Sustainability Reporting 101: How To Read & Understand One

Summary

In this video, Lindsay Hampson, founder of a sustainability-focused business, explains the importance of sustainability reports. She outlines the key components such as environmental impacts, social contributions, and governance practices. Hampson highlights how these reports are crucial for businesses, especially in supply chains, and for customers who care about sustainable practices. She also emphasizes the need for real, data-backed actions in these reports, warning against greenwashing. The video wraps up with tips on how to analyze a sustainability report, ensuring it includes measurable goals and tangible initiatives.

Takeaways

• 😀 Sustainability reports are non-financial reports that describe a company's impact on the environment and society, along with its governance practices.
• 🌍 Sustainability reports help companies demonstrate how their actions align with environmental, social, and governance (ESG) standards, which are crucial for both business-to-business and business-to-consumer relationships.
• 📊 The essential elements of a sustainability report include environmental impacts (e.g., energy, water, waste), social contributions (e.g., fair wages, modern slavery), and governance practices (e.g., whistleblower policy).
• 🌱 Companies should report on environmental metrics like greenhouse gas emissions, water usage, and waste management. They should also set goals and actions to reduce their environmental footprint.
• 👥 Social contribution in sustainability reports includes practices like paying fair wages, ensuring ethical treatment of employees, and addressing community concerns.
• 🏛 Governance practices include ensuring transparency, ethical decision-making, and accountability in a company’s operations, like having clear policies for handling misconduct.
• 📑 Companies should provide both qualitative data (e.g., strategies and actions) and quantitative data (e.g., baseline figures, future targets) in their sustainability reports.
• 🔎 Sustainability reports should include concrete, verifiable data to avoid accusations of greenwashing, ensuring that the company's actions are genuinely sustainable.
• 🛠 A well-structured sustainability report might include leadership messages, company sustainability vision, operational details (like carbon emissions), and a breakdown of future targets and initiatives.
• 📅 Reports are typically created the year after the fiscal year they cover, ensuring that they reflect up-to-date progress, like Meta’s 2023 sustainability report released in 2024.
• 🚫 Businesses are encouraged to not rely on tools like ChatGPT to generate their sustainability reports but rather to gather accurate data, assess their current sustainability state, and define clear goals and actions for the future.

Q & A

What is a sustainability report?

A sustainability report is a non-financial company report that outlines how a company impacts the environment and society. It includes information on environmental, social, and governance (ESG) factors and discusses the company's sustainability efforts and goals.

Why are sustainability reports significant for businesses?

Sustainability reports are important because businesses may be asked to provide them by their customers, particularly if they are part of a supply chain. A company’s sustainability practices contribute to the sustainability of other companies in the supply chain, making it a crucial factor for B2B and B2C relations.

What are the essential elements of a sustainability report?

The key elements of a sustainability report include environmental impacts (e.g., energy, water, waste, emissions), social contributions (e.g., fair wages, ethics, modern slavery), and governance practices (e.g., whistleblower policies, sustainability verification).

Can you provide an example of a company’s sustainability report?

An example is Meta’s 2023 sustainability report. It includes details on their sustainability vision, efforts to achieve Net Zero, biodiversity risks, product circularity, and employee and community collaborations. It also provides detailed data on their carbon emissions and supply chain sustainability.

How does Meta report its sustainability efforts in its 2023 report?

Meta’s 2023 report includes sections on leadership letters, sustainability vision, goals for Net Zero, carbon emissions data (Scope 1, 2, and 3), efforts to make their products environmentally friendly, and their collaborations with suppliers to ensure sustainability across their supply chain.

What should a company track in a sustainability report regarding environmental impacts?

A company should track data on energy consumption, water usage, waste generation, greenhouse gas emissions, non-GHG emissions, and any other environmental effects. The report should include baseline figures, future targets, and initiatives to reduce environmental impacts.

How can companies assess their sustainability goals and achievements in a report?

To assess sustainability goals, companies should clearly state their objectives (e.g., reducing waste or emissions) and outline specific initiatives or actions to achieve those goals. The report should also include metrics to measure progress, such as baseline numbers and future targets, to show real, measurable impact.

What role does data play in a sustainability report?

Data is crucial in a sustainability report to ensure transparency and avoid greenwashing. A credible report provides actual data, such as emissions figures, waste levels, and other quantifiable metrics, demonstrating the company’s genuine sustainability efforts and results.

What are Scope 1, 2, and 3 emissions in sustainability reports?

Scope 1 emissions refer to direct emissions from a company's operations, Scope 2 emissions are indirect emissions from purchased electricity, heat, or steam, and Scope 3 emissions come from the supply chain (both upstream and downstream). These scopes help measure the total carbon footprint of a company.

What are some best practices when preparing a sustainability report?

Best practices include starting by collecting baseline data on ESG factors, setting clear goals for improvement, describing concrete initiatives to meet those goals, and ensuring the report includes real, verifiable data. It's also important to ensure the report is transparent, honest, and free of greenwashing.