Sustainability Reporting Made Easy: A Comprehensive Guide for Companies

With society's growing focus on sustainability, the pressure on companies to transparently disclose their business activities for a sustainable future is also increasing. In recent years, sustainability reporting has evolved into an essential tool to meet the needs and expectations of diverse stakeholders, from investors to customers and regulatory bodies.

Through sustainability reporting, companies systematically summarize their environmental, social, and governance (ESG) performance. The report transparently outlines how the company is committed to and progressing in ESG areas.

For years, only corporations (and equivalent companies) were required to report sustainability data under the German CSR Directive Implementation Act (CSR-RUG, the German transposition of the NFRD). However, this changed in 2023 with the introduction of the CSRD, which replaced the NFRD. For more details, such as which companies must report starting in which year, see our comprehensive blog article: CSRD Directive.

However, the effort put into sustainability reporting can be worthwhile for other reasons too. Everything you need to know, along with tips for efficient sustainability reporting and a step-by-step guide, is provided in this article.

Goals of Sustainability Reporting

Since 2023, sustainability reporting has become mandatory for large companies and international corporations with subsidiaries in the EU due to the CSRD. The CSRD, through the European Sustainability Reporting Standards (ESRS), ensures that companies create a unified sustainability report, enabling stakeholders to compare companies based on various sustainability metrics.

However, it’s not just legal requirements that make sustainability reporting essential. Other stakeholders, such as investors, customers, and employees, demand clear and transparent communication on a company's environmental and social impacts.

External Factors for Publishing Sustainability Data

Sustainability metrics (such as CO₂ emissions or the gender composition of workforce) not only improve transparency but also strengthen public trust and a company’s reputation. Companies that report comprehensively and transparently position themselves as industry leaders and can enhance their image as responsible actors.

Publishing a sustainability report also provides a competitive edge: more and more customers and business partners prefer to work with sustainably-oriented companies.

Internal Factors for Transparent Sustainability Reporting

In addition to external factors, there are internal reasons for detailed sustainability reporting. Nowadays, employees increasingly value companies that are committed to sustainability. Transparent reporting can strengthen employee engagement, which in turn has positive effects on loyalty, motivation, and ultimately productivity.

Regular sustainability reporting helps companies keep track of ESG opportunities and risks, allowing for early action on potential issues and facilitating continuous improvement in corporate sustainability strategy.

Key Elements of Sustainability Reporting

In addition to quantitative data, companies should focus on qualitative information within ESG areas in sustainability reporting. It’s not just about reporting numbers but publishing relevant data for their stakeholders. Various frameworks (such as GRI) can support and structure the sustainability report if your company is not yet affected by the CSRD and not required to follow ESRS. Regardless, a sustainability report should include the following core elements:

Resource Usage, Greenhouse Gas Emissions & More: Environmental Metrics in the Sustainability Reporting

How do daily business activities impact the environment? What is the company’s ecological footprint? These questions, among others, should be answered by including environmental metrics in the sustainability report.

In addition to emission metrics (such as greenhouse gas emissions or CO₂ reductions), data on resource use (water and energy consumption) and waste management (waste generation, recycling rates) are relevant. ESRS-compliant sustainability reports should cover all Scope 1–3 emissions (direct and indirect emissions as well as emissions along the value chain).

The Human Factor in Sustainability Reports: Social and Governance Data

Effective sustainability reporting addresses not only environmental impact but also the company’s social and governance factors. These include workforce-related topics and ethical issues in corporate governance, including metrics such as:

• Social metrics: Turnover rate, sickness rate, age structure, pay equity, gender equality, accident rates & workplace safety
• Governance metrics: Female leadership ratio, training programs, anti-corruption measures, GDPR compliance, compliance regulations

These metrics demonstrate the measures a company takes to promote fair labor practices and fulfill its social responsibility toward employees and society.

Challenges and Best Practices in Sustainability Reporting

Creating a sustainability report is no small task and, depending on company size, often takes several months and many long workdays.

The main challenge lies in the accurate and comprehensive data collection from different business areas and subsidiaries. Sustainability data comes in various units and from diverse sources (internal as well as external, such as suppliers), typically lacking clear, standardized structures. For instance, social topics (e.g., working conditions) may require a status report, and sustainability experts regularly face a vast amount of unstructured data in varying terminologies and units.

