The Main Challenges in Preparing a Sustainability Report
When approaching the preparation of a sustainability report for the first time, many questions may arise:
- How many indicators should be reported?
- How can the information be collected?
- How can data compliance be certified?
In this article, we address all these questions, providing a helpful guide for companies new to drafting their Sustainability Report.
How Many Indicators Should Be Reported?
The number of indicators to include in a Sustainability Report depends on two factors:
- The reference standard adopted, which specifies the “mandatory” indicators and elements to report;
- The materiality analysis, aimed at identifying, for each company, the “material” indicators — those relevant to the company in addition to the mandatory ones.
Using the GRI standard, the total number of indicators is about 130, which can be reduced to 70-80 after the materiality analysis. The number of indicators required by the ESRS standard is much higher (about ten times the GRI count).
As already mentioned, the ESG macro-themes to which these indicators belong range from environmental topics (E for Environment) to social topics (S for Social), and finally to governance topics (G for Governance).
How to Collect the Information?
The collection, validation, and enhancement of such a large and diverse set of indicators necessarily involves multiple company functions and therefore multiple responsible people (Top Management, Human Resources Manager, Energy Manager, Quality Manager, Safety Manager, Production and Maintenance Managers, Compliance Manager, etc.).
It is common for the person tasked with collecting/preparing/calculating an indicator’s value to differ from the manager responsible for that function, who remains responsible for “validating” the data.
Moreover, in companies with a complex organizational and territorial structure, some indicators must be calculated by consolidating values collected at the level of individual operational units. For example, a company with multiple operational units (factories), possibly located in different countries, with different legal entities and different types of production. In this case, the functions involved in preparing and validating the data multiply according to the number of “units” involved.
How to Certify Data Compliance?
The CSRD requires guarantees regarding the information companies disclose: for each data point in the sustainability report, it should be possible to trace back to the “responsible person” who “validated” it, as well as the “source” of the data or at least the methodology used to calculate it.
Ensuring the reliability of the information included in the Sustainability Report is also essential to avoid accusations or suspicions of greenwashing.
Greenwashing is a practice in which an organization, company, or entity makes misleading or exaggerated claims about its environmental initiatives or sustainability efforts to improve its public image without actually implementing meaningful sustainable practices. This practice is often used to attract consumers and investors increasingly attentive to environmental issues but without a real commitment to sustainability.
Furthermore, if a company is required or decides to submit its sustainability report for review and validation by a third-party certification body, the audit team responsible for certification must have access, for each indicator, to the following information:
- Who provided the data;
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From which source the data was extracted (which document, information system, or other source);
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In the case of calculated or consolidated data from detailed data, which calculation/consolidation algorithm was applied;
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The date when the data was entered/validated and the “validity period” of the data itself;
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Who is the person responsible for “validating” the data;
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In the case of certification: who is the auditor who certified the data.
Conclusion
An advanced solution to support the sustainability report drafting process exists, featuring a simple and intuitive interface, automatic checks, guided completion, and full visibility on all modification processes: YEP – Your ESG Platform!