What is a Sustainability Report
The sustainability report is a strategic document through which a company transparently communicates its environmental, social, and governance (ESG) impacts.
It’s not just a legal requirement but a management and communication tool that demonstrates how aware a company is of its role within the economic and social system.
Unlike the financial statement, which captures economic and financial results, the sustainability report explains how those results are achieved — and at what cost or benefit to the environment and society.
An effective sustainability report is based on:
- Measurable and verifiable ESG indicators, aligned with international standards (ESRS, GRI, VSME)
- Stakeholder engagement, both internal and external, to define priorities
- A forward-looking approach, connecting current data to future improvement goals
If you’d like to learn more about the concept and purpose of sustainability reporting, read our introductory article: Sustainability Report: What Is It? Why Should It Be Prepared?.
In Italy, more and more companies — including small and medium-sized enterprises — are adopting sustainability reporting to enhance their reputation and respond to growing expectations from clients, suppliers, and institutions.
Why Sustainability Reporting Matters in Italy
In Italy, as in much of Europe, sustainability has become central for several reasons:
- Regulatory pressure: with the implementation of the CSRD (Corporate Sustainability Reporting Directive), many Italian companies will soon be required to report ESG data
- Growing stakeholder demand: banks, investors, clients, consumers, and employees increasingly expect transparency on environmental and social issues. Sustainability has become a key part of brand identity and employee retention
- Competitive advantage: early adopters can position themselves as responsible and trustworthy market players
- Risk management: sustainability reporting helps identify non-financial risks — climate change, supply chain vulnerabilities, regulatory compliance — and address them before they escalate
- Access to finance and incentives: financial institutions assess ESG performance; some public grants and funding programs reward sustainable practices
- International alignment: companies operating globally benefit from using internationally recognized standards that facilitate communication with stakeholders abroad
Even for SMEs, which are not yet subject to mandatory reporting, starting early offers a significant strategic advantage.
The Italian Regulatory Framework
For Italian SMEs, sustainability reporting is not yet mandatory but is increasingly encouraged. Several Chambers of Commerce, trade associations, and regional programs promote voluntary non-financial reporting as a source of competitive and reputational benefit.
From Legislative Decree 254/2016 to the CSRD
Until recently, only large public-interest entities were required to publish non-financial report, under Legislative Decree 254/2016.
Today, the CSRD has extended ESG reporting obligations to a much broader range of companies.
Who is obliged and when
Implementation will occur in stages:
- From 2025 (for 2024 data): large enterprises with over 1,000 employees, more than €50 million in revenue, or €25 million in total assets.
- From 2028: large enterprises meeting at least two of the following criteria — 250 employees, €50M revenue, €25M total assets.
- From 2029: listed SMEs.
ESRS: The New Common Language
The European Sustainability Reporting Standards (ESRS) define the principles, metrics, and structure for ESG reporting, ensuring data comparability, reliability, and coherence across Europe.
For non-listed SMEs wishing to begin their sustainability journey, a simplified voluntary standard — VSME (Voluntary Standard for SMEs) — has been developed, offering a proportionate yet aligned approach.
Want to learn more about regulatory updates and the potential of the VSME standard? Read our article: The Omnibus I Package Proposal: What’s New and the Benefits of the VSME Standard.
How to Prepare a Sustainability Report
Creating a sustainability report requires a structured approach, accurate data, and sound internal governance. The key steps include:
- Materiality (or Double Materiality) Assessment
Identify the most relevant sustainability topics (material issues) for your company and stakeholders.
Under the CSRD, the concept of double materiality has been introduced, assessing both how sustainability issues affect the company and how the company impacts the environment and society - Choosing a Reporting Standard
Select the most suitable framework — typically ESRS, GRI, or VSME.
The key is consistency and alignment with recognized frameworks - Data Collection and Validation
Engage all relevant departments (HR, production, environment, finance, procurement) to collect, verify, and centralize ESG data in a structured and traceable way.
A digital tool like YEP helps manage the process efficiently, reducing time and error risk — [discover its features here] - Drafting and Storytelling
Data should be accompanied by clear, coherent narratives explaining your journey, results, and future commitments.
Charts, tables, and storytelling elements make the report more engaging and credible - Publication and Communication
Publish the report on your website, share it through official channels, and send it to key stakeholders (investors, clients, suppliers). Collect feedback and use it to guide continuous improvement.
Benefits for Italian Companies
Sustainability reporting is a strategic investment that delivers concrete benefits — even for SMEs:
- Improved internal efficiency: structured ESG data collection helps identify operational inefficiencies and reduce energy or material waste
- Stronger supply chain relationships: large corporations increasingly require ESG reporting from suppliers; being ready means staying competitive
- Reputation and positioning: transparency builds stakeholder trust and strengthens your company’s image as a responsible and forward-thinking business
- Non-financial risk management: ESG analysis helps anticipate and mitigate environmental, social, and governance risks
- Easier access to funding: many regional, national, and EU programs reward companies that integrate ESG practices
- Long-term strategic planning: the reporting process helps align sustainability goals with your business strategy, reducing future compliance costs when reporting becomes mandatory.
Common Mistakes to Avoid
As discussed in our article The main challenges in preparing a Sustainability Report, companies — especially those new to ESG reporting — often make recurring mistakes that can undermine report quality.
Here are the most common pitfalls:
- Managing data manually in untracked Excel files: high error risk and poor data traceability
- Failing to involve key departments (HR, production, procurement, environment)
- Lack of evidence supporting the information provided
- Treating the report as a one-off project rather than an ongoing process
- Disconnecting sustainability communication from the overall corporate strategy
- Omitting sensitive topics or not explaining performance gaps, leading to potential greenwashing accusations
A digital tool like YEP helps structure and digitalize the entire process, ensuring data traceability, accuracy, and transparency. [Explore how it can support your company here]
FAQ: Sustainability Reporting
- Who is required to publish a sustainability report in Italy in 2025?
Currently, only large enterprises with over 1,000 employees (as defined above) are required, but many SMEs are starting voluntarily to gain a competitive edge. - Which standard should I choose?
It depends on your stakeholders’ requirements and your reporting goals. You can start with the simplified VSME and later migrate to ESRS, or adopt ESRS directly. The key is consistency and long-term vision. - How long does it take to prepare the first report?
For small companies starting from scratch with the basic VSME standard, it may take just a few weeks — especially with tools like YEP that streamline the process.
Larger or more complex companies may require additional time, depending on data availability and scope. - How often should it be published?
The sustainability report should be updated and published annually, tracking progress and new goals. - When is an external auditor required?
External assurance is mandatory only where required by law (e.g., under the CSRD).
However, involving an auditor voluntarily can enhance credibility and add value through verified, evidence-based reporting.
Get professional support
In a rapidly evolving regulatory and cultural landscape, sustainability reporting is both an ethical and strategic choice.
Choosing digital tools like YEP means simplifying the process, improving data quality, and turning sustainability into a tangible business asset.
If you want to create a clear, compliant, and impactful sustainability report for your company, we can help — from data collection to publication.
Contact us now for a tailored consultation and discover how YEP can support your ESG journey.