Sustainability Report Best Practices – 11 Key Elements

May 23 2025 By Evelyne Hoffman Economy 0 Comments

In 2023, a mid-sized global logistics firm released a sustainability report boasting some pretty bold commitments: “We aim to be carbon neutral by 2035.” But beyond the headline, the report offered no breakdown of emissions data, no interim targets, and no explanation of how carbon neutrality would be achieved. The social impact was limited to a few anecdotal stories without any metrics, and the entire document completely lacked references to recognized reporting standards.

Despite its ambitious tone, the report left stakeholders with more questions than answers – and damaged the firm’s credibility in the eyes of investors and environmental analysts alike. Even worse, it could lead to court cases as we will show later on this article.

This example illustrates a growing problem in ESG communication: reports that appear impressive on the surface but lack the depth, structure, and transparency needed to build trust and guide action. Since sustainability reporting becomes a critical tool for risk management, stakeholder engagement, and regulatory compliance, quality and rigor matter more than ever.

In this article, we bring you the 11 essential elements that define a strong sustainability report. Drawing on verified examples, global standards, and measurable outcomes, we explain what each element means, why it matters, and how it should be implemented.

Whether you’re an ESG manager, policy advisor, or business executive, this guide offers a clear roadmap for reporting that goes beyond compliance and earns trust.

But first a few more examples of how you really should not do your sustainability reporting.

4 Examples of Misleading Claims in Sustainability Reports

There are several documented instances where companies have faced scrutiny or legal action due to misleading claims in their sustainability reports. Here are the most known ones, but there are plenty of examples:

1. Santos Limited (Australia)

In 2024, Santos, an Australian oil and gas company, was involved in a landmark greenwashing case. The Australasian Centre for Corporate Responsibility (ACCR) alleged that Santos misled investors by promoting itself as a “clean fuels company” with a credible net-zero emissions plan. Evidence presented in court suggested that key details of Santos’ net-zero roadmap were devised impulsively under the CEO’s direction as the plans were being finalized.

2. Delta Air Lines (United States)

Delta Air Lines faced a lawsuit over its claim of being “the world’s first carbon-neutral airline.” The plaintiff argued that Delta’s reliance on carbon offsets, which were allegedly ineffective or unverifiable, rendered its carbon neutrality claim misleading.

3. Vale S.A. (Brazil)

Vale S.A., a Brazilian mining company, agreed to pay $55.9 million to the U.S. Securities and Exchange Commission (SEC) to settle charges related to false and misleading safety disclosures in its ESG reports. The SEC alleged that Vale misled local governments, communities, and investors about the safety of its dams, particularly before the catastrophic collapse of its Brumadinho dam in 2019.

4. H&M (Global)

H&M faced criticism for its “Conscious Collection,” with reports revealing that many of its sustainability claims were unsubstantiated. Investigations found that some garments labeled as environmentally friendly actually required more water to produce than average.

11 Essential Elements To Create a Perfect Sustainability Report

We’ll now examine what it takes to produce a sustainability report that stands up to scrutiny.

1. Governance and Strategy

This section explains how sustainability is embedded at the highest levels of an organization. It defines the company’s ESG vision, values, and objectives and demonstrates how these are operationalized through policies, leadership structures, and risk management practices.

Investors and stakeholders want to know whether sustainability is a boardroom priority or a side initiative. A robust governance structure includes dedicated sustainability committees, executive oversight, and integration of ESG metrics into corporate performance evaluations. For example, if a company’s CEO chairs a sustainability council and ESG targets are tied to executive bonuses, this indicates strategic alignment.

Example: Swiss Re reports how it integrates ESG factors into its business strategy and sets targets aligned with global frameworks like the UN Sustainable Development Goals (SDGs) and the Paris Agreement. The board-level governance ensures that sustainability targets such as achieving net-zero emissions by 2050 are embedded across operations

2. Materiality Assessment

A materiality assessment identifies which ESG topics are most relevant to the company and its stakeholders. It evaluates both the impact of the business on society and the environment, and the influence of ESG issues on the business’s success – a concept known as “double materiality.”

