efforts. Clarity sustainability microsite or interactive report more critical to ensuring a smooth reporting process and on your audience can help you to home in on useful to their decision-making. Firm understanding successful end product that resonates with your key other aspects of a disclosure strategy, such as on who your intended audience is will ultimately stakeholders. whether to report in line with a particular standard help you better communicate with them. or framework. For example, investors exhibited 2.1 keen interest in SASB and TCFD reporting in 2020, whereas GRI is useful for a broad swath of Identify Key Audiences stakeholders. BSR’s perspective is that companies should utilize each of these frameworks and for The Report standards in tandem to provide a comprehensive Before diving into drafting, pause and think: why view of a company’s performance on key are you writing this sustainability report, and which sustainability topics. IN PRACTICE audience(s) are you trying to reach? The style, content, and the means by which you choose to convey The best reporting, no matter the audience, Audiences can shift over time information (e.g. data tables, imagery and case studies, contains a smart mix of data and narratives. Target audiences for your sustainability lengthy narrative, or other means) should be tailored Investors, for example, often seek raw report may change from year to year. While to your top stakeholders to ensure that the report performance data and KPIs that enable both year- investors are a common target audience, resonates with your intended audience. on-year and peer comparison. That is not to say other stakeholder groups may resonate in companies should sacrifice narrative explaining the wake of a shift in business practices, Audiences for a sustainability report can include: performance or trajectories in favor of data (see strategy, or leadership. For example, • Investors, lenders, insurers, and reinsurers Principle 4), but simply that the importance of internal stakeholders have not historically • Employees (or potential employees) quantitative data to investors should not be been a primary stakeholder group for • ESG rating and ranking agencies overlooked. Conversely, consumers, employees, many companies, but increased levels of • Senior leadership and Boards of Directors or media groups may prefer more human-centric employee activism in recent years, coupled • Customers, consumers, and users reporting that conveys information through with trends of hypertransparency and • Government actors (e.g. regulators and policymakers) case studies and storytelling in addition to hard the spotlight placed on employee issues • Broader civil society (e.g. NGOs, activists, academia, numbers that display performance data. by COVID-19, mean that employees are and the media) becoming a focus for sustainability reports. • Local communities And whereas many investors or data aggregation entities prefer PDF reports that are easily
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Case Study: Q&A with Adobe
How do you choose your audience for the of the information investors and investment report? Who is top priority? analysts seek, from SASB metrics to diversity Adobe is guided by our mission to change the data to where to find more information on world through digital experiences. Customers, compliance, can be found in the report’s Investors are the investors, current and potential employees, data tables. We also provide more detailed and community partners are all stakeholders information on key material aspects, such as top audience for our that seek purpose-driven information and data privacy and cybersecurity, sustainability, the key is getting the right information to the and diversity and inclusion, which helps to put annual Corporate right stakeholders through the right channels. our data in context and allows investors to Social Responsibility We use several channels to communicate make appropriate investment decisions. with our stakeholders so that everyone gets report because they the information that they need. Investors are With increasing demands on the types of ESG the top audience for our annual Corporate disclosure that investors are seeking, it helps have emphasized the Social Responsibility report because they to stay on top of ESG reporting trends in two particular importance of have emphasized the particular importance major ways: 1) by listening to our investors and of data-driven disclosures in making informed incorporating their feedback and 2) through data-driven disclosures investment decisions. working groups such as BSR’s Future of Reporting initiative. Many of our investors tell in making informed How do you present information for your us that we have best-in-class ESG disclosure, investment decisions. report’s target audience? How do you engage and we couple ongoing investor feedback with your audience or ensure that Adobe’s industry best practices to ensure our report reporting continues to meet that audience’s and ESG communications meet their needs. needs? Because investors seek both data and context to make key ESG decisions, the majority of the Corporate Social Responsibility report is focused on data-driven disclosure. Nearly all
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2.2 • Each framework features a distinct approach. • These standards and frameworks are constantly (For example, GRI and SASB’s approaches to evolving, meaning that such a mapping or Assess Gaps Against materiality are complementary, and together harmonization will quickly become outdated. Standards and Frameworks they fulfill the concept of double materiality, but the two entities ultimately differ in their The report’s intended audience affects not only how definitions of ‘material’ issues. 1 ) the publication is drafted but also which reporting standard(s) or frameworks might be utilized and thus what information or metrics are required. Entity Main Audience Attributes In the past, companies have mostly focused on General and Many sustainability reports’ starting point since GRI Standards aligning with one standard. Today, to create a robust GRI report, companies should align their reporting multi-stakeholder enable companies to communicate outward impacts with the GRI and SASB standards and the TCFD Focuses on sustainability issues that have a financial impact on recommendations at a minimum. Doing so accounts SASB Investors the company for the two sides of materiality previously described and tests the company’s resilience against a range Follows the “multi-capitals” model of value creation and Investors, but also of future scenarios. IIRC integrates financials/business information with sustainability general disclosures A key challenge is harmonizing these frameworks within a single report or set of reports and Framework that focuses on climate through four pillars: TCFD Investors governance, strategy (including scenario analysis), risk identifying areas of overlap where a particular management, and metrics/targets disclosure topic or metric fulfills multiple standards. Efforts to align the standards and frameworks Global UN framework that, although not a reporting standard, Multi-stakeholder, have proliferated in recent years (see Corporate SDGs provides a common language, ambition, and set of universal governments Reporting Dialogue and World Economic Forum goals and targets reports). However, even if one were to map each Set of thematic questionnaires (on climate, water, forests, framework’s alignment and interaction, two issues CDP Investors and/or supply chain) that companies may choose to publicize would remain:
1 GRI’s definition of materiality focuses on a company’s “significant impacts outward” on the economy, environment, and people, including human rights. SASB’s definition focuses on sustainability issues’ financial impact on a company.
