A Guide to Sustainability Reporting

Sustainability reporting is now a key part of doing business in the modern world – it has become a crucial tool for companies to build stakeholder trust, attract investor capital, and meet mandatory regulatory requirements.

As customers, regulators, investors, and employees request more transparent and credible information, companies are expected to share not just their financial performance but also how they are impacting and impacted by factors including environmental, governance, and social issues.

This process, known as sustainability reporting, enables businesses to track, measure, and disclose key information related to their sustainability efforts, thereby fostering transparency with stakeholders, ensuring accountability on commitment to sustainable and responsible business practices, and serving as a strategic imperative for business by helping to identify risks and contributing to long-term value creation.

But what exactly should a sustainability report include? Why has it become a standard expectation? And how can businesses make sure their sustainability reports are both accurate and meaningful?

This guide seeks to answer these questions and more. Whether you are just getting started or looking to improve your current reporting process, this article will walk you through fundamentals of sustainability reporting, recognized reporting frameworks and standards, and best practices that are shaping sustainability disclosures worldwide.

Key Takeaways

• Sustainability reporting helps companies track and disclose material sustainability information and metrics
• A robust report is an opportunity to take control of your company sustainability narrative and to differentiate from the competition
• Reports help to enhance transparency, foster trust with key stakeholders, and support long-term business strategy
• Sustainability reporting is becoming more regulated with stricter requirements, so adhering to relevant reporting frameworks, conducting rigorous materiality assessments, and having an intelligent solution to effectively collect, measure, and disclose sustainability data will be crucial for success
• Investors and other stakeholders are increasingly interested in GHG and climate data

Fundamentals of Sustainability Reporting

What Is a Sustainability Report?

A sustainability report is a disclosure document that outlines key information about a company’s sustainability performance, strategies, and impacts – it should provide a comprehensive overview of how the company operates responsibly and how it manages risks and opportunities related to sustainability. 

Reports can come in various formats – from standalone sustainability reports to web disclosures or integrated into annual reports or financial filings – and they typically include both qualitative information and quantitative metrics related to a company’s sustainability performance as well as insights into the company's sustainability strategy, goals, and initiatives.

Key Elements of a Sustainability Report

Unlike financial reports, which detail a company’s business operations and financial performance, sustainability reports offer a broader view of a company’s sustainability strategy, initiatives, outcomes, progress, and goals. These reports are most commonly published annually or biennially, or in some cases according to regional or regulatory requirements.

An effective sustainability report typically includes the following components to ensure coverage of the company’s sustainability focal areas, risks, and opportunities:

• Information on the company’s sustainability program strategy, initiatives, and goals outlining key sustainability objectives, long-term vision for sustainability, and targets for improvement
• Relevant environmental metrics, such as greenhouse gas emissions (GHG), energy consumption, water usage, or waste generation, which provide stakeholders with insights into the company's environmental impact
• Relevant social metrics, like workforce data, employee engagement, health and safety, and community engagement statistics, which demonstrate the company's commitment to social welfare
• Key governance metrics, such as board structure, oversight of sustainability risks, ethical behavior, and regulatory compliance, which highlight the company's commitment to transparency, accountability, and responsible business practices

The example metrics above are relevant for many companies, but determining which specific quantitative metrics are relevant and important to the company and should therefore be included in a sustainability report will vary on a company-by-company basis and depend on several unique factors.

The method by which a company can determine what information (i.e., metrics, narrative, etc.) to include in their sustainability report is called a Materiality Assessment or a Double Materiality Assessment.

A Materiality Assessment, sometimes called a Priority Topic Assessment, is a strategic process to identify and prioritize the environmental, governance, and social issues that matter most to a company and its stakeholders – it determines which sustainability factors (and underlying metrics) present the greatest risks and opportunities to the company’s financial well-being, forming the foundation for a sustainability strategy and reporting.

A Double Materiality Assessment (DMA) goes one step further and adds an impact perspective, determining how the company’s operations impact the environment and society. A DMA expands the horizon of how a company considers sustainability, from identifying key risks and opportunities that may impact the company, to also understanding how the company is impacting the environment and the communities in which it operates.

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Who is Your Sustainability Report Intended For?

Sustainability reporting is still a largely voluntary undertaking, but it has become increasingly tied to regulatory requirements. In the United States, sustainability reporting is becoming mandatory for a growing number of companies, driven by new state-level regulations (e.g., California), while companies that operate internationally are facing disclosure requirements in Europe (EU’s Corporate Sustainability Reporting Directive (CSRD)), the UK (TCFD-aligned climate reporting), and Australia (ISSB-aligned climate-related financial disclosures) to name a few, with multiple international jurisdictions across Asia, Latin America, and the Middle East implementing similar mandatory reporting requirements.

While regulators can be a key audience, they should not be the only consideration to shape a report – the intended audience for sustainability reports includes a broad range of stakeholders, including:

• Investors: who are seeking to assess financial risks, long-term resilience, and value creation opportunities
• Regulators and Policymakers: who use sustainability reports to monitor compliance with environmental or social standards or as part of reporting requirements
• Customers and Clients: who evaluate company and brand values, ethics, and impacts
  Employees and Prospective Talent: who may assess company culture, values alignment, and commitment to sustainability
• Suppliers and Business Partners: who want to align on sustainability efforts and ensure supply chain resilience
• Communities and NGOs: who monitor local impacts and corporate accountability

Reporting Frameworks and Standards

Overview of Sustainability Reporting Frameworks

Sustainability reporting requirements may vary by region and industry, and while many jurisdictions are moving toward mandatory sustainability disclosures, reporting standards or frameworks help to ensure consistency, comparability, auditability, and credibility in disclosures (voluntary or mandatory). They do this by providing structured guidelines, standards, and methodologies that enable companies to identify, measure, and disclose their environmental, social, and governance impacts to important stakeholder audiences.

Depending on a company’s industry, geographic location, and stakeholder expectations, more than one of the following sustainability standards or frameworks may apply:

• The ISSB (International Sustainability Standards Board) is an independent standard-setting body established by the IFRS Foundation to develop a comprehensive global baseline of sustainability-related disclosure standards. These standards (IFRS S1 and S2) require companies to disclose material sustainability and climate risks and opportunities to investors alongside financial statements:
  • IFRS S1 are general requirements that set the overarching framework for disclosing material sustainability-related risks and opportunities

  • IFRS S2 are climate-related requirements focusing on climate risks (physical & transition) and opportunities

    The ISSB builds on the work of earlier market-led investor-focused reporting initiatives, including the Task Force for Climate-related Financial Disclosures (TCFD), and industry-based SASB Standards

• The Task Force on Climate-related Financial Disclosures (TCFD) has developed a consistent framework for companies to disclose climate-related financial risks and opportunities. The TCFD framework includes 11 recommended disclosures built around four thematic areas:
  • Governance: How the Board and management oversee climate-related risks and opportunities
  • Strategy: Actual and potential impacts of climate risks on the business, strategy, and financial planning, often involving scenario analysis (e.g., 2°C or lower scenario)
  • Risk Management: The processes used to identify, assess, and manage climate risks at the organizational level

  • Metrics and Targets: The specific KPIs used to measure performance, including Scope 1, 2, and 3 greenhouse gas (GHG) emissions

    The TCFD framework was fully integrated into the new International Sustainability Standards Board (ISSB) global standard in January 2024

