Sustainability reporting

What a sustainability report is

ESG information becomes useful only if it is comparable, verifiable and consistent from one year to the next. That is why companies use reporting frameworks that set out which topics to disclose, how to measure indicators, and how to explain strategy, risks and targets.

A good report is not limited to success stories. It also explains where the company missed its targets, what methodology it used for its calculations and what data is still missing.

The main international frameworks

Framework	Who develops it	Main focus	Intended users
GRI Standards	Global Reporting Initiative, an independent international organization	The organization's impact on the economy, the environment and people; organized into universal, sector and topic standards	A broad range of stakeholders
IFRS S1 and IFRS S2	International Sustainability Standards Board (ISSB), part of the IFRS Foundation	Financially relevant sustainability information; S1 sets the general requirements, S2 focuses on climate-related risks and opportunities	Investors, creditors and other providers of capital
ESRS (in the context of the CSRD)	European standards developed with technical support from EFRAG and adopted by the European Commission	Reporting based on double materiality, applied to companies within the scope of the Corporate Sustainability Reporting Directive (CSRD)	Investors and a broad range of stakeholders

The ISSB standards build on the structure of the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures), organized into four areas:

Governance – who oversees sustainability risks and opportunities;
Strategy – how they affect the company's business model and plans;
Risk management – how they are identified, assessed and monitored;
Metrics and targets – what is measured and what goals the company has committed to.

Greenhouse gas emissions: Scope 1, 2 and 3

The most widely used environmental indicator is the carbon footprint, expressed in tonnes of CO₂ equivalent (tCO₂e). The classification of emissions into three “scopes” comes from the GHG Protocol, the greenhouse gas accounting standard that is widely used, including by the reporting frameworks above.

Category	What it includes	Examples
Scope 1 – direct emissions	Emissions from sources owned or controlled by the company	Burning natural gas in the company's own boilers, fuel for its own fleet, industrial processes
Scope 2 – indirect emissions from energy	Emissions associated with energy purchased and consumed	Purchased electricity, heat or steam
Scope 3 – other indirect emissions	Emissions from the value chain, upstream and downstream	Production of purchased raw materials, transportation by third parties, employee travel, use of sold products

Indicators and a numerical example

Environmental: Scope 1, 2 and 3 emissions; energy use (MWh) and the share of renewable energy; water use (m³); waste generated and recycled (tonnes).
Social: number of employees and staff turnover; workplace accident rate; training hours per employee; gender pay gap.
Governance: share of independent board members; existence of anti-corruption policies and whistleblowing channels; compliance incidents.

Emissions intensity

Intensity = Emissions (tCO₂e) / Revenue (MDL million)

Relating emissions to revenue makes it possible to compare companies of different sizes and to track progress even as the business grows.

Key takeaways

Sustainability reporting makes ESG information comparable, verifiable and consistent over time.
GRI focuses on impact, IFRS S1/S2 on information relevant to investors, and ESRS, in the context of the CSRD, on double materiality.
Scope 1 = direct emissions, Scope 2 = purchased energy, Scope 3 = the rest of the value chain.
Intensity indicators, such as emissions per MDL million of revenue, allow comparisons across years and between companies.
Whether a standard applies depends on the jurisdiction and on the specific requirements of lenders.

Finished the lesson?Mark it as completed to track your progress.

Educational material only. It does not constitute investment, legal or tax advice. Numerical examples are hypothetical.