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The BSR Reporting Triangle (right) is a helpful way to visualize how the various reporting frameworks can be used in a complementary fashion. At the top Integrated of the triangle, an integrated report collates succinct Report business and sustainability information relevant for (IIRC) a broad audience. In the middle layer, the report audience becomes more specific. A sustainability report focuses on an ESG-focused audience, whereas financial reporting typically speaks to Sustainability Form-10K / Report the investor audience. At the base of the triangle, 20-F (SASB) (GRI) individual issue-specific reports serve yet more specific audiences, but together these form a critical piece of a company’s overall reporting. Each type of report within the triangle has a specific use, and Data Climate Other the frameworks or standards that typically underpin Human Privacy Rights Change Detailed them can be used in a complementary fashion to (OTI) (UNGP) (CDP) Reports (PRI) advance a company’s overall disclosure.
Once you consider which frameworks or standards to align with and have noted the disclosure areas • Clear, concise, integrated story explaining how company creates value or metrics they require, check to see if there are • Entry point to more detailed information • Utilize IIRC Framework any gaps in the metrics required to communicate performance on the issues identified in your materiality analysis. There most likely will be • Annual Reports/Form 10-K/Doc de Réf focused on information material to investors disclosure or data gaps, and for first-time reporters, • Sustainability reports focused on information material to stakeholders that’s okay. For standards such as GRI and SASB, • Utilize SASB, GRI Standards, and/or TCFD the key to a robust disclosure is covering your company’s material issues. GRI and SASB take • Issue- or country-specific reports similar approaches in that they both provide lists of • Examples include law enforcement relationship reports, human rights reports, climate potentially material disclosure topics and metrics, change reports, site-based reports • Utilize specialist guidance, such as CDP, UNGP, OTI, PRI and they leave it to companies to decide which
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ones to use based on materiality. Whereas the GRI year, and in CONNECTIVITY OF features a set of generally applicable universal the meantime, INFORMATION and topic standards, SASB provides sector-specific note that disclosure topics and accounting metrics. Standard baselines are still setters understand that every company’s situation being established while you work to build is unique, and not all metrics will be reported internal buy-in and readiness. The standards against, especially when early in the reporting themselves acknowledge this, as seen in GRI’s journey. However, there appears to be a trend of new designations of companies’ reporting “in convergence around disclosure of common topics accordance with” versus “with reference to” their and metrics on a sector basis, and we may begin revised universal standards. to see the standards mandate reporting on certain issues in the near future.
After you’ve identified your metrics and gaps, the next question is: how do you incorporate all the information required? Do you align the frameworks through a single megatable, individual sections, entirely different standalone reports on GRI, SASB and TCFD? Something else? This is an area that is open for debate, but we’ll revisit it in more detail in step 3.3.