• The Sustainability Accounting Standards Board (SASB), in collaboration with the IFRS Foundation, develops industry-specific sustainability accounting standards to help companies disclose material sustainability information to investors. SASB's standards identify the subset of sustainability issues most relevant to financial performance in 77 industries, enabling companies to prioritize sustainability initiatives and improve transparency in reporting practices
• The Corporate Sustainability Reporting Directive (CSRD), is a European Union directive – which means it is a legal act requiring EU Member States to adopt it into their own national laws – that requires companies to disclose detailed environmental, social, and governance data. While the European Commission is the regulatory body that oversees CSRD, the directive will apply to companies outside of Europe if they have significant business or operations within Europe. It aims to bring sustainability reporting to the same level of rigor as financial reporting, enhancing the transparency and comparability of sustainability disclosures and mandating sustainability information be integrated into annual corporate reports and subjected to external assurance
• Within the CSRD lies the European Sustainability Reporting Standards (ESRS): European Sustainability Reporting Standards (ESRS) - The Required Framework for CSRD Compliance
  • The ESRS are the technical standards that provide the specific framework and methodology for a CSRD-aligned disclosure. They act as the "rulebook," detailing the exact metrics and data points a company must disclose to comply with the CSRD
  • The ESRS cover 12 standards, including 2 cross-cutting requirements (general principles) and 10 topical standards across E, S, & G (Climate Change, Biodiversity, Workforce, Affected Communities, Business Conduct, etc.)
  • A key feature of CSRD is the requirement for a double materiality assessment – where companies must report on the sustainability-related risks and opportunities that could significantly influence their financial performance as well as on the actual or potential, positive or negative impacts their operations and value chain have on people and the environment – this dual-perspective evaluation is used to determine which sustainability topics are most important for a company
• The Global Reporting Initiative (GRI) develops sustainability reporting standards that help organizations communicate their sustainability impacts and demonstrate accountability for their environmental, social, and economic performance. GRI is historically the most widely used standard for sustainability reporting, providing impact-focused guidance by industry, supporting transparency across a wide range of sustainability topics, and allowing companies to tailor disclosures to stakeholder concerns. GRI's standards provide a comprehensive framework for reporting on sustainability issues, enabling companies to identify, measure, and manage their sustainability-related risks and opportunities
• CDP (formerly Carbon Disclosure Project) is not strictly a sustainability standard, rather it is best defined as a global disclosure platform and rating system, but one that is closely aligned with the guidance and recommendations of the leading standards and frameworks. CDP’s primary role is as a mechanism for data collection and benchmarking of climate-related information
  • CDP runs the world's largest environmental disclosure system acting as a central hub where companies submit data via standardized questionnaires on climate change, water security, and forests
  • CDP then scores the disclosure from A to D-  based on transparency, quality, and performance, allowing investors to compare performance across companies. Companies that fail to disclose receive an F
• GHG Protocol is the leading global standard for measuring and managing climate-warming emissions, established by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). It provides a standardized framework for tracking GHG emissions across three main scopes (1, 2 & 3). The protocol includes various guidance standards for corporate, product, and city-level reporting. As the foundation for major climate regulations and voluntary decarbonization initiatives (like SBTi), it enables a standardized approach to GHG measurement and accurate, comparable data for stakeholders. The GHG Protocol is currently undergoing its most significant update in 20 years, focusing on stricter Scope 2 and 3 data quality and the introduction of a new Land Sector and Removals Standard. These changes will be effective starting in 2027 with an aim to align corporate carbon accounting with the new ISSB global disclosure requirements
• The Science Based Targets initiative (SBTi) is a global organization that enables businesses to set ambitious emissions reduction targets aligned with the latest climate science. Its primary goal is to help the private sector decrease its GHG emissions to limit global warming. The SBTi is a partnership between several environmental organizations, including CDP, the United Nations Global Compact (UNGC), World Resources Institute (WRI), and the World Wide Fund for Nature (WWF)
• The United Nations Sustainable Development Goals (UN SDGs) are 17 global goals supported by 169 targets, adopted by UN Member States in 2015. They aim to achieve a better and more sustainable future for all by addressing global challenges such as climate change, inequality, and responsible consumption. The SDGs resulted from an inclusive process involving governments, businesses, civil society, and citizens. While not a reporting standard per se, many companies use the SDGs as a strategic framework to organize and align their sustainability initiatives
• The United Nations Global Compact (UNGC) is the world’s largest voluntary corporate sustainability initiative, calling on companies to align their strategies with ten universal principles regarding human rights, labor, environment, and anti-corruption. It is important because it provides a globally recognized ethical framework and a common language for businesses to demonstrate their commitment to the SDGs. By participating, companies gain access to a network of peers and tools that help them manage non-financial risks while building long-term value and brand trust

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Sustainability Reporting Best Practices

Why Does Sustainability Reporting Matter?

Sustainability reporting has moved past the early days of "corporate social responsibility" and is now a widespread expectation. Beyond mere compliance, a sustainability report represents a strategic opportunity to take control of your company’s narrative before the market – or your competitors – define it for you. 

By moving from reactive disclosures to proactive storytelling, companies can highlight their resilience and innovation. And instead of allowing third-party environmental, social, and governance (ESG) rating agencies to guess your performance, a robust sustainability report provides the primary "source of truth" for your company’s sustainability journey. This level of transparency can buy trust from key stakeholders and allow companies to frame potential risks as managed transitions.

Strengthen Brand Image and Trust: Trust is the foundation of strong business relationships. Transparency in sustainability builds credibility with key stakeholders who increasingly support companies aligned with their priorities. Clear reporting focused on the sustainability topics and metrics that matter most to the company transforms vague sustainability claims into verified commitments, building deep trust with stakeholders.

• Authenticity in reporting serves as a "shield" against greenwashing allegations, which carry increasingly steep legal and reputational penalties
• Aligning public disclosures with stakeholder priorities can create a "halo effect" that serves to improve customer loyalty and brand perception

Improve Efficiencies & Drive Business Performance: Sustainability often aligns with efficiency and robust reporting is a diagnostic tool that can uncover operational inefficiencies that can directly impact the bottom line. Examples include cutting energy usage, reducing waste, and improving labor practices, which can all lower operational costs. These savings can be reinvested in innovation, employee benefits, or customer service, strengthening the business in the long run. By embedding sustainability into core business strategy, companies potentially see both reputational and financial returns.

