From Financials to Sustainability Reporting

In the business world, understanding the health and performance of your company has traditionally relied heavily on financial data. For years, financial reports have been the cornerstone, providing insights into revenue, expenses, profits, and more. However, as the climate crisis escalates businesses face increasing pressure to operate sustainably so a new form of reporting is emerging—one that goes beyond the balance sheet to assess the environmental and social impact of operations.

The Rise of Sustainability Reporting

Historically, businesses diligently produced financial reports to comply with regulations like those set by HM Revenue & Customs (HMRC). These reports were crucial for tax purposes, providing transparency and accountability to stakeholders. However, as concerns about climate change, scarce resources, and social inequality mount, there’s a growing recognition that traditional financial reporting is not enough to capture the full picture of a company’s performance.

Expanding scope of sustainability reporting

Enter sustainability reporting which is gaining momentum and becoming increasingly more relevant for businesses all around the world. With the introduction of regulations like the Streamlined Energy and Carbon Reporting (SECR) and the Corporate Sustainability Reporting Directive (CSRD), sustainability reporting is being elevated to an equal footing with financial reporting.

Streamlined Energy and Carbon Reporting (SECR)

In 2019 SECR, was introduced in the UK. It requires large companies that fit strict criteria to report on their energy use, greenhouse gas emissions, and energy efficiency measures in their annual reports (again what they report is determined by certain criteria?. This regulation aims to increase transparency around energy and carbon emissions and encourage companies to reduce their environmental impact. Read more details on criteria at GOV.UK

Corporate Sustainability Reporting Directive (CSRD)

Similarly, CSRD, a proposed European Union directive, seeks to expand the scope of sustainability reporting requirements for companies. It mandates certain companies to disclose information on environmental, social, and governance (ESG) matters in their annual reports. Different companies will be obliged to comply with the requirements for the first time in various fiscal years, depending on specific criteria. Read more on the EU CSRD page

What should be included in reports?

Under the CSRD rules, reporting entities will be required to report qualitative and quantitative information related to:

• Diversity of company boards 
• Double materiality 
• ESG targets and progress in reaching them 
• Greenhouse gas emissions and targets 
• Human rights issues 
• Social responsibility and employee treatment 
• Sustainability goals, performance and policies 

These regulatory developments signal a significant shift in how businesses are expected to operate and communicate their performance to stakeholders. No longer can sustainability be treated as a mere side issue or optional reporting. It is now recognised as a fundamental aspect of business strategy and risk management.

Integrating Sustainability for Deeper Insights

By integrating sustainability reporting into their practices, businesses can gain a deeper understanding of their impact on the environment and society. They can identify risks and opportunities, improve resource efficiency, enhance brand reputation, and build trust with customers, investors, and other stakeholders.

Even better, sustainability reporting can drive innovation and foster a culture of continuous improvement within organisations. By collecting, managing and monitoring data sets a business can identify trends, make data driven decisions, drive sustainability initiatives and communicate ESG efforts to stakeholders. Also help set realistic targets and enable business to reflect and track progress. By publicly disclosing their performance, companies can hold themselves accountable and strive for positive change.

Paving the Way for a Sustainable Future

In conclusion, the evolution from financial reporting to sustainability reporting represents a fundamental shift in how we measure the health and success of businesses. As regulations like SECR and CSRD come into force, businesses have a unique opportunity to embrace sustainability as a core value and contribute to a sustainable future. By unlocking the true health of their business through comprehensive reporting, companies can pave the way for a more sustainable and prosperous future for all.

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