Could sustainability reporting be dead?

How CSRD will change the face of sustainability reporting as we know it: insights from early reporters.

The moment a double materiality assessment is finally completed you can almost physically feel the organisation-wide sigh of relief. But this feeling is short-lived and swiftly followed by the question so what does this actually mean for reporting?

This is a question we’ve heard from many of our clients and friends in the sector. And since the first drafts of the standards were published, our instinct has been that CSRD is going to change the face of sustainability reporting as we know it. This prompted us to review the reports ‘aligned’ or ‘inspired by’ CSRD’s requirements, published voluntarily by a group of early reporters in 2024. Through this, we’ve gathered perspectives on how this experience has impacted plans for the future of their sustainability communication.

Through this exercise we identified a set of signals from early reporters that give an indication on what could be ahead. We’ve set out three possible scenarios for ‘sustainability communication’ in the world of CSRD, and what may lead companies to pursue each one.

Earlier this year we published a report on Practitioners’ Perspectives on CSRD. This research is a continuation of that work and our belief that learning from the experience of peers is a vital asset to any practitioner involved in preparing CSRD disclosures and sustainability communications.

Disclosure is not communication. Historically, ‘sustainability reporting’ has involved a combination of formal disclosure against frameworks and standards, along with communication of strategic priorities and delivery plans.

Given the immense scale of CSRD, it’s easy to assume that it will encompass all existing aspects of sustainability reporting. For many early reporters, the most obvious option has been to attempt to consolidate all corporate sustainability reporting into once place – hinting at the end of the road for separate corporate sustainability reports.

Many companies have expected CSRD disclosures to meet their compliance requirements, whilst bringing all sustainability information into one place in the Integrated Report, and communicating a compelling narrative on CSRD.

Our experience – and the experience we’ve heard from clients – is that is just not possible. CSRD’s disclosure requirements are not conducive to compelling communication, so shouldn’t be treated as such.

So, Could Sustainability Reporting be Dead? Three scenarios

Based on our research, we think companies caught by CSRD are faced with a choice between one of three future reporting scenarios.

Scenario 1: The Death of Sustainability Reporting

“We decided to take a pragmatic approach, starting by reorganising everything we already have into the ESRS structure.”

In brief: Reduced risk appetite will mean bare minimum disclosures.

Format: The standards define the structure, full stop. The sustainability statement in the integrated report reflects the structure of the requirements set out by the ESRS, signalling and delivering a focus on compliance.

Implications: Disclose less, expose less. Many companies will also choose to strip back the content of the statement to minimum viable disclosures which are still able to meet the assurance standards. In some cases this could mean disclosing less information on topics than they have done in previous years and rowing back on all other communications related to their sustainability activity outside of their disclosures.

Rationale: The lowest risk appetite prevails.This decision will be driven by reduced risk appetite for a relatively uninhibited flow of information on a companies’ sustainability activities, as regulation brings with it increased scrutiny and legal risk.

Scenario 2: The rebirth of the Sustainability Report

“It has forced us to truly consider where the line between compliance and our strategic priorities should be.”

In brief: There is a fundamental difference between disclosure and communication.

Format: The standards define the structure, but the story happens elsewhere. Some companies will have their CSRD disclosures presented in their integrated reporting - likely in line with the structure defined by the ESRS – and use a different platform for communication and storytelling for sustainability.

Implications: Rethinking the standalone sustainability report. For many this will be a reconsidered ‘sustainability report’ that will focus on sustainability priorities which will not necessarily align with material topics. Others will use their website as a more flexible mechanism for ‘always on’ progress reporting, ditching the ‘single moment in time’ report all together.

Rationale: Unshackled, but substantiated storytelling. This approach allows companies to surface information about where they are investing energy, resources and effort to align sustainability and business objectives, and to reference their mandatory disclosures to support and substantiate these activities where necessary.

Scenario 3: CSRD becomes an index

“CSRD isn’t our impact story.”

In brief: There is a way to bridge the gap between disclosure and communications.

Format: CSRD is integrated but relegated. Some companies will pursue integrated reporting but instead of using the structure of the requirements set out by the ESRS they will use their strategic framework as the starting point for the sustainability statement.

Implications: The new GRI. In this scenario companies are likely to develop a CSRD index which links up to sections in the core content that cover disclosure requirements and includes the detail of information they are obliged to disclose but don’t form a meaningful part of their story on sustainability.

Rationale: Signalling the importance of prioritisation for progress. Companies pursuing this approach are likely to be committed to the concept of integrated reporting but want to use this valuable retail space to signal, to their stakeholders, where the most significant opportunities for impact and progress for their business lie.

Determining the right route forward for each business

The now well-established system of financial reporting developed over a period of decades. The CSRD disclosure process is asking businesses to introduce a similar system of disclosures for sustainability but at a much more accelerated pace.

The overwhelming advice from the early reporters we interviewed was to engage early in the discussion on your disclosure, reporting and communications strategy. There is a perception - unfortunately inaccurate - that the debates finish with the double materiality assessment. However, establishing where you are going to articulate the story of sustainability impact for the business requires as much, if not more discussion.

It is likely that over time, CSRD will become the equivalent of financial reporting and an equivalent of strategic reporting will emerge. However, the decision on the reporting and communications philosophy each company adopts in the wake of CSRD signals the business’ view on the value creation potential of sustainability in the future. And therefore, is a decision that requires time and consideration before setting a course.

A thank you - and download the slides from our recent webinar

A huge thank you to the sustainability, reporting and communications leaders who shared their perspectives on the future of sustainability reporting with so much thought and candour as part of this research.

You can download the content from our webinar on this topic here:

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