• Efficiency Gains: The rigorous data collection required for sustainability reporting often reveals excessive energy or material waste, which could lead to realizable cost savings

Increase Access to Capital (The Investor Lens): Institutional investors (large asset managers and pension funds) view sustainability, and more specifically climate and social risks, as financial risks – and capital tends to follow data, so major lenders and institutional investors are treating sustainability data as a signal or proxy for management quality.

• Increased Valuation: Since institutional investors view sustainability data as a signal of superior management, companies with transparent sustainability reports often see a lower "risk premium" and higher stock valuations as a result
• Capital Access / Lower Cost of Debt: Banks and lenders increasingly use sustainability disclosures to offer "Sustainability-Linked Loans," providing cheaper capital where interest rates drop if the company hits specific environmental or social targets
• Risk Pricing: If a company doesn't report its sustainability data, investors often assume the worst (an example is a "stranded asset" like a factory in a flood zone or a product about to be banned due to environmental or social concerns) and price that uncertainty into higher interest rates or lower valuations
• The "Green Premium": When a company has robust sustainability reporting, it can open itself to pools of sustainability-linked capital. Companies with higher ESG scores often gain access to "Green Bonds" or inclusion in major ESG indices like the MSCI ESG Leaders, FTSE4Good, or the S&P 500 ESG, which can trigger automatic and significant buy orders from passive funds that track or mirror these indices
• Attract "High-Conviction" Sustainable Capital: Beyond passive investing, strong sustainability performance and reporting can also attract active institutional investors who manage billions in dedicated sustainability mandates. Modern portfolio managers use sustainability data as a proxy for management quality. They believe that management that can navigate a complex sustainability issue like energy transition is likely to outperform in other areas of the business
• Reduce Volatility: Index inclusion can often stabilize a stock. Because these funds are "long-term holders" by design, they provide a buffer against the short-term buying and selling which can plague non-indexed stocks
• Engage, Not Exclude: Sustainable investors are increasingly preferring to "stay engaged" with leaders to help them grow, providing a stable, supportive shareholder base that supports long-term strategic moves over quarterly returns

Satisfy Legal Compliance and Gain "License to Operate": Increasingly, sustainability reporting is no longer voluntary, especially for large companies. Around the world, governments are introducing laws that require companies to disclose their sustainability data. Meeting these requirements is not optional – it’s a legal obligation that can result in penalties if ignored. In the EU and parts of the U.S., failing to report can lead to significant fines (up to 5% of global turnover in some regions) or even personal liability for directors. In addition, a growing proportion of compulsory rules are requiring reports to be audited by third parties, putting sustainability data on the same level of legal accountability as financial data. Having robust sustainability reporting systems in place can help ensure companies remain compliant and avoid legal or reputational risks.

Improve Supply Chain Resilience: Large companies are increasingly requiring their smaller suppliers to report their sustainability risks, and more specifically their GHG footprints. And if a small supplier can’t provide certain sustainability data, they may be at risk of being dropped by major buyers like Apple, Walmart, or Siemens, who need that data for their own commitments and compliance. This is called the "Scope 3 effect”, where pressure for robust sustainability reporting is being felt through the value chain.

Improve Risk Management: Sustainability reporting helps companies identify and prepare for risks that could affect their operations. Climate risks, supply chain disruptions, labor disputes, and regulatory changes are just a few examples of sustainability-related risks. By analyzing these factors and disclosing them publicly, businesses can develop strategies to mitigate impact and maintain continuity. Comprehensive reporting also provides traceable data to back up marketing claims, protecting the brand from accusations of "greenwashing" or other reputational damage. A good example is how food and beverage companies use water risk assessments to prevent shortages in key regions. By proactively reporting these risks, they can plan investments in water conservation or switch sourcing locations.

Attract Talent: Today’s workforce is looking for more than a paycheck, and many job seekers want an employer whose values match their own. Publishing a sustainability report can help show that a company is serious about environmental and social responsibility. This can be a key differentiator in competitive hiring markets, especially among younger generations. For instance, a tech company that reports on gender diversity, pay equity, and inclusive hiring practices may appeal more to candidates looking for ethical and equitable workplaces.

Sustainability Reporting Rulebook

Sustainability reporting is not just about data collection – it’s a tool for strategic communication. When done well, it tells a story about a company’s values, priorities, and long-term vision. It helps answer questions like:

• How is the company managing risks related to climate change?
• How is the company supporting its workforce?
• What does the company see as strategic opportunities and what is it investing in?

