A Guide to Sustainability Reporting

Sustainability reporting has become a key part of doing business in the modern world. As customers, investors, regulators, and employees demand more transparency, companies are expected to share not just financial performance but also how they impact the environment, society, and governance practices. This process, known as sustainability reporting, allows businesses to track, measure, and disclose data related to their ESG (Environmental, Social, and Governance) efforts.

But what exactly does sustainability reporting include? Why is it becoming a standard expectation? And how can businesses make sure their reports are both accurate and meaningful? This guide answers these questions and more. Whether you are just getting started or looking to improve your current reporting process, this article will walk you through the key components, best practices, and major reporting standards that shape sustainability disclosures worldwide.

What Is Sustainability Reporting?

Sustainability reporting is the act of publicly disclosing an organization’s environmental, social, and governance (ESG) performance. The goal is to give stakeholders a clear picture of how a company operates responsibly and how it manages risks and opportunities related to sustainability.

A sustainability report typically includes data on energy use, greenhouse gas (GHG) emissions, diversity, inclusion, labor practices, governance policies, and more. Unlike annual financial reports, which focus strictly on monetary results, sustainability reports offer a broader view of a company’s non-financial performance. These reports may be published annually, biannually, or according to regional or regulatory requirements.

In practice, this means a company might describe how it is reducing its carbon footprint, improving employee well-being, or ensuring ethical supply chain practices. For example, a retail company may report on how it sources materials responsibly and reduces packaging waste, while a manufacturing firm might share how it’s reducing energy use or investing in renewable energy sources.

Key Takeaways

• Sustainability reporting helps organizations track and disclose ESG metrics.
• Reports enhance transparency, foster trust, and support long-term business strategy.
• Key reporting standards include GRI, TCFD, CSRD, and ISSB.
• Double materiality assessments and carbon accounting are increasingly important.

Sustainability Reporting Explained

To understand sustainability reporting, it's helpful to break it down into its components. The "sustainability" aspect refers to the environmental and social impact of a company. This includes everything from how much water a factory uses to how inclusive a workplace is. The "reporting" part is about documenting and sharing that information with stakeholders.

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

• How is the company responding to climate change?
• What actions are being taken to support workers?
• Are corporate governance practices fair and transparent?

For instance, an airline might report how it’s investing in sustainable aviation fuel to reduce emissions. A software company might detail its community outreach and volunteer programs. By linking these efforts to specific metrics and targets, companies build credibility and accountability.

Why Does Sustainability Reporting Matter?

Builds Trust with Customers and Investors

Trust is the foundation of strong business relationships. Transparency in sustainability builds credibility with customers who increasingly support brands aligned with their values. Likewise, investors use ESG data to assess long-term risk and resilience. A company that demonstrates environmental stewardship and social responsibility is more likely to attract long-term investors who care about more than just quarterly profits.

Meets Regulatory Requirements

Around the world, governments are introducing laws that require companies to disclose their ESG data. In the European Union, the Corporate Sustainability Reporting Directive (CSRD) mandates detailed sustainability disclosures. In the U.S., the Securities and Exchange Commission (SEC) is advancing rules on climate-related disclosures.

Meeting these requirements is not optional—it’s a legal obligation that can result in penalties if ignored. Having robust reporting systems in place ensures companies remain compliant and avoid legal or reputational risks.

Improves 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. By analyzing these factors and disclosing them publicly, businesses can develop strategies to mitigate impact and maintain continuity.

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.

Helps Attract Talent

Today’s workforce wants more than a paycheck. Many job seekers are looking for employers whose values match their own. Publishing a sustainability report shows 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.

Can Lower Operation Costs and Boost Long-Term Performance

Sustainability often aligns with efficiency. Cutting energy usage, reducing waste, and improving labor practices can 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 see both reputational and financial returns.

Key Elements of a Sustainability Report

A strong sustainability report typically includes three major types of metrics: environmental, social, and governance. These categories ensure the report covers a company’s full range of responsibilities and risks.

Environmental Metrics

These metrics measure how a company interacts with the natural environment. This includes:

• Greenhouse gas (GHG) emissions: Measured in metric tons of carbon dioxide equivalents (CO2e), this includes emissions from operations, energy use, and supply chains.
• Carbon accounting: The process of tracking and reporting GHG emissions across Scope 1 (direct), Scope 2 (energy), and Scope 3 (indirect) sources.
• Energy usage: Amount and sources of energy consumed (e.g., fossil fuels vs. renewables).
• Water use: Volume of water withdrawn, reused, or returned.
• Waste management: Waste generated and methods of disposal or recycling.

Social Metrics

These reflect how a company affects people—internally and externally. Key areas include:

• Diversity, equity, and inclusion (DEI): Workforce representation across race, gender, age, etc.
• Labor rights: Fair wages, collective bargaining, and working conditions.
• Health and safety: Injury rates, training programs, and safety investments.
• Community engagement: Volunteering, local hiring, and philanthropy efforts.

Governance Metrics

Governance covers how a company is run. These metrics often focus on:

• Board structure: Composition, diversity, and independence.
• Executive compensation: Pay structures linked to performance or ESG goals.
• Ethical behavior: Anti-corruption, whistleblower policies, and compliance.
• Risk oversight: How ESG risks are monitored and addressed at the highest levels.

Common Sustainability Reporting Standards

Companies rely on established frameworks to ensure consistency, comparability, and completeness in their disclosures.

CSRD (Corporate Sustainability Reporting Directive)

The CSRD is a new European regulation that expands sustainability reporting requirements. It applies to large companies operating in the EU and will soon affect thousands of businesses. A key feature of CSRD is the requirement for double materiality assessments—companies must report both on how sustainability issues affect them and how they impact the world.

TCFD (Task Force on Climate-related Financial Disclosures)

TCFD offers guidance on disclosing climate-related financial risks and opportunities. Its framework focuses on four areas:

1. Governance
2. Strategy
3. Risk management
4. Metrics and targets

Many global companies and regulators now require TCFD-aligned reporting. It helps organizations plan for climate resilience.

ISSB (International Sustainability Standards Board)

ISSB is working to unify global sustainability reporting through IFRS S1 (general disclosures) and IFRS S2 (climate-specific disclosures). These standards build on TCFD and others to create a single global baseline. Companies using ISSB frameworks benefit from consistency and potential alignment with future regulatory requirements.

GRI (Global Reporting Initiative)

GRI Standards are the most widely used for sustainability reporting. They are impact-focused and support transparency across a wide range of ESG topics. GRI allows companies to tailor disclosures to stakeholder concerns and provides guidance by industry sector.

CDP (Carbon Disclosure Project)

CDP collects environmental data from companies for investors, customers, and regulators. Participants answer standardized surveys on climate, water, and deforestation. Scores are assigned based on disclosure quality and performance, often influencing investor decisions.

Sustainability Reporting Best Practices

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

Relying on a globally accepted framework—like GRI, TCFD, or ISSB—provides structure and legitimacy. It ensures consistency and makes it easier for investors and stakeholders to compare reports across companies and industries. For example, the GRI Standards include sector-specific guidance and a modular format that adapts to various organizational needs.

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 reports 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.

Engage Stakeholders

Effective sustainability reporting includes feedback from employees, customers, investors, and community members. This ensures the report addresses issues that matter most to those impacted. Conducting stakeholder interviews, surveys, or public comment sessions can help identify material issues to include in the report.

Focus on Materiality

Not all ESG issues carry the same weight for every business. Materiality assessments help prioritize topics that are most relevant. For example, a logistics company might focus heavily on fuel efficiency, while a tech firm might emphasize data privacy and inclusive hiring.

Ensure Data Quality and Transparency

Data should be accurate, auditable, and consistent. Companies should explain their methodologies, include footnotes, and acknowledge limitations. External assurance (audits) adds further credibility and is increasingly expected under regulations like CSRD.

Leverage Technology

Managing ESG data is complex. Platforms like Nasdaq’s Metrio help organizations collect, analyze, and disclose ESG data more efficiently. Automating data pulls from internal systems saves time and reduces the chance of error.

Upgrade Your Sustainability Reporting Process with Nasdaq

Effective ESG reporting requires more than a spreadsheet. Nasdaq’s Sustainability Solutions streamline every step of the sustainability reporting journey:

• Centralizes ESG data collection
• Supports frameworks like CSRD, ISSB, and GRI
• Automates metrics tracking and progress updates
• Enhances transparency with dashboards and visualizations
• Simplifies audit prep with structured documentation

Whether you're preparing for your first sustainability report or refining an existing process, Nasdaq Sustainability Solutions reduce manual work and improve quality.

Sustainability Reporting FAQs

What are the 7 principles of sustainability reporting?

The Global Reporting Initiative outlines seven key principles:

1. Accuracy: Information must be correct and precise.
2. Balance: Reports should reflect both positive and negative outcomes.
3. Clarity: Content should be understandable to stakeholders.
4. Comparability: Readers should be able to compare across time and between organizations.
5. Reliability: Data should be verifiable and collected consistently.
6. Timeliness: Reports must be up to date and released regularly.
7. Sustainability context: Information should reflect broader environmental or societal conditions.

Are ESG and sustainability reporting the same?

They’re closely related but not identical. ESG reporting often focuses on financially material issues for investors. Sustainability reporting may cover a broader scope, including community impact or environmental stewardship, regardless of direct financial outcomes.

What should a sustainability report include?

At a minimum, a sustainability report should include:

• ESG goals and progress updates
• Key metrics and KPIs
• Materiality assessment findings
• Governance and oversight details
• Stakeholder engagement processes
• Alignment with one or more reporting standards

Is sustainability reporting mandatory?

In some jurisdictions, yes. The EU’s CSRD requires many companies to publish sustainability reports. The SEC is finalizing U.S. rules on climate disclosures. In other cases, it remains voluntary but strongly encouraged by investors and customers.

How do you prepare a sustainability report?

Start by selecting a reporting standard (e.g., GRI, TCFD). Conduct a materiality assessment to determine which ESG issues to prioritize. Gather data across departments—HR, finance, operations—and verify its accuracy. Draft your report with both narrative and metrics, then review with internal teams. If possible, seek third-party assurance before publishing.