It's safe to say that 2021 has shown to be the year of sustainability reporting. Reaching the fifth-year benchmark of the Paris Agreement while tackling a global pandemic, the importance of a company’s sustainability achievements has never been more crucial. Stakeholders worldwide are increasing their expectations and demands on businesses, and the UN secretary declares that in these challenging times, sustainability reporting is more important than ever.
So what are the main expectations and requirements on sustainability reporting in 2021? In this blog, we have gathered the 6 top sustainability reporting trends to keep track of!
Sustainability Reporting for a company or organization is a way to disclosing sustainability data to improve their transparency and visibility, with the purpose to develop a framework for action and legal requirements. The economic, environmental, and social impacts caused by a company or organization's everyday activities are then put together in a Sustainability Report.
1. Increased demand for more accurate data
Sustainability reports’ credibility has been on the biggest challenges ever since it became a popular means for communicating a business’ sustainability actions. According to a recent McKinsey study, investors say that they “cannot readily use companies’ sustainability disclosures to inform investment decisions and advice accurately” – something that is unfavorable for both the business and report recipient. In order to properly meet the increasing sets and regulations of non-financial reporting, stakeholders are demanding more transparent and high-reliable data.
By reporting on your sustainability data correctly, the demand from stakeholders will be satisfied. One step closer to that achievement is to investigate the current landscape of sustainability reporting. Gain insights of what processes to have in place, and how an ideal reporting process could look like in our report Navigating the Landscape of Sustainability Reporting.
2. Anti-corruption, climate change, labor & human rights are dominant themes among disclosure requirements
According to the latest Carrots and Sticks report – a collaboration between the UN, the Global Reporting Initiative (GRI) and the University of Stellenbosch Business School on sustainability reporting policies – anti-corruption, climate change, labor & human rights are the dominant themes in disclosure requests of now. The pandemic has exposed and exacerbated systematic inequalities throughout the value chain. Stakeholders are demanding businesses to take control over – and transparently communicate – every tier of their entire supply chain.
3. Growing importance of scope 3 emissions and climate actions throughout the supply chain
Until recently, most businesses have been focusing on reducing and measuring emissions from their own operations (scope 1) and power consumption (scope 2). However, as there is a growing awareness that a business’s indirect emissions that occur within the value chainoften account for far more than their own operations, more businesses commit to addressing the climate impact of their value chains. In order to stay on top of the competitionand respond to external pressures, committing to scope 3 emission reduction is no longer voluntary, rather, a must.
Until now, it has more or less been up to the individual business to choose what ESG-related activities to disclose – something that has created confusion and inconsistency in the reporting sphere. However, this year, many of the EU’s ambitious regulation frameworks are being set in action. These standards are designed to create consistency in reporting, and to ensure that businesses measure relevant objectives to meet EU’s political ambition and urgent timeframe of becoming a climate-neutral continent by 2050. An important and much needed step in the development of corporate sustainability reporting! Learn more about the EU's work towards standardization by starting with the 5 financial regulations that will affect your sustainability reporting.
5. A growing request from investors for sustainability and ESG data
Both governmental incentives and consumer behavior are pointing to the fact that the market is expecting, and even demanding companies to invest in their sustainability work. And additionally, according to a recent study by the Harvard Business Review, ESG issues have become much more important for long-term investors. Although investors and asset owners, such as pension funds, have been considering sustainability criteria for decades, a recent trend shows that more investors are taking meaningful action to integrate sustainability issues into their investing criterias. The first step to prepare for this shift in investment focus is to make sure that you’re integrating ESG into your business. Don’t know where or how to start? Check out our blog on 5 Frameworks to tackle ESG factors in the Financial Sector.
Sustainability reporting requirements are becoming more complex and demanding, and businesses and investors alike are turning to reporting platforms to ease and improve their reporting processes. Reporting under multiple reporting frameworks and to multiple stakeholders can be a difficult matter – especially if it's done manually. With sustainability reporting platforms, you can automate and gather all your reporting data and frameworks in one place – and share your dashboards directly with investors and important stakeholders.
Want to know more about how to move away from endless spreadsheets to a smooth and stress-free reporting process? Start by investigating our Sustainability Management Solution and be amazed by the possibilities.