Not all issues carry equal weight across sectors. For a mining company, water usage and community rights may be material, whereas for a tech firm, data privacy and energy use in data centers are more relevant. Companies typically conduct stakeholder interviews, surveys, and risk mapping to determine these priorities and then visualize them in a materiality matrix.

Example: The Global Reporting Initiative (GRI) encourages organizations to consult stakeholders and use a structured approach to define material topics. EPA’s approach also recommends stakeholder involvement at every stage to ensure alignment with public interest and long-term sustainability impact.

3. Environmental Impact

This core section quantifies the company’s ecological footprint, typically using metrics such as:

• Greenhouse gas (GHG) emissions (Scope 1, 2, and 3)
• Energy consumption (MWh, GJ)
• Water usage and discharge
• Waste generation and recycling rates
• Land and biodiversity impacts

Environmental metrics offer evidence of a company’s role in climate change, resource depletion, and ecosystem degradation. Trends over time—like a 20% reduction in carbon intensity or a transition to 100% renewable energy—demonstrate tangible progress. Firms should also explain mitigation plans, such as science-based targets or circular economy strategies.

Examples:

• Carbon Emissions: Swiss Re committed to reducing Scope 1 emissions by 53% by 2030 from a 2018 baseline.
• Energy Efficiency: Apple reported a 40% reduction in greenhouse gas emissions by shifting to renewable energy sources across facilities.

4. Social Impact

Social performance covers the company’s interactions with employees, communities, and wider society. Key areas include:

• Human rights and labor conditions (including in the supply chain)
• Diversity, Equity, and Inclusion (DEI)
• Occupational health and safety
• Community investment and development
• Education, training, and upskilling

Social data reflects a company’s ethical stance and societal value. Reporting should differentiate between internal practices (e.g. gender pay gap, employee turnover) and external impacts (e.g. school support, volunteering). Narrative examples and disaggregated data by region, gender, or vulnerability group improve clarity.

Examples:

• Community Engagement: Reforestation projects report the number of community members trained and involved, such as Eden Projects tracking tree survival rates alongside local benefits.
• Workforce Development: Unilever links employee evaluations to sustainability KPIs and encourages green initiatives at all levels.

5. Economic Sustainability

This component illustrates how sustainability contributes to long-term profitability and business resilience. It covers:

• ESG-linked investments and cost savings
• Supply chain resilience
• Sustainable innovation and new markets
• Job creation and local economic impact

This is where companies explain the business case for sustainability. For instance, reducing packaging may cut costs and emissions; investing in green tech can open new revenue streams. Transparency about long-term ROI and KPIs like “sustainable procurement ratio” shows that ESG is financially material – not just ethical.

Example: HCL Technologies in India redesigned job descriptions to include environmental responsibilities, linking sustainable practices to cost control and employee performance metrics.

6. Regulatory Compliance and Framework Alignment

This element outlines how the company aligns with established sustainability reporting standards, such as:

• GRI (Global Reporting Initiative)
• SASB (Sustainability Accounting Standards Board)
• TCFD (Task Force on Climate-related Financial Disclosures)
• CSRD (EU Corporate Sustainability Reporting Directive)

Framework compliance ensures consistency, comparability, and credibility of ESG disclosures. Companies should detail which frameworks they follow and why, including a mapping table that shows how report content addresses required metrics. Compliance also signals preparedness for future regulation and investor scrutiny.

7. KPIs and Performance Metrics

This section presents the quantitative backbone of the report. Key Performance Indicators (KPIs) enable stakeholders to track year-over-year performance and benchmark against peers.

Good KPI selection reflects the material issues identified earlier and aligns with global standards. KPIs should be time-bound, comparable, and ideally third-party verified. Graphs, charts, and trend lines enhance accessibility.