The main lesson to keep in mind when approaching these standards is that reporting is a practice, and it is an ever-evolving one. The key to success is striving for continuous improvement. Getting to a best-in-class report will take several reporting cycles. In “year zero”, you may simply acknowledge the gaps with honesty and transparency, and articulate a plan to fill them in subsequent years. You can incorporate additional metrics the following
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Case Study: Q&A with Flex
Which standards do you report against, How do you identify gaps in reporting against is missing and whether or not the gap can and why? the standards? be filled in the short, medium, or long term. Flex—a global technology, supply chain, and We undertake an annual materiality exercise Once this is determined, we develop a plan manufacturing solutions partner—has reported to help prioritize our focus areas. The to enhance disclosures or performance and to the GRI since 2013. We do so for two main assessment considers all GRI topics, which address gaps in partnership with the content reasons. The standards provide clear KPIs to are then reviewed and narrowed down to owner. use when disclosing our material aspects, and those of greatest importance to us and our they enable us to clearly convey our progress stakeholders. From this process, 15 topic areas and results to a broad set of stakeholders, emerged as significant and are displayed in our including customers, employees, shareholders, materiality matrix. Once our material priorities communities, and external organizations. were determined, we looked closely at the GRI standards to avoid disclosure gaps in reporting. Many of our stakeholders are taking a stronger Once our material interest in sustainability, and we actively SASB features sector-specific lists of material consider reporting against frameworks to disclosure topics and accounting metrics, priorities were better disclose our activities. Some of our which it has determined to have an impact on determined, we looked investors have expressed interest in SASB businesses within an industry. We mapped its to understand our sustainability progress in recommended disclosure topics to our current closely at the GRI comparison to our industry. For the first time, metrics, identified gaps in our reporting, and a section of our 2020 sustainability report is are working to address them. standards to avoid dedicated to aligning with SASB. disclosure gaps in How do you approach reporting to a standard Additionally, we are a member of the UN that asks for information you do not collect or reporting. Global Compact and align our activities to face hurdles disclosing publicly? specific Sustainable Development Goals Our corporate sustainability team discusses related to our operations. any disclosure gaps with the appropriate content owner to ascertain what information
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2.3 your content outline, be sure to list where in the reduces the burden on you and clarifies who is in report you are addressing the various elements of what role; it also helps you to garner support and Develop High-Level each standard because this will help you build an buy-in across the company. Your content outline index later. and reporting governance structure will help guide Content Outline Organized you through Step 3 of the reporting process. around Material Issues and Strategic Priorities 2.4 When setting up reporting governance, begin to consider who should be involved in the final Set Reporting Governance approval process. A section sponsor may sign off Based on the previous steps, organize a high-level on the information when it comes together, but content outline around your strategic pillars, with who should it be sent to next? Some companies Having a governance STAKEHOLDER associated material issues bucketed underneath. system for the reporting ENGAGEMENT have board approval, senior leadership approval, A robust sustainability report that adheres to GRI process will help you plan legal team approval, and more. The formal and other standards will also include information on the effort and ensure there is clarity on who signs sign-off process, especially with the board the business, sustainability governance, strategy, off the report and makes final decisions on content and senior leadership, adds rigor and buy-in stakeholder engagement, material issues, and (see section 3.4 for discussion on the approvals to the sustainability program and report. For performance on those issues within a given time process). Reporting governance processes and sustainability reporting to have a status and frame. systems will be unique for each company. For significance akin to financial reporting, formal some companies, the sustainability manager may sign-off mechanisms should match. It is important New reporters should COMPLETENESS write the whole report and act as the sole data- to keep in mind that a formal sign-off process, consider building the compiler. For others, there may be content owners which may often include the legal team, can content outline in a spread across business units who contribute data be lengthy and necessitate several rounds of spreadsheet, which can help make the document or language (see section 3.1 for information on approval or edits. actionable (e.g. noting who is responsible for a data governance). The appropriate approach will certain section or material issue, where you need depend on a company’s size, structure, and culture. to gather data from, who needs to sign off, etc.). Be Tactically, a company may include information on sure to include the recommended disclosure topics, reporting governance within the content outline for metrics, or standards from SASB, GRI, TCFD, and their report, delineating who is responsible for what. your other chosen frameworks so that you don’t miss any information they require. This can also Setting a reporting governance system not only help identify gaps and overlap in the standards. In
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Case Study: Q&A with SABIC
How have you set up your reporting expectations for the current cycle. Sponsors, At the beginning, the reporting process may be governance strategy? along with BSR and content owners, gather a bit chaotic. Once you develop a sustainability At the beginning of our sustainability reporting content and information from individual data strategy and priorities and align your planned journey in 2011, SABIC did not have a strong owners. Around February, the sponsors and report content and structure with this, you can reporting governance or report structure report steering committee collate all content set up a reporting governance structure that in place. Different parties and functions to ensure it fits the intended report structure centralizes information gathering and engages contributed to the process on an ad hoc and SABIC’s larger sustainability strategy and internal stakeholders in an efficient manner. basis, with representatives from across the priorities. company contributing upon request. Each function collated their own information. Most What is the relationship between reporting of the drafting was done by one to three governance, sustainability governance, and people, supported by BSR and a partner within corporate governance? corporate communications. Our executive-level Sustainability Council is Over the past three chaired by the CEO. This group makes the Over the past three years, SABIC has highest-level strategic decisions regarding years, SABIC has structured reporting governance in a more sustainability at SABIC. The report’s structure structured reporting efficient and streamlined manner. Today, we and governance align with priorities set by have a dedicated reporting lead and section the Council, who also oversee our materiality, governance in a more sponsors from the corporate sustainability target setting, and long-term roadmap department, who interface with designated development processes. The reporting process efficient and streamlined content owners from different businesses and is built around our sustainability priorities, manner. functions. The lead works between reporting which then inform the selection of content seasons to set our overall reporting strategy owners. for the coming years, and the lead works with section sponsors and content owners What advice would you give to a new reporter to kick off the process in the fall and set the regarding reporting governance?
