Leadership in sustainability: Taking your ESG reporting to the next level 

“From mandatory sustainability disclosures to the need for decarbonisation, circularity and human rights due diligence, companies must adapt quickly to meet regulatory requirements and stakeholder expectations.” 

Corporate sustainability has never been higher on the agenda. Indeed, 2024 marked the first year for which large, listed EU-based companies needed to deliver annual reports in compliance with the EU’s Corporate Sustainability Reporting Directive (CSRD). With many more companies set to  fall within the scope of the CSRD in the coming years, a holistic approach to sustainability reporting is essential. But how can companies ensure that their strategy meets the requirements of this new reporting landscape? 

Read on for our guide to ensuring optimal coverage of your sustainability impacts, including a range of sustainability topics you may not have considered. 

Governance: The foundation of a robust ESG framework 

Although it’s the last letter in ‘ESG’, governance is one of the most important factors in establishing an effective sustainability reporting strategy. Conducting regular ESG assessments, setting measurable goals, and reporting progress transparently are all critical steps in building stakeholder trust. In addition, companies need to develop robust internal systems for tracking and reporting their sustainability data. This could include investing in sustainability software platforms that can manage complex data sets and help ensure compliance with international reporting standards. 

Achieving a high level of sustainability integration requires both leadership buy-in and effective communication of policies throughout the organisation. In this way, sustainability KPIs can be embedded into core business functions, such as procurement, supply chain management and human resources – facilitating lasting improvements. 

Focus on value chain impacts 

Sustainability reporting increasingly requires companies to look beyond the ‘four walls’ of the organisation to identify the wider impacts of their activities. For example, companies will be required to account for their Scope 1, 2 and 3 emissions as part of their CSRD reporting. This includes direct emissions, indirect emissions from energy consumption and emissions generated throughout the value chain. 

Under the CSRD, they will also need to provide forward-looking ESG strategies to reduce value chain emissions. This may include investing in renewable energy or energy efficiency projects, as well as working with partners to reduce emissions throughout the supply chain. A sustainability consultant can help companies engage stakeholders to obtain accurate data on indirect (Scope 3) emissions and select the most effective decarbonisation solutions for their context. 

Key sustainability metrics: Sustainable sourcing and circularity 

Another aspect of managing value chain emissions is addressing the impacts of upstream activities such as raw material sourcing. Companies should conduct comprehensive audits of their supply chains to identify environmental and social risks, engage with suppliers to promote sustainability and set clear sustainability targets.  

It’s equally important to consider downstream impacts, such as product end of life. This is where the concept of circularity is essential. Circularity involves designing products and systems that minimise waste and maximise the reuse of materials, helping to tackle resource scarcity. Circular practices are gradually becoming more mainstream, driven by a mix of consumer demand, legal requirements and the need to reduce costs associated with waste. IKEA, for example, has launched initiatives to buy back and resell used furniture, extending product life cycles and reducing waste. 

Sustainability reporting: Highlighting social impacts 

As the requirements of sustainability reporting have broadened to include a wider range of issues, a company’s social impacts have become increasingly important. For example, employee engagement, human rights and geopolitics are now key considerations in sustainability strategies. For example, a disengaged workforce can lead to reduced productivity, higher turnover and a decline in business performance. Companies therefore need to focus on fostering a culture that supports employee well-being – and therefore long-term sustainability and profitability. 

To prioritise employee engagement, companies should conduct regular surveys to measure employee satisfaction and identify areas for improvement. Other areas to consider include benefits such as flexible working, alongside promoting diversity and inclusion, and ensuring clear communication of company goals and values.  

ESG strategy development: Human rights and geopolitics 

Human rights issues, from labour conditions to land use, are critical components of sustainability. Companies are facing mounting pressure from regulators, NGOs and the public to address human rights violations within their operations and supply chains. Organisations should conduct human rights due diligence throughout their operations and supply chains to identify and mitigate risks. Engaging with affected communities, ensuring fair wages and providing safe working conditions are essential elements of a robust human rights strategy. 

Meanwhile, geopolitical instability increasingly intersects with sustainability issues. Whether it’s trade disputes, changing regulations or conflicts that disrupt supply chains, geopolitical risks need to be incorporated into sustainability planning and risk management frameworks. Building resilience into supply chains, diversifying production bases and scenario planning can help businesses adapt to these challenges. 

Sustainability reporting: Developing a holistic ESG framework 

From decarbonisation and circularity to human rights due diligence, the number of sustainability issues that companies need to report on can seem overwhelming. However, taking a more holistic approach to measuring sustainability impacts is about more than adapting to regulatory requirements and stakeholder expectations. It’s also about facilitating the development of a more impactful ESG framework. After all, the more relevant impact categories you consider, the more effectively you can drive sustainable change – ensuring your business can make a lasting positive impact. 

Want to find out more about getting support with your sustainability reporting? Visit our CSRD and reporting service page for more information or contact one of our experts today.