Examples:

• Carbon intensity: tCO₂e per $M revenue
• Lost Time Injury Rate (LTIR): incidents per 200,000 hours worked
• % of women in senior management
• Water recycled (% of total use)

8. Verification and Assurance

Assurance provides independent confirmation that the sustainability information is accurate and credible. External audits often follow standards like ISAE 3000 (Revised) or AA1000AS.

Third-party verification boosts trust, reduces the risk of greenwashing, and adds rigour to ESG claims. The report should specify what was verified (e.g., emissions data, waste metrics), by whom (e.g., PwC, EY), and the assurance level (limited vs. reasonable).

9. Stakeholder Engagement

This section details how stakeholders are involved in shaping sustainability priorities and interpreting impacts. Stakeholders include employees, customers, investors, NGOs, local communities, and regulators.

Effective engagement ensures the company is not working in an ESG vacuum. Techniques include community forums, investor roundtables, grievance mechanisms, and partnerships. Feedback gathered can influence materiality assessments, program design, and risk identification.

Example: EPA recommends aligning with the Global Reporting Initiative (GRI) and other international protocols to allow comparability and verifiability of data.

10. Future Goals and Continuous Improvement

Beyond backward-looking data, a good report sets forward-looking ESG targets. These may include:

• Achieving net-zero by 2040
• Increasing supplier ESG audits by 30%
• Improving DEI representation by 10% in leadership

Future-facing goals demonstrate ambition and accountability. Best practice includes interim milestones, timeframes, and responsibility assignments. Clear roadmaps, combined with adaptive management strategies, reflect a culture of learning and progress.

Example: Sustainability-linked commercial paper (CP) programs often tie financing terms to performance on KPIs like GHG emissions or gender diversity in leadership roles.

11. Case Studies

Case studies showcase real-world implementation of ESG strategies, bringing metrics to life. These might highlight:

• A community reforestation project with quantified CO₂ sequestration
• A supplier code of conduct roll-out and its impact on labor conditions
• A waste reduction initiative that saved both costs and landfill use

These narratives validate data and illustrate complexity and success. They provide transparency and humanize the report, making it more accessible to non-specialist audiences.

An Example of Verified Sustainability KPIs and Outcomes by Theme

This table offers as a clear illustration of how ESG goals are turned into measurable outcomes. It offers readers a data-driven view of the effectiveness and credibility of sustainability reports when grounded in concrete KPIs.

Theme	KPI or Target	Measurement Unit	Reported Outcome
Greenhouse Gas Emissions	Scope 1 emissions reduction by 53% by 2030 (baseline: 2018)	% Reduction	49% reduction achieved by 2024
Renewable Energy	100% renewable electricity use maintained	% of total electricity	Achieved (ongoing)
Business Travel Emissions	GHG emissions from air travel cut by 50% (2024 target)	% Reduction	63% reduction achieved
Governance Diversity	30% female representation on Board of Directors	% Representation	42% achieved
Supply Chain ESG Alignment	67% of vendors to have science-based targets by 2027	% of vendor spend	46% achieved
ESG Risk Screening	Transactions screened for ESG risks	# of transactions	125,520 in 2024
Community Engagement	Urban greening success rate (Medellín case)	% Project Longevity (5yrs)	74% for community-led vs. 36% expert-led
Biodiversity Impact	Increase in biodiversity index from community-led urban project	% Increase	47% increase
Water Use	Share of energy from renewable sources	% of energy portfolio	15% reported by 15 countries
Waste Management	Collection and disposal practices across nations	Indicator frequency	Used in 18 national indicator sets
Employment in Green Sectors	Jobs created in sustainable industries	# of jobs	Increasing trend, used as national indicator

Risks When Failing to Produce a Correct and Transparent Sustainability Report

Failing to produce a correct and transparent sustainability report exposes organizations to a range of reputational, legal, financial, and operational risks. These risks are rapidly intensifying due to tightening regulations, increased stakeholder scrutiny, and growing public awareness of environmental and social issues.

