Sustainability reporting has absorbed considerable corporate time and investment, but gathering information to meet disclosure rules does not automatically improve the way a business operates. The challenge for companies is to turn reporting systems into practical tools for decision-making, linking environmental and social priorities to work across the organisation.
The scale of the task is reflected in a 2022 cost-benefit analysis of the first draft European Sustainability Rep...
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orting Standards. It estimated incremental administrative costs of about €1.7 billion in one-off spending and €1.9 billion in recurring costs. Those figures cover the additional costs attributed to the proposed requirements across the companies studied, not a standard bill for every business. The analysis found that costs varied, with firms newly brought into the reporting framework often facing greater demands because they had less experience and expertise in place.
Such investment can build data systems, processes and skills. But if the information is used mainly to complete disclosures after the fact, much of its potential remains untapped. The authors of an analysis in MIT Sloan Management Review argue that reporting should be a starting point for integrated action, rather than the final purpose of sustainability work.
One place to begin is deciding which issues matter most. Double materiality assesses both how sustainability-related developments may affect a company’s financial prospects and how its activities affect people and the environment. The approach is gaining ground, although measures of its adoption differ by survey. S&P Global’s Corporate Sustainability Assessment found that 48% of the 6,793 companies it assessed in 2024 said they used double materiality. KPMG’s 2024 survey, covering 5,800 companies across 58 countries, reported a figure of 42%. The different samples and methods mean the findings are not directly interchangeable.
Identifying a priority, however, is not the same as measuring it well. S&P Global found that fewer than half of the companies identifying issues material to external stakeholders described metrics for assessing the related impacts. That gap points to a broader problem: organisations may acknowledge that an issue matters without having the information needed to track progress or guide choices.
The MIT Sloan Management Review analysis sets out five principles for making sustainability data more useful: concentrate on material priorities, connect information to operational decisions, bring financial and non-financial measures together, improve data stewardship across organisational boundaries, and translate broad ambitions into measurable activity. Together, these ideas shift the emphasis from producing a comprehensive report to embedding sustainability in everyday management.
Examples from Schneider Electric and Zalando show different ways companies say they are putting that approach into practice. Schneider Electric describes a consolidated Impact Score built from selected performance indicators. Each measure is scored against a baseline and a longer-term ambition, and the resulting average contributes to the collective element of the company’s short-term incentive plan. The company’s account illustrates how sustainability indicators can be incorporated into performance management, although it is not an independent assessment of their effectiveness.
Zalando’s published sustainability priorities include emissions, working conditions and responsibilities across its supply chain. The company says its work involves suppliers, brand partners and other stakeholders, extending beyond its own direct operations. That model underscores the importance of assigning responsibilities and tracking activity across relationships a business may influence but does not wholly control. As with Schneider Electric, the information comes from the company itself and describes its stated approach.
The wider lesson is that reporting requirements can help prompt investment in better information, but disclosure alone does not guarantee better outcomes. Companies need to decide which issues deserve attention, establish useful measures and connect those measures to the people and processes that can act on them. When sustainability data informs operational choices and accountability, compliance infrastructure can serve a broader strategic purpose.
Source: Noah Wire Services