Five Steps to Good Sustainability Reporting 23 STEP 3
STEP 1 Set Priorities Develop and and Develop Strategy
Revise Content FIVE STEPS TO GOOD SUSTAINABILITY REPORTING STEP 2 Build the Structure and Gather Data
STEP 3 Develop and Revise Content
Five Steps to Good Sustainability Reporting 24 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Step 3 focuses on compiling data and drafting the and collation method may be sufficient, whereas report. Following Steps 1 and 2 will set you up for a for others, utilizing tools or proprietary systems may smooth reporting process and workflow, ensuring help to streamline the process. While BSR does not alignment with good practices when you compile endorse specific tools, member companies have your first draft. utilized providers, including OneReport, Enablon, Intelex, and Thinkstep, for this process. 3.1 Collate Data
Collating the data STAKEHOLDER for the report can ENGAGEMENT be time-intensive if measurement systems and a reporting governance structure are not in place. Using your content outline and governance structure or workplan, solicit data from relevant colleagues. Increasingly— and conveniently—data no longer need to be “gathered” by those responsible for reporting because they already exist within company systems. Therefore, the data provider will simply provide the database location to the content owner.
While every company collects and collates data differently, it is critically important that all have a system in place to review or audit the data and ensure their accuracy. What works will vary by company and operating context. For some companies, a spreadsheet-based data collection
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Case Study: Q&A with Keysight Technologies, Inc.
What is your process for collecting and How long does the data collation process functional management and reporting. Instead, collating data? take, and how frequently are figures updated it is intended to utilize their existing processes Keysight has a hub-and-spoke approach for by data owners? to ensure accurate data. In addition, our data collection and collation of ESG data Data collection and collation typically takes quarterly KPI tracking ensures accuracy of communicated in our annual CSR reporting. three months. It is more streamlined because key data points and highlights any potential Reporting guidance is provided by the Keysight completes annual CSR report concerns before there is an impact in the data. central CSR management team to functional disclosures, in accordance with GRI, at the reporting leads through a kickoff meeting same time as rating organization submittals. that communicates the timeline, reviews new/ Figures are updated annually through the updated disclosures, identifies improvement central repository for both the CSR report opportunities, and provides a one-page and rating organization disclosure submittal reporting process overview as a team and verification. Top-level CSR KPIs on key resource. Functional team leads then collect disclosures, programs, and initiatives are Functional and the data directly from their extended team of tracked quarterly by functional leads and SMEs and review the initial data submissions, rolled up into a quarterly status review for extended team SMEs primarily using functional spreadsheets and executive sponsors and the executive steering have individual tracking platforms. Once the functional team leads committee. Within functional teams, data may complete an initial review, the data are collated be updated more frequently and typically at a and measurement into a central repository where it is reviewed more detailed level. for consistency and legal requirements by the approaches related to Director of CSR and Legal/Compliance prior to What systems ensure accurate data? their functional areas. executive review and approval. Functional and extended team SMEs have individual tracking and measurement approaches related to their functional areas. Keysight’s hub-and-spoke structure is not intended to impede or change standard
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3.2 explaining to the reader how they should interpret brief case studies or Draft and Iterate the KPI and adding context to the numbers. The links to detailed write- BALANCE KPN should not just repeat in words what the KPI ups, if appropriate for You don’t need to reinvent the wheel every year. says in numbers. Instead, it should rather describe the target audience. It can be perfectly acceptable to keep the report’s the performance (whether good, bad, or neutral), structure or content the same over several years the reason for the performance (e.g. external shock, The drafting process is not a “one and done” while updating the data. Changing the narrative new management strategy), and future expectations process. Take time to iterate in several drafts. may be necessary only when the company’s (e.g. increased investments, bolstered strategy, Gather feedback KEY PERFORMANCE strategy or external conditions change. Structural continued improvement). from content INDICATORS AND consistency has the added benefit of making it owners and other NARRATIVE easier for report readers to connect year-on-year When drafting, maintain balance and honesty to functions within information, facilitating comparability of qualitative ensure an authentic performance narrative. No the company (legal, communications, and others). information. This helps the user see beyond the company is perfect, and audiences will be skeptical This can serve to both increase the quality of writing insights afforded by data tables, which are often of a report that lacks a balanced discussion of and garner internal buy-in. the only area of year-on-year comparison. When successes, challenges, and shortcomings, as well deriving your initial outline, consider what content as learnings and plans for future performance is likely to change each year and what might remain improvements. static, shift to a website, or otherwise simply be referenced in future iterations. Once the data Companies do not have to include all the have been collated and the report outline is fully information within the sustainability report if their prepared, you can begin to draft the narrative, from stakeholders or target audiences prefer a more the foundational elements to the information on streamlined document. Hyperlinking to issue- KPIs and material issues. specific disclosures (e.g. CDP responses) or other online content (e.g. codes of conduct or corporate While an important aspect of reporting, KPIs and policies) enables readers who are interested in data tell only part of the story. Even investors who the details to explore the subject in more depth on utilize the data tables and KPIs in a report need the their own. To provide a preview that exemplifies background of KPNs. KPNs bring life to the data, performance, consider callout boxes that contain
