ESG reporting Vs. Sustainability Reporting

Ashkan Pakseresht

A sustainability report is a regular publication issued by companies aiming to communicate their corporate social and environmental responsibility to a wide range of stakeholders.

The report serves to consolidate and disseminate the information that an organization chooses to disclose regarding its commitments and activities in the realms of social and environmental impact. By doing so, the organization informs stakeholders, including customers, employees, and others interested in its actions, about its sustainable development strategy.

ESG reports are designed to disclose environmental, social, and corporate governance information based on specific criteria, aiming to reveal an entity's risk profile to investors.

In order to engage in effective and responsible investment practices, investors require access to ESG reports, which provide them with reliable, accurate, comparable, and timely data for evaluation. Governance reporting is typically included in an organization's annual report. It is customary for companies to present their governance procedures and codes of ethics in these reports. Reporting environmental data poses greater challenges due to the complexity of metrics involved. Ongoing developments in regulations may lead to improvements in reporting standards in this area. Social issues encompass various aspects such as employee well-being, labor relations, and workplace health and safety. Companies have been slower in providing reliable and comparable data on social issues.

It is important to note the distinction between ESG and sustainability. ESG represents a specific set of criteria established by lawmakers, investors, and ESG reporting organizations. On the other hand, sustainability is a broad term encompassing the pursuit of positive outcomes for a diverse array of stakeholders. This disparity is reflected in the reporting. While many standards utilized in ESG reporting can also be applied to generate a sustainability report, the purpose and intended audience of the reports differ. Additionally, a sustainability report may have a more general focus, while an ESG report adheres to a structured framework based on environmental, social, and governance criteria.