For instance, an airline might report how it’s investing in sustainable aviation fuel to reduce its GHG emissions while a consumer goods company might detail its sustainable packaging or community impact programs. By linking key sustainability efforts to specific metrics and targets, companies build credibility and accountability with important stakeholders.

To create a useful and credible sustainability report, companies should follow a set of best practices that improve the quality, clarity, and usefulness of their disclosures:

Use a Recognized Framework

Start by selecting one of the earlier mentioned sustainability reporting frameworks or standards – frameworks help companies by providing a structured "blueprint" for identifying, measuring, and communicating their sustainability impacts. If a company is required to report against a regulated reporting framework (i.e., CSRD/ESRS, etc.) consider starting with that framework. Relying on a globally accepted framework provides structure and legitimacy to a report. It ensures consistency and makes it easier for investors and stakeholders to compare information across companies and industries. For example, GRI Standards include sector-specific guidance and a modular format that adapts to various organizational needs.

Conduct a Materiality or Double Materiality Assessment

Materiality or double materiality assessments help to prioritize topics that are most relevant for a company, from a financially material perspective or an impact perspective. Priority sustainability topics and their related metrics will vary company by company and industry by industry.

Engage Stakeholders

Effective sustainability reporting includes input and feedback from key stakeholders – customers, employees, investors, and the community. This ensures the report addresses issues that matter most to those impacted. Conducting stakeholder interviews or surveys helps to identify material issues to include in the report.

Track and Collect Data

Sustainability information spans a company's environmental impacts, social practices, and governance standards. It is used by investors, regulators, and companies themselves to assess sustainability performance and long-term risk. Sustainability data comes in both quantitative (numerical, measurable metrics like emissions, employee turnover percentages, or the gender makeup of employees) or qualitative format (narrative-based information that outlines sustainability strategy, provides context, and detail on key focal areas like a company's data privacy protocols or employee engagement strategies). Data will need to be identified and gathered across departments (HR, finance, operations, etc.) and then verified for accuracy. Stakeholders expect that a company’s sustainability data is accurate, auditable, and consistent. Companies will need to explain their sustainability data processes and methodologies as external assurance (audits) become more standard.

Leverage Technology

Managing sustainability data can be complex. Data management & reporting software can be instrumental in simplifying the process of collecting, analyzing, and reporting sustainability data. It consolidates data from various internal and external sources into interactive dashboards, visualizations, and reporting tools to facilitate effective and impactful communication of sustainability performance to key stakeholders like investors, customers, and employees, fostering trust, credibility, and focus on continuous improvement.
Data management and reporting software can streamline data collection and analysis processes and help identify trends, monitor performance, and contribute to more informed strategic decisions.

Data management platforms, including Nasdaq Metrio™, can help organizations collect, analyze, and disclose sustainability data more efficiently. A leading software-as-a-service (SaaS) platform, Nasdaq Metrio enables automated data collection workflows and has dynamic KPI-tracking dashboards and external reporting capabilities, allowing sustainability teams to drive efficiency, attract investors, and engage stakeholders while reducing enterprise risk. Nasdaq’s innovative technology combined with in-house sustainability expertise provides full-service support to companies navigating global compliance requirements, tracking their carbon emissions, or managing sustainability programs. 

Set Measurable Goals and Show Progress

A good report includes more than aspirations. It outlines clear, quantifiable goals (e.g., reduce Scope 1 and 2 GHG emissions by 30% by 2030) and provides updates on progress over time. Showing year-over-year data helps build trust and allows stakeholders to see if the company is moving in the right direction.

Upgrade Your Sustainability Reporting Process with Nasdaq

Effective sustainability reporting requires more than a spreadsheet. Nasdaq’s advisory and software sustainability solutions can support at every stage of a sustainability reporting journey:

• Conduct materiality, double materiality, gap, and climate risk assessments
• Centralize sustainability data collection
• Support frameworks like CSRD, ISSB, and GRI
• Automate metrics tracking and progress updates
• Support any GHG and climate strategy needs
• Aide reporting with dynamic dashboards and visualizations
• Simplify audit prep with structured documentation

A robust sustainability report can help a company gain a competitive advantage, from improving perception in the capital markets to increased ability to attract talent, effectively conveying the organization’s sustainability risks and opportunities helps to differentiate in a competitive market. Whether you're preparing your first sustainability report or refining an existing process, Nasdaq Sustainability Solutions can help you throughout your reporting journey.

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Nasdaq listing rules do not require disclosure of sustainability data. This guide is provided as a reference for companies evaluating costs and benefits of disclosure or that have determined to disclose sustainability information.