Five Steps to Good Sustainability Reporting 27 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Case Study: Q&A with Sempra Energy
Describe the report writing process. Who is Most of the drafting of the report is now done in- involved in drafting the content, and how house. Once drafted, the report goes through a long does it take? wide variety of reviews, including SMEs, operating Our annual corporate sustainability report company leadership, and Sempra leadership is generated by Sempra Energy’s corporate to ensure accuracy and transparency in the sustainability department in collaboration with information we are providing in the report. By our various operating companies. We have charter, our Safety, Sustainability and Technology We have refined our refined our process over the 12 years we have Committee of Sempra’s Board of Directors process over the published an annual sustainability report. We reviews the report prior to publishing. The entire now look to publish our report in late Q1 or process takes several months. 12 years we have early Q2 to more closely align with our financial reporting. published an annual What earlier step in your reporting process has sustainability report. In creating our annual sustainability report, the most impact on drafting? we typically kick off the data gathering and We always start with our intended audience: collection process in December and hold our key stakeholders. Who are they? What is several meetings with key internal stakeholders the information they need to understand how to determine the direction and content of the we manage ESG risks and opportunities as an upcoming report in order to begin the drafting integral part of our business? How can we best process early in the year. Each year, we do communicate that information? (For additional look to ensure that our sustainability story is information on how Sempra communicates the directly tied to our overall business strategy final draft to its target audience, please see the and direction, and we periodically refresh our case study in section 4.3.) materiality assessment.
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3.3 means of reporting—there remains a question of TCFD elements, a company can incorporate such how to integrate the information. Some companies a mapping into a GRI/SASB table, add the target Apply Necessary issue standalone TCFD reports, but for the identification throughout the report, or pull out a purposes of this guide, let’s consider the example brief standalone section on SDGs.2 GRI and SASB Standards—Create an Index of a company that already reports using GRI and have also undertaken a mapping of each of their SASB and is now seeking to integrate the 11 TCFD standards or disclosure topics to the SDGs, which Since you’ve already identified the standards and recommendations. can help companies seeking to align with the frameworks you’ll be using in Step 2.2, this phase targets. should largely be a mapping exercise that collates Based on the four TCFD pillars, the company the information you’ve gathered for your draft and could 1) map the TCFD recommendations within a Companies stand to benefit from applying references it in a table or series of indices. combined GRI/SASB index, 2) pull out the TCFD- reporting standards because they add rigor and relevant information in sidebars or callout boxes accountability to their disclosures. Furthermore, Depending on the standard, you may need to throughout the report (e.g. in the sections on once standards are applied, audiences can more create an index, which can be featured in the governance, strategy, metrics, etc.), 3) create an easily navigate and compare reports, driving back of the report as an appendix or be published individual TCFD index or standalone report, or 4) increased consistency and higher levels of ambition separately. GRI and SASB each require an index, include TCFD information in annual or financial and performance on material sustainability issues. though the two can be combined into a single reporting. table. Each of the standards offers a range of helpful support materials. SASB’s Implementation Similarly, the SDGs are not themselves a reporting Primer provides disclosure guidance, checklists, standard, and as such, there is a wide variety and worksheets for companies that have chosen of means by which companies communicate to report against their standards, and GRI’s their contributions to the Goals. Good practice Standards page offers reference documents to help on SDG reporting entails mapping impacts to companies get started. Both host regular webinars the target level (rather than Goal level, which is and trainings. nonspecific and adds little value to report readers) and acknowledging not just where the business With frameworks such as TCFD that provide contributes to the SDG targets but also where it recommendations only on categories of information stands to detract from their achievement. Like the to report—rather than specifics on disclosure or
2 Note: the SDGs can also be utilized to help companies set strategy or ambition levels of their sustainability goals and targets. Adopting the relevant SDG targets’ level of ambition as agreed by the UN, and meeting or exceeding it when you set your sustainability strategy or measure your company’s performance on the issues, can be a powerful message to send to your stakeholders.
