Many investors have asked Ethiquette how they can asses the social and environmental value of companies in their investment portfolio. One accessible way for individual investors (and financial advisors) to do so is to evaluate company sustainability reports. In order to assess the social and environmental value of a company using its sustainability report, it helps to have a better understanding of corporate sustainability reporting. The sustainability report serves to disclose information to internal and external stakeholders in the company on the company’s economic, social, environmental and governance impact as well as the company’s all over performance on these issues (UNEP, 2013).
These reports are usually annual and are available on the company website. They sometimes target specific stakeholders such as investors or attempt to address all stakeholders simultaneously. These reports are increasingly used in the field of responsible finance to better understand the economic, environmental and social impacts of businesses, their action plan and the actions taken.
There are a growing number of recognized reporting frameworks which include the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC), the Carbon Disclosure Project (CDP), the Green House Gas Protocol (GHGP) or, Sustainability Accounting Standards Board (SASB), etc. There are also several organizations and countries addressing the issue as well, such as the Groups of Friends Paragraph 47 (GoF P47) or the United Nations Environmental Program (UNEP), etc. Some countries such as, France and South Africa have established regulations on environmental, social and governance reporting. However, there is no universal and agreed definition of the details to be included in these reports, even if the general concept is shared.
I also want to clarify one important point: these reports should be used as an information tool and not as a marketing tool. They must have a value-added content that meet certain criteria and not just visually attractive, even if one does not preclude the other. Environmental marketing has its place, but not in these corporate sustainability reports.
The number of companies issuing such reports has seen significant growth in recent years. According to the latest survey conducted by KPMG in 2015, 92% of the 250 largest global cap (G250) and 73% of top 100 national caps (N100) from 41 different countries produce a sustainability (or sometimes called a “CSR“, for Corporate social responsibility, report. These statistics have been stable since the 2013 survey. So, the question is no longer whether companies should produce a sustainable business development report, but rather about the quality of these reports or what information should be included in the report, and how to distribute the report (KPMG, 2013).
The UNEP, Frequently Asked Questions on Corporate Sustainability Reporting, outlines the information that should be included in the report:
The consumption of resources such as energy, water, forest products, etc.
Production of waste, emissions and pollutants such as carbon emissions, the amount of waste sent to landfills, discharges of water, etc.
The associated risks and opportunities,
Participation in the local community through NGOs or other Company policies and positions on key issues in sustainable development (SD) of the company,
The innovations on its products and services in connection with sustainability,
Respect for human rights,
The governance of the company,
The human resources management and working conditions,
The social issues,
The objectives, targets and performance made in sustainability.
However, more and more companies also provide information on their value chain and their supply chain, or their suppliers (the sustainability reporting frameworks like G4 GRI, the IIRC and the Scope 3 of GHGP all recommend supply chain disclosure). This is one of the major trends nd it is the focus of my current research with the International Reference Centre on the product life cycle, processes and services (CIRAIG). Specifically, I’m seeking to link the results and data from lifecycle approaches to corporate sustainability reporting.
Lifecycle management includes, among other things, tools to analyze the environmental and social impact of the company throughout its lifecycle. These tools have many uses including decision support (UNEP, 2009). They are used to measure environmental and social impacts of a company throughout its value chain from the raw material extraction to end of life. The lifecycle assessment tool identifies where, in the company’s value chain, are the main environmental and social impacts (UNEP, 2007). The tool also helps make decisions that do not simply displace the impact of an activity in the value chain to make it someone else’s responsibility.
Sustainability reports should also respect a the principles of materiality, transparency, balance, neutrality, accuracy, completeness, clarity and conciseness while using understandable terms and as far as possible, recognized indicators. These reports should allow for monitoring of the environmental and social impacts of the company from one year to another.
To assess the credibility of a corporate sustainability report, here are a few practical tips:
If the report is very visual, contains a lot of photos, but no specific content, that is problematic. These reports must be primarily for information, not advertising tools. Do not believe the beauty of the report, but evaluate the completeness and accuracy of its content.
If the report contains no specific numbers and only vague information, it shows a lack of conciseness. Although it is very difficult to quantify social impacts, it is possible to quantify the environmental impacts, like for example the carbon emissions.
These reports need to be balanced, that is, they should include positive and negative information. A report that only talks about successes of the company is a bad sign. The company should be not hide failures or negatives. It should be transparent about problem areas and set out corrective measures that will be put in place to rectify the situation.
Companies should discuss the issues that are material to their activities, not irrelevant issues for them, their stakeholders and the industry. For example, if the company talks about water discharges when they do not use water in their industrial processes, this information is irrelevant. Speaking of water discharges when it is not applicable contravenes the principle of materiality. One can also imagine the opposite – if the company uses a significant amount of water in its processes, but makes no mention of its water consumption and its emissions.
If the report contains no action plan and targets, it lacks precision. The evolution over the years needs to be clear in the report, even if performance is worse. A company that produces this type of report for several years should show the evolution in its indicators and the targets it wants to achieve as well as explain how it intends to achieve them.
The use of recognized indicators or recognized standards, especially for carbon emissions, bodes well. Some companies, such as Cascade, produce a solid sustainability report and provide much information on their website without using a recognized standard, but they are the exception.
In conclusion, these reports can be very useful and allow everyone to see the company’s management in relation to sustainable development, how the company has integrated sustainability principles into the business strategy which includes economic, environmental, social and governance implications. As consumers, access to this information can help us make more responsible purchasing decisions, and as investors it also allows us to make more informed and more responsible decisions.
In an upcoming blog post, I will use the above tips to walk you through a specific sustainability report that I consider to be one of the very best corporate sustainability reports out there.
This post was originally written in French by Anne-France Bolay.
About the author
Anne-France Bolay has a Bachelor of Management from HEC Montreal, with a specialization in Project Management and is currently completing an MA in Industrial Engineering at Polytechnique Montreal. She is doing researcher with the CIRAIG, exploring the intersection between lifecycle assessment approaches and corporate sustainability reporting.
United Nations Environmental Program (2013). Frequently Asked Questions on Corporate Sustainability Reporting. Taken from: https://www.globalreporting.org/resourcelibrary/GoF47Para47-FAQs.pdf
KPMG (2015). KPMG Survey of Corporate Responsibility Reporting 2015. Taken from:
KPMG (2013). KPMG Survey of Corporate Responsibility Reporting 2013. Taken from:
United Nations Environmental Program (2009). Guidelines for Social Life Cycle Assessment. Taken from:
United Nations Environmental Program (2007). Life Cycle Management, A business guide to sustainability. Taken from: