Five Years That Changed Sustainability Reporting

What a difference five years can make. Sustainability reporting has moved from broad CSR-style narrative towards materiality-based reporting. For private companies, the value is in starting the journey, understanding what matters and building from there.

A recent chat with one of my clients made me reflect on how much sustainability reporting has changed over the last five years.

I spend a lot of time in this area, so it is easy to forget that not everyone has ‘lived’ through the changes in the same way. That is particularly true for finance leaders in private businesses, or in companies that have not been directly caught by listed company reporting requirements.

Just over five years ago, the reporting landscape looked very different. The Corporate Sustainability Reporting Directive (CSRD) had not been proposed. The International Sustainability Standards Board (ISSB) did not exist. Neither did the IFRS Sustainability Disclosure Standards. European Sustainability Reporting Standards (ESRS) reporting was not something companies were actively working through. Very few people knew what the Omnibus meant - not a bad thing.

That now feels like a different world.

After a healthy dose of pragmatism, we now have a final set of ESRS. IFRS Sustainability Disclosure Standards are being adopted by governments in more jurisdictions and are creating a clearer global baseline for investor-focused sustainability reporting. The UK government is still taking its time.

The direction of travel is clear. Sustainability reporting has moved away from broad Corporate Social Responsibility (CSR) style narrative and towards reporting that is grounded in materiality, evidence and management decision-making.

CSR-style reporting is no longer enough

Traditional CSR reporting used to explain what a company was doing on sustainability. It often covered a broad range of activity across people, environment, community and responsible business. These underlying activities still matters, but a broad CSR narrative does not cut the mustard on its own today.

The question is no longer what a company is doing on sustainability. It is which sustainability-related issues matter most to the business, why they matter, how they are governed and managed, and what evidence supports that judgement.

That is a different exercise. It requires prioritisation, evidence and management judgement.

Start with financial materiality

For private companies starting this journey, my advice is still to begin with financial materiality.

That means identifying the sustainability-related risks and opportunities that could affect the company’s financial performance, resilience, cost, growth, access to capital or valuation.

Climate may be financially material. But depending on the sector, business model and geography, other issues may matter just as much. Biodiversity, pollution, water, circularity, workforce capability, health and safety, product quality, customer expectations or supply chain resilience can all affect how a business creates and protects value.

The point is not to force every sustainability topic into the first report. The point is to understand what matters commercially and build from there.

For private companies outside mandatory reporting, this still has real value. It can help educate investors, strengthen internal prioritisation and improve how sustainability-related risks and opportunities are considered within enterprise risk management.

That matters even more where a business is owned by, or seeking investment from, an investment management firm or private equity house. Investors may not expect perfection in year one, but they are likely to expect a clear view of what matters, what is being managed and what still needs work.

It does not all need to happen in year one

One of the most important points is that sustainability reporting is a journey.

A company does not need to solve everything in the first year. In fact, trying to do everything at once can make the process heavier than it needs to be.

A sensible first year might focus on a financial materiality assessment, a small number of priority topics, clear ownership and a focused first report. Future years can then build on that foundation by improving data quality, strengthening controls, refining metrics and linking the work more closely to planning, risk management and financial decision-making.

I have recently supported a private company through this type of first-year journey, including a financial materiality assessment and first sustainability report. The value was not just the report itself. It was the clarity the process created around priorities, gaps, ownership and next steps. It also gave senior management greater confidence in explaining to key investors what was material to the business and, importantly, what was not.

That is where I think the process is most useful.

Double materiality for more mature reporters

For more mature reporters, double materiality takes the analysis further. It adds a second lens: how the business affects people and the environment.

That broader lens is important. A company’s impacts on people, supply chains, communities and the environment may be material in their own right, but they can also connect directly to financially material risks and opportunities over time.

But the same principle applies. The output needs to be focused. A materiality assessment that identifies everything as material is not very helpful. The value comes from judgement, prioritisation and evidence.

For those following developments, the European Financial Reporting Advisory Group (EFRAG) has launched a consultation on the ESRS for certain non-European Union groups. The proposal focuses on impact materiality only, which feels pragmatic. Many non-EU groups may already cover financial materiality through IFRS Sustainability Disclosure Standards. The European Commission also remains under pressure to reduce the reporting burden on international groups with significant European operations.

The United States remains the obvious outlier. That may take another five years.

Before You Switch Off

Sustainability reporting has changed significantly over the last five years.

CSR-style reporting is no longer enough. Materiality-based reporting is here, and in my view it is here to stay. For private companies not yet in scope of mandatory reporting, the question is not whether they need a perfect report tomorrow. They do not.

The better question is whether starting the journey now would help them understand what matters, improve internal decision-making, strengthen risk management and prepare for future investor or reporting expectations.

My view is simple: start with financial materiality, keep it proportionate and build from there.

For those heading into the summer break, I hope you get a chance to properly switch off and recharge. Stepping back has always helped me think more clearly about what matters, and that feels like a good place to leave this article.