Five Steps to Good Sustainability Reporting 29 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Case Study: Q&A with Verizon
How do you align with or report against What were your biggest challenges reporting standards in your disclosures? against these standards, and how did you Consistent, transparent engagement with overcome them? our investors helps us to understand their While similarities exist, each reporting standard expectations regarding ESG reporting and framework is unique. One challenge we standards and frameworks. Given that encountered was that some indicators do not investors are the primary audience for our ESG align with the measurement systems we have We also include a report, these conversations serve as a guide in place for our operational data, making it section in the ESG in determining how we report against various cumbersome–and in some cases impossible– reporting standards. Our 2019 ESG Report to match the data to the requested indicator. report dedicated to includes easy-access indices for ESG data, GRI- In these instances, we were as transparent as and SASB-aligned content, and the UN Global possible, noting why we couldn’t provide the Verizon’s contributions Compact principles. We considered creating a data point in the requested format and linking to the UN Sustainable similar TCFD index, but given the breadth and to other relevant content within the report. depth of the disclosure, we decided to publish Development Goals a standalone TCFD report and link to it from the ESG report. (SDGs).
We also include a section in the ESG report dedicated to Verizon’s contributions to the UN Sustainable Development Goals (SDGs). We highlight the five SDGs toward which Verizon can make a unique and significant impact and link to sections of the ESG report that share more detail on related goals and activities.
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3.4 agenda. Historically, boards (or potentially just one committee) have typically only heard about Garner Final Approvals sustainability in passing. However, as sustainability issues continue to proliferate and their value to— Sustainability reports must go through an internal and impact on—company performance becomes approval process to ensure accuracy and quality clearer, those with robust corporate governance at control. This process looks different for every Board level will be the first to ensure sustainability company. While approvals have historically been ad issues and performance are not seen as a purely hoc or informal, the process has gained structure tactical play or philanthropic add-on. While few in recent years as companies see the increasing companies currently incorporate Board approval as strategic value of sustainability reporting. part of the reporting process, it is a natural outcome of regular reporting to the Board by management The final approval process must have a clear of sustainability progress, and it will be increasingly system of governance and should start before you necessary as the body of evidence on the linkages even begin drafting, as noted in step 2.4. Waiting to between sustainability performance and finance seek approvals and feedback from the necessary performance continues to grow. The final approval parties until you have a near-final draft in hand risks process may also include assurance by a third party. having to repeat major steps or redo significant Though this may not be feasible for new reporters, portions of the report. To increase the chances of a as it can be expensive and time consuming, smooth sign-off process, identify champions within assurance helps to bring STAKEHOLDER ENGAGEMENT leadership and other necessary teams, engage rigor and quality to the them from the start by seeking their input on an report. initial outline, and keep them appraised throughout the process (see Principle 6).
As sustainability information and reporting continues to gain prominence, Board buy-in and approval become increasingly necessary. Engage the Corporate Secretary or other appropriate party to ensure the report is on the next meeting
Five Steps to Good Sustainability Reporting 31 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Case Study: Q&A with BSR Member (Anonymous)
Who approves the final sustainability report? a community audience. Today, the audience Historically, our report was approved by the VP has shifted towards investors and employees, of Corporate Affairs. This year, final approval and although the report has become more Today, the audience has shifted to the newly created position of strategic, it remains a voluntary disclosure. has shifted towards VP for Strategy and Sustainability, though by As such, the Board is not required to approve the time it reaches this step, the report will the document, and responsibility remains with investors and have already gone through several reviews those in the executive team. and initial approvals. For example, our CEO employees, and comments on and approves the content although the report has outline at the start of the drafting process, which ensures there aren’t any major course become more strategic, corrections needed later in the report’s development. Our legal team and other subject it remains a voluntary matter experts also substantiate the report to disclosure. ensure quality and accuracy prior to final sign- off.
Do you seek Board approval for the Sustainability report? The Board is not a formal part of the approval process, but the board committee that oversees ESG issues does receive updates on the report’s status and we receive comments from Board members. The Board hasn’t been a part of the formal approval process because the sustainability report historically focused on
Five Steps to Good Sustainability Reporting 32 STEP 4
STEP 1 Set Priorities and Develop Finalize and Strategy
FIVE STEPS TO GOOD SUSTAINABILITY Communicate STEP 4 REPORTING STEP 2 Finalize and Build the Communicate Structure and Gather Data
STEP 3 Develop and Revise Content
Five Steps to Good Sustainability Reporting 33 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Once your content is approved, you must finalize mentioned in Section 2.1, different audiences have and communicate the report. Take a moment to different visual preferences and information needs. reflect on the original intention for your report: why For example, some audiences prefer a PDF report did you write a report in the first place, and who is that they can use “control-find” (CTRL-F) to look up the audience that you hope will read it? Step 4 is particular terms or programs. Other audiences may about getting the report in front of those audiences, like an interactive report posted on the company both internal and external. website or regularly updated online content that does not neatly conform to an annual cycle. Some 4.1 audiences like both.
