Sustainability Reports are not Sustainable

Odd and Decah partnered up to start a conversation on how we can reimagine sustainability reporting. Will you join us?

Hello friends, it has been a while. We’ve had a bumpy year, but we are back on track with our bi-weekly substack, and we invite you to join our open workshop to discuss sustainability reporting with our partners from Decah: subscribe here.

By 2026, all publicly traded companies, investment funds, and securitization companies will be required to disclose their sustainability-related financial information based on the international standard (IFRS S1 and S2) issued by the International Sustainability Standards Board (ISSB). 

In practice, what does this mean?

With less than two years remaining, the clock is ticking for around 15,000 companies in Europe alone. They will soon be required to gather, organize, and present their social and environmental data for communication, review, and external audit, whether they are prepared or not.

Moreover, consumers will understand who is acting to reduce their environmental impact and who is just engaging in greenwashing.

In plain words, who walks the talk?

The Dreaded Sustainability Report

To those working in a company's sustainability area, the task of collecting data for certifications and reports is not just a job, it’s a full-time dedication. You work year-round collecting, qualifying, and organizing data from the most diverse sources, convincing teams from other areas to collaborate and "yield" their data (as if they owned it) to finally publish a 150+ page report that probably will be read by themselves.

These are all the pages for the Formula 1 report, which is one of the most concise this year. We have been studying reports for a while, and most range from 120 to 150 pages, so 63 is an achievement.

But honestly, who has the time to read more than 50 pages? And most importantly, who are these reports for?

Yes, this is a response to the requirements and a format proposed by agencies commonly adopted in the market. But in my view, the constant redoing of this process highlights that:

• The effort behind the report is only shown by the number of pages it contains (so many pages, wow, so much complexity);

• You spent so much time collecting the data in the first place it is hard to think of different ways in which this could be shown;

• There is no clarity on why and who we report to - it has become the pro forma.

Can the reality of sustainability departments and communication change?

Sometimes, the answer does not depend on the sustainability department. In addition to everything mentioned, most ESG departments don’t have an expressive budget. Suppose they seek to communicate à la Apple, where they hire the incredible Octavia Spencer to play Mother Nature. In that case, they need access to funds from the communication or marketing department, which is not always aligned with the department’s budget in the first place.

If you haven’t seen it yet, I suggest you do. It is a 5-minute report and storytelling masterpiece.

To move away from the traditional report that nobody reads, it must convince the company that communicating its efforts on ESG fronts is a brand equity investment and one of the main factors in building reputation.

On the other hand, when communication teams decide to “bet on green” as a way to build brand equity, they usually hire a communication agency that knows a lot about communication but little about ESG best practices, possibilities of generating real impact, and perhaps even less about how to collect and represent data from these sources. We have even seen examples of charts and infographics with little depth and, worse, with errors in how they are shown, leading to incorrect interpretations and generating fragile campaigns.

All these elements lead companies to fall into the common pitfall, the communication void, without a story, most of the time with unique and static solutions, with little reflection and capacity to demonstrate the real effort generated to achieve the final results. Ultimately, these companies have communication liabilities, which do not generate actions, inspiration, or the ability to start conversations, only focusing on compliance, certifications, and index scores.

If you spend a whole year working on something to start all over again from scratch one year later with the only purpose of ticking the boxes and getting certified, your process is not sustainable.

But are there other ways to communicate ESG data that are interesting, engaging, and, most importantly, truthful about the company's actions?

We believe there are.

To share reflections and learnings from studies conducted in recent months on the current formats of ESG Sustainability Reports and Third-Sector accountability, we have partnered with incredible partners who have been translating data into action for globally known companies: Decah.

Letícia and Vinícius will hold two open workshops:

1. July 16th, 9 am Brazil time/2pm CET in Portuguese;

2. July 17th, 6 pm CET in English;

We will present and discuss the challenges of the current formats, possibilities for more strategic visualizations, stakeholder prioritization, key messages, and diagnostic exercises on maturity regarding what we call "Data Impact Storytelling."

The talk is open to the public, and you can subscribe using this link.

See you soon!

About Decah and Vinícius

Since 2014, Decah has been a B Corporation that fosters collaborative behaviors to catalyze a culture of impact innovation and corporate socio-environmental responsibility. Check their 2023 Retrospective here.