Jan-Niklas Möller, Sustainability Manager at WEPA, explained in an interview about sustainability data that his team faced significant challenges in ESG data management:

“We had to adjust or even create new data management processes. 

We needed to understand which data we already had, which additional data we needed, and what purpose the sustainability data would serve. Additionally, we are receiving an increasing number of external inquiries, meaning the volume of sustainability data required is constantly growing.”

Another major challenge is the materiality analysis for the sustainability report. It helps companies to reduce their sustainability report to the key topics — and in the case of the CSRD, it is mandatory for the content of the ESRS sustainability report.

Challenges that arise in sustainability reporting can be easily managed thanks to digitalization using automated software tools.

Digitalization in Sustainability Reporting

By using digital tools to streamline or enhance individual steps in sustainability reporting, companies can:

• Optimize processes
• Increase employee efficiency
• Reduce costs by minimizing manual effort

An ESG reporting software like Sunhat can take on the time-intensive task of data collection and management, reducing the manual effort for the sustainability team and improving data accuracy. Data from various sources (departments, subsidiaries, external partners) in different units and formats (text, figures, documents) can be collected and managed in one platform, making them directly usable for sustainability reporting according to frameworks or standards such as GRI or CSRD. Additionally, data can be quickly updated and adapted to new reporting periods, eliminating the manual work of consolidating data from, for example, multiple Excel files.

Sunhat and other software solutions for sustainability reporting employ Artificial Intelligence (AI) to increase data collection and preparation efficiency. AI can convert unstructured data (such as text documents, internal policies) into structured data that can then be used for the sustainability report or sustainability questionnaires.

Let us show you how you can organise your data collection and management for your sustainability reporting more efficiently - with AI, fully GDPR-compliant: Book a demo now!

Practical Step-by-Step Guide to Creating a Sustainability Report

Through the combined expertise of our clients with years of sustainability reporting experience, we developed these 11 recommended steps for the reporting process:

1. Developing a sustainability strategy: This requires close coordination with the various departments (e.g. HR, occupational safety, energy, ...) and, of course, your Executive Board and the strategy team. The sustainability strategy should contribute to the corporate strategy.
2. Planning the budget: Sustainability reporting requires a certain budget that takes all costs into account (costs for preparation, and also for publication, agency costs if applicable).
3. Involving the specialist departments: The sustainability team needs support from various departments for the report and should involve them at an early stage.
4. Creating the materiality matrix: Allow sufficient time for the creation of the double materiality matrix (if necessary according to CSRD).
5. Collecting ESG data: Depending on the size and structure of the company, data collection and analysis can take a lot of time. Therefore, you should start early — with a software solution such as Sunhat, you can do this more efficiently.
6. Creating the project plan & clarifying responsibilities: Create a project plan and define responsibilities. These can be people from your team as well as people from the specialist departments, such as HR, compliance, occupational safety and others.
7. Project team kick-off: In order to keep an eye on the current status and progress, regular consultations should take place.
8. Collecting content and texts: Writing the report with internal or external support.
9. Planning the approval and layout processes: The design must be created, content transferred and translations and proofreading carried out — allow sufficient time for the internal and external approval processes.‍
10. Defining publication measures: Plan internal and external communication to stakeholders (investors, customers, associations, etc.).‍
11. Finalization and evaluation: Final meeting with learnings for future reports.

Depending on whether you create the design and text in-house or commission an agency to do so, you should plan more time for the corresponding feedback loops and proofreading.

You can take a look at an example of sustainability reporting from our customer, the hygiene paper manufacturer WEPA: WEPA sustainability management

‍

Conclusion: Sustainability Reporting as a Key to Long-Term Success

Sustainability reporting is more than a regulatory requirement — it’s a crucial tool for building trust with customers and employees. Companies that proactively address these requirements and adopt best practices will benefit in the long term from a stronger market position and a positive image.

Software solutions that use AI can enhance sustainability reporting efficiency, supporting the sustainability team with practical tools. Sunhat simplifies sustainability reporting (for both CSRD and GRI) through:

• Simplified data collection and management
• Integration of external requirements and internal data
• Optimized processes and collaboration across departments

Book a demo to learn more about our software solution!