Here are the primary risks:

1. Regulatory and Legal Risk

• Penalties and Enforcement: Under frameworks like the EU’s Corporate Sustainability Reporting Directive (CSRD) or the U.S. SEC climate disclosure rules, companies can face fines, litigation, or exclusion from capital markets if they fail to meet reporting obligations or are found to mislead.
• Litigation: Companies like Santos and Delta have faced legal action for alleged greenwashing and misleading sustainability claims, with lawsuits focused on false or unverifiable net-zero goals.
• Securities Fraud: Misstated ESG data in public disclosures can trigger investigations by financial regulators (e.g. the SEC), as seen in the Vale case involving dam safety misrepresentations.

2. Reputational Risk

• Loss of Trust: Inaccurate reports can severely damage public and investor trust, especially among ESG-focused stakeholders.
• Greenwashing Accusations: Unsubstantiated or vague claims can be perceived as greenwashing, leading to media scrutiny, consumer backlash, and NGO criticism.
• Brand Devaluation: Consumers and investors increasingly favor companies that demonstrate genuine and verifiable sustainability leadership. A flawed report undermines this position.

3. Financial and Investment Risk

• Capital Access: ESG data is now integral to risk assessments by asset managers, banks, and insurers. Poor reporting can limit access to green bonds, sustainability-linked loans, and ESG investment funds.
• Valuation Impact: Inconsistent or unreliable sustainability disclosures can lead to lower credit ratings, investor divestment, or depressed stock prices due to perceived ESG risks.
• Cost of Capital: Companies with poor ESG transparency may face higher borrowing costs due to increased perceived long-term risks.

4. Operational Risk

• Ineffective Strategy: Without accurate ESG data, companies may misallocate resources, pursue ineffective climate actions, or miss material risks.
• Poor Risk Management: Sustainability reports help identify supply chain vulnerabilities, climate exposure, and regulatory readiness. Incorrect data obscures these issues.
• Internal Misalignment: Lack of clear, measurable ESG goals reduces employee engagement, impairs performance tracking, and undermines cross-functional coordination.

5. Competitive Disadvantage

• Benchmarking Gaps: Competitors with strong sustainability disclosures may outperform in procurement, hiring, and reputation rankings.
• Market Access: Retailers and B2B buyers increasingly require ESG-compliant suppliers. Inaccurate reporting can result in exclusion from tenders or value chains.
• Innovation Stagnation: ESG transparency drives innovation in products, services, and circular economy models. Weak reporting may signal a lack of forward-looking capacity.

Summary Table: Risks of Inaccurate Sustainability Reporting

Risk Type	Description
Regulatory	Legal action, fines, and non-compliance penalties
Reputational	Accusations of greenwashing; loss of stakeholder trust
Financial	Reduced access to ESG financing; investment exclusions
Operational	Misguided strategies; poor risk visibility; misaligned internal goals
Competitive	Exclusion from markets or supply chains; weaker ESG rankings

Sustainability Reporting should be a Structured, High-Stakes Practice

Sustainability reporting is not a voluntary exercise in corporate branding, it should be a structured, high-stakes practice that demands credibility, transparency, and measurable value. As we’ve shown in this article, each of the 11 elements plays a critical role in shaping a report that not only meets regulatory expectations but also builds lasting trust with stakeholders.

A clear strategy means nothing without governance. Emissions data are hollow without third-party verification. Social commitments fall flat without stakeholder engagement. And ambitious targets lack credibility without transparent KPIs and continuous improvement plans.

Together, these elements form an integrated system. Omitting even one can weaken the report’s overall integrity and effectiveness. When done right, however, a sustainability report becomes far more than a disclosure, it becomes a blueprint for performance, accountability, and long-term resilience.