Liaise with Communications The layout and CONSISTENCY AND design of the report COMPARABILITY for Production itself should reflect Many sustainability reports are designed by your audience. Work communications teams for production. During with designers to best communicate information for this phase, collaborate with the communications your chosen audiences. Are they visually driven? and design team to produce a clear and visually Do they prefer data tables? Do they like stories and compelling report. The report does not have to pictures? No matter what design you choose, make be overly designed, but it is important to make sure the report information is clear and speaks the information clear to your audience. Keep to the information needs of your target audience, in mind that the report should be consistent which you identified prior to building out the initial and comparable year over year. Unless you are draft. The design or layout should not overshadow changing strategic direction, it is probably best to the information of your company’s sustainability keep the design and layout similar annually in order program and work. to maintain and promote comparability. Doing so will also ease the drafting process in future iterations, as there will be clearer expectations on tone and look and feel, as well as on length and depth (e.g. word count per page and number of pages needed to adequately cover all material issues). As
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4.2 show them the final product to help close out the process. Publish and Communicate
Internally and Externally Externally: Now that the report is designed and ready to be published, be sure to communicate it to both • Post the report externally: Post the report on internal and external audiences. Here are a few the company website and promote on social ways to maximize the impact of your reporting. media (e.g. LinkedIn).
• Highlight in recruiting: Include the report in Internally: recruiting materials and link to it on the job • Share the report with employees: Post the posting page. report on your internal intranet, distribute the • Communicate to investors: Include top material report via email, place copies in break rooms issues in investor communications and make and cafeterias, or include in new employee on- the report available to analysts. Use the report boarding materials. as a communications tool with ESG analysts, • Host internal conversations: Discuss the raters, and data providers. Consider creating sustainability report in a town hall or in local a short brochure or “cheat sheet” of key office meetings. ESG information on the issues most relevant to investors. Release this highlights page • Spur action: Use the metrics and targets from concurrently with your financial reporting. the report to engage key teams in sustainability improvements and innovations. This may take • Respond to inquiries: Leverage the report in the form of creating “green-teams,” volunteer responding to requests from stakeholders (e.g. opportunities aligned with priority areas, or ratings and rankings agencies). incentives to jump-start performance on critical • Share with key customers: Look for overlap in material issues. material issues/initiatives or core values, and • Share with those who contributed: Thank leverage opportunities to build relationships executives, data owners, SMEs, and all those through collaboration on shared priorities. who contributed to the reporting process and
Five Steps to Good Sustainability Reporting 35 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Case Study: Q&A with Sempra Energy
How do you launch the report? Whom do you communicate the report to, The overall preparation around the release of and how? our sustainability report has taken on additional We focus on our key stakeholders: investors, rigor over the past couple of years due to the customers, employees, business partners, We focus on our key increased focus and attention on sustainability regulators, elected officials, and other key and ESG performance. While we publish the community leaders. This outreach can take stakeholders: investors, report itself to our sustainability site on www. many forms, including emails, personal notes, customers, employees, sempra.com, we also reach out directly to articles, and social media. key stakeholders and across multiple media business partners, channels to provide them with information about and links to the report. In prior years, we regulators, elected would send hard copies of the report, but in officials, and other key an effort to be more environmentally friendly, we have greatly reduced the total number community leaders. of printed reports. We also work to make the printed versions of our sustainability report as environmentally friendly as possible.
Five Steps to Good Sustainability Reporting 36 STEP 5
STEP 5 STEP 1 Review Set Priorities Learnings and Develop Review and Iterate Strategy
FIVE STEPS TO GOOD SUSTAINABILITY Learnings STEP 4 REPORTING STEP 2 Finalize and Build the Communicate Structure and Gather Data and Iterate STEP 3 Develop and Revise Content
Five Steps to Good Sustainability Reporting 37 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
After publishing and communicating the report, 5.2 reflect on the reporting process and plan for an even more successful year 2. Reporting is a Set a Longer-Term continuous learning process, and no one does it Reporting Approach/Plan perfectly. The final step in the reporting process is to develop or refine a strategic approach for the years to 5.1 come. In the strategy, highlight new metrics for potential inclusion next year, identify issue-specific Review the Process: How reports you’d like to produce to complement Did You Do? current disclosures, and consider other reporting Review how the reporting process worked this year. standards or frameworks to disclose against, as well Were there unexpected bottlenecks? Are there as the actions that doing so might necessitate. The internal partners you should have collaborated ultimate goal of reporting is to improve sustainability with earlier or in a different manner? Reviewing performance year over year and increase the reporting process will help you to learn from transparency to enable better decision-making by any challenges you encountered or to amplify internal and external stakeholders alike. Over time, successes. Reporting is a cyclical exercise; you can translate more ambitious reporting efforts utilize the learnings from this reporting cycle to into industry leadership in terms of both business ensure continuous improvement in the next one. success and environmental and social impacts. Furthermore, consider tracking metrics from the report launch itself (e.g. page views, downloads, social media impressions) and any changes in ratings and rankings before or after a report release.
