Sustainability reporting: Your practical guide

A sustainability report outlines your organisation’s ESG performance. Generally, this includes information on your sustainability strategy, goals, performance indicators, and progress towards your objectives, as well as covering your impact on the environment and society, and fulfilling your governance practices. Additional content could include stakeholder engagement, sustainability initiatives, and future commitments.

Please note that if you are subject to sustainability reporting regulations, you must adhere to the disclosure requirements regarding the content and structure of your sustainability report.

In the UK, sustainability reporting is mandatory for certain companies' annual reports (see cheat sheet below), including the disclosure of non-financial information across ESG. Listed companies also have specific reporting obligations related to these factors. These requirements can change vary depending on the specific regulation, sector, and country.

The CSRD is an EU Directive which aims to enhance transparency and accountability in corporate reporting, providing stakeholders with valuable insights through analysis, benchmarking, and auditing. Companies subject to the CSRD are required to report on their material sustainability topics from a double materiality perspective. The CSRD seeks to expand the scope of sustainability management and reporting to encompass risks and opportunities, ultimately driving businesses to develop strategies for improvement. This could impact UK companies through EU operations and groups. Companies that are in scope will be required to produce a mandatory sustainability report which is subject to assurance (see question 06 below). 

Learn how the CSRD could impact you

Double materiality refers to the consideration of both financial and non-financial impacts within sustainability reporting and decision making. Reporting on a double materiality basis means identifying and assessing how the company’s business activities impact the society and environment (impact materiality) and how sustainability issues affect the company and enterprise value (financial materiality). By addressing double materiality, you have a comprehensive view of both risks and opportunities, and can better assess and communicate overall value creation and risk management, meeting the needs of both investors and wider stakeholders.

The CSDDD is an EU regulation mandating that in-scope companies establish due diligence processes to detect and address negative human rights and environmental effects originating from their operations and throughout their supply chains.

To comply, companies should conduct a supply chain-mapping exercise, start to educate internal stakeholders, and conduct a gap analysis comparing current due diligence policies with CSDDD requirements. Reviewing supply chain contracts and creating a plan to identify adverse impacts are crucial. Engaging with key suppliers and customers about human rights and environmental expectations is essential for minimising negative impacts and ensuring collaboration. 

Find out how you can prepare for the CSDDD

If you're in scope for CSRD then assurance is mandatory for your sustainability report.
Even if it's not required, obtaining assurance adds credibility. It can provide important feedback on improving data management, reporting methodology and measurement, as well as increasing the board's understanding about risks and the accuracy and completeness of date. It can also be part of the terms of a sustainability-linked loan agreement. Above all it shows you are prepared to be challenged and open to doing better.

Learn more about ESG assurance

To map your value chain, identify the activities contributing to your product or service delivery, from raw material sourcing to customer distribution. Assess the inputs, outputs, and impacts of each activity, including environmental and social aspects. Engage with stakeholders to gather relevant data, then create a visual representation highlighting value creation points, risks, and improvement opportunities. This helps in understanding the full scope of operations and identifying potential sustainability initiatives. Regularly update the map to ensure accuracy and relevance, and use it to inform decision-making and strategy development.

Work with stakeholders to identify key sustainability issues for your organisation. Alongside desktop research, collect input from internal and external parties, including employees, customers, investors, and community representatives to create a preliminary list of potential material topics. Next, analyse the potential impact of these on your organisation and its stakeholders, considering both the significance of the impact and the organisation's influence on the issue. Refine the list based on this analysis to focus on the most relevant and impactful. Finally, validate and prioritise these issues through further stakeholder engagement and internal review.

Your approach will differ depending on whether compliance is voluntary or mandatory for you. If it is, there are more steps to meet the regulatory requirements. 

Learn about the benefits of a materiality assessment

The CBAM acts like a border tariff charged on carbon emissions, the UK CBAM is a tax, while the EU CBAM operates like a 'cap and trade' (like an Emissions Trading Sysem). Importers of in-scope goods must calculate the embedded carbon emissions inherent in those goods and ultimately pay ‘top ups’ for those emissions. CBAM’s purpose is to dissuade the importation of lower cost goods from outside of the EU or the UK, at the expense of the environment. It's already in force in the EU, but tariffs aren't payable until 2026. The UK CBAM will begin reporting and payment in 2027. 

The goods directly impacted by CBAM are:

• iron
• steel
• aluminium
• hydrogen
• cement
• fertiliser
• electricity (EU only).

Find out more about the impact of ESG on tax requirements

SLLs offer financial incentives tied to your sustainability targets, such as reducing carbon emissions or improving social impact. Additionally, SLLs can enhance the firm's reputation, attract socially conscious investors, and contribute to its overall sustainability strategy.

A mid-market borrower’s ESG status continues to be an important part of a lender’s due diligence, our 2024 ESG lenders survey found that 71% of lenders said that, all other things being equal, they're more likely to agree a loan for a business with strong sustainability credentials. Sustainability reporting is a key element of this.

Learn how your sustainability credentials impact your access to credit