How Can Companies Gain Value from Sustainability Reporting Requirements?

The phrase "mandatory reporting requirements" probably sounds more like a punishment than an opportunity to make more money. 

Yet some companies are already generating value from mandatory sustainability reporting, such as some that have started complying with the EU's Corporate Sustainability Reporting Directive (CSRD) and those in other jurisdictions that have adopted the International Sustainability Standards Board’s (ISSB) reporting framework, according to recent PwC research.

Even with regulatory delays such as for CSRD, along with shifting political priorities away from sustainability requirements in countries like the U.S., there's plenty of movement toward more sustainability reporting, in part because of the business value it creates.

In fact, over two-thirds of companies that have already reported under the CSRD or ISSB frameworks say they've gained moderate or significant value from collecting data and insights through the reporting process, beyond just meeting compliance requirements.

Differences Between Companies That Do and Don't Get Value from Sustainability Reporting

What separates those that generate significant value vs. moderate, limited or no value from sustainability reporting? 

First, the companies that say they're getting significant value from sustainability reporting are also more likely to use the data and insights collected for CSRD or ISSB compliance across many areas of their businesses, such as for other types of regulatory reporting, risk management, and to inform their overall business strategies. 

Granted, that doesn't necessarily imply causation, as companies that are highly committed to sustainability might inherently be more likely to say they get significant value from reporting, while being eager to use the data and insights across their organizations.

Still, PwC's research seems to suggest that leveraging sustainability reporting is at least worth trying, as most companies that see no value besides compliance are not using the collected data and insights at all in other areas. 

In other words, it could be a self-fulfilling prophecy that sustainability reporting doesn't generate any business value for companies if they're not making the effort to apply what they've collected.

Another differentiator seems to be that investing more in sustainability reporting also aligns with generating more value from it. PwC finds:

• 56% of those generating significant value from sustainability reporting have significantly increased resources committed to sustainability reporting over the last year vs. 26% for all respondents
• 40% of those generating significant value from sustainability reporting have increased senior leadership time committed to sustainability reporting vs. 16% of all respondents

Again, there could be a bit of confirmation bias here, in that companies investing time and money in sustainability reporting may be more likely to assume they're generating significant value from it. 

However, other research suggests that there are worthwhile use cases.

Making the Business Case for Sustainability Investments

BCG research found that when large publicly traded companies clearly make the business case for investing in sustainability efforts, they tend to see more positive market reaction than those that don't. Yet many companies still drop the ball in this area; from 2019 to 2024, the share of investors who thought companies effectively communicated why they engaged in sustainability initiatives only grew from 37% to 40%.

However, sustainability reporting requirements could help change that. 

With CSRD, for example, companies will need to disclose details such as sustainability-related CapEx and OpEx. 

The CSRD's double materiality assessment — looking at the internal financial impacts of sustainability and the external impacts the company has on people and the planet — could also prompt a company to analyze areas like the cost/benefit of transitioning to more circular production processes. 

As a result, a business might find that its relatively low sustainability-related CapEx doesn't align with the opportunity in front of it. Instead, building out a new facility that will allow for more circular manufacturing, for example, could be well worth it, and the company then has a clear, data-backed story to tell investors about why this CapEx is necessary. 

ISSB requirements to conduct a climate-related scenario analysis could also help companies identify risks that are worth addressing. To some, it might seem like ignorance is bliss; why worry investors about something that is only theoretical? However, being transparent about these issues and then addressing them could lead to greater gains. 

As BCG found, sharing the strategy behind investments that mitigate operational risk, like reducing the risk of production cuts due to water shortages as companies like Heineken have done, can lead to higher valuations. Investors could see that type of risk mitigation as extending the duration of existing cash flows, rather than having a climate issue cut off a revenue stream.

In that sense, even companies without investors should be motivated to map climate risks, so as to reduce the risk of revenue blocks, which sustainability reporting can help uncover.

Similarly, collecting and organizing more detailed data in areas like greenhouse gas emissions and water usage can help in areas like marketing. Customers often report being willing to pay more for sustainable products and want to buy from brands committed to environmental and social responsibility.

While there's nothing stopping companies from doing this data collection sans regulation to be able to tell clear stories about why their products are better for people and the planet than competitors' offerings, regulation like CSRD provides a push in that direction. But to get there, companies need to share that regulatory data outside of just compliance and sustainability teams, such as with marketing/communications departments. 

That then ties back into benefits in other areas such as compliance. For example, if marketing teams have the latest sustainability data stemming from regulatory reports, they can then make accurate claims and avoid the legal and reputational backlash that can come from hyperbolic claims.

Ultimately, sustainability reporting requirements don't necessarily generate additional value automatically, but by applying the data and insights across your organization, you can strengthen areas such as risk management, marketing, and investor relations.

Disclosure: Carbon Neutral Copy's parent company, JournoContent LLC, has clients involved in sustainability-related areas, among others. The owner of Carbon Neutral Copy, Jacob (Jake) Safane, has investments in sustainability-related companies, among others.

As such, conflicts of interest related to these and other investments/business relationships, even if unintended, may exist at times. Please email info@carbonneutralcopy.com if you'd like further clarification on any issues.