Five Steps to Good Sustainability Reporting 38 STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 SET PRIORITIES AND BUILD THE STRUCTURE DEVELOP AND REVISE FINALIZE & REVIEW LEARNINGS DEVELOP STRATEGY AND GATHER DATA CONTENT COMMUNICATE AND ITERATE
Case Study: Q&A with Millicom
Why did you develop a long-term reporting • Addressing improvement opportunities 3. Use these frameworks to drive and improve strategy? identified during the independent the company’s sustainability performance. For Millicom, ESG reporting serves three assurance process. 4. Generate reliable data by identifying and essential purposes: • Establishing clear goals and related developing the right capabilities so we can 1. Disclosure: informing our stakeholders of timelines. maintain a close link between the report our ESG performance. • Building flexibility and monitoring content and goals and performance. 2. Integration: working across the capabilities for emerging trends. organization to prioritize and manage ESG • Building consensus and mechanisms for How has it been helpful with your reporting issues. systematic collaboration with colleagues process thus far? 3. Continuous improvement: measuring gaps across the organization, and with Investor A long-term strategy allowed us to build and assessing opportunities for replication Relations and Finance in particular, to consensus and integrate the reporting process across the organization. For this, we continue integrating ESG issues throughout into everyday workflows across the whole needed to strengthen our core reporting the different sections of our Annual Report company. The resulting “Lead and Shape” practices in the short term and build a and to minimize redundancies. strategy—developed jointly with BSR—was well long-term strategy. • Prioritizing multiple ESG queries received received by key internal stakeholders. It has throughout the year. allowed us to foster awareness, consensus, Our earlier reporting experiences have and knowledge among internal partners on shown that some capabilities need multi-year What is your goal for your reporting strategy? the business value of having consistent and time horizons to develop (e.g. adopting new Our long-term “Lead and Shape” strategy can reliable data that adhere to the most current metrics and indicators in line with reporting be boiled down to four objectives: standards and procedures, along with clear standards). A long-term strategy allowed us 1. Create a succinct annual report and milestones and a multi-year roadmap to to build capabilities over several years while issue-specific reports with decision-useful which all parties can align and contribute. driving toward specific goals each year. The information for target audiences. This provides a sound structure for systematic underlying analysis for our strategy included: 2. Use harmonized and relevant metrics from continuous improvement and is already • Determining, in a proactive way, which reporting frameworks and standards, so we becoming, as we had envisioned, a driver for reporting frameworks/standards made can stay relevant with today’s dynamic and better performance as much as a driver for sense for our business and stakeholders. demanding reporting scene. better reporting.
Five Steps to Good Sustainability Reporting 39 Concluding Thoughts
As the role of sustainability reporting expands, there is an increasing need to ensure standardization and clarity. While this is to a large degree already demanded by investors, sustainability reporting is also in the nascent stages of formalization through regulatory and legislative processes such as the European Union’s Non-Financial Reporting Directive. These are expected to crystallize current trends and cement the two dimensions of materiality as a cornerstone of sustainability reporting.
Disruptions like the COVID-19 pandemic have clearly demonstrated the interdependence of sustainability and business performance. Moving forward, companies should develop reporting strategies that more clearly reflect the link between financial reporting and sustainability. More integrated, comparable, and standardized reporting will be needed to ensure businesses’ resilience. Such reporting can both meet the new information needs brought to light by COVID-19 and other systemic shocks and strengthen companies’ decision-making, risk management processes, and overall performance in the long term.
Five Steps to Good Sustainability Reporting 40 ABOUT BSR BSR™ is a global nonprofit organization that works with its network of more than 250 member companies and other partners to build a just and sustainable world. From its offices in Asia, Europe, and North America, BSR™ develops sustainable business strategies and solutions through consulting, research, and cross-sector collaboration. Learn more about BSR’s 25 years of leadership in sustainability.
Visit www.bsr.org for more information.
Five Steps to Good Sustainability Reporting 41