To explore this issue in detail, we hosted a roundtable alongside our sister agency – Stratton Craig. We were joined by participants from ten leading companies from across a variety of sectors, with a range of functions represented, including investor relations, corporate governance/legal and sustainability.
Under Chatham House Rules, we convened a frank and open discussion about how companies are preparing for this step-change in sustainability reporting; their views on the challenges of increased disclosure; and the opportunities that come with the new requirements.
To frame our conversation, we posed some key questions:
What will happen to sustainability storytelling if reporting becomes more focused on disclosure?
Will a more comprehensive Annual Report be able to service all key stakeholders?
How will you communicate your sustainability messages outside your reporting suite?
Some key themes quickly emerged from the discussion:
Previously, sustainability reporting was mostly a voluntary activity, with only a few mandatory elements such as climate risk reporting and carbon disclosures. However, under CSRD, companies will be required to include a detailed sustainability statement within their Annual Report, significantly increasing the report length.
However, its formal tone and investor-focused content could make it less effective at conveying key sustainability messages to a broader set of stakeholders. Companies know they will need to think more broadly about the channels they are using to communicate their sustainability messages, and many acknowledged the need to take a digital-first approach to their communications. However, the shape of this is yet to be fully shaped.
Although the need to address a range of stakeholders was broadly acknowledged, there was a mixed level of understanding of the priorities and needs of a broader set of stakeholder groups. Those in the room felt best informed about the investor and analyst audiences, but less certain when it came to employees, prospective employees and other stakeholder groups who are less likely to engage with compliance-driven language and narrative from the sustainability statement in the annual report.
Some companies have already begun stakeholder mapping exercises to deepen their understanding on what matters most to whom, and there was agreement that this would be a valuable step for many in the room, to help create the right future communications and reporting strategy.
We discussed how companies might opt to communicate their sustainability stories differently in the future, with a split between brand and marketing-focused content vs disclosure-focused content. But often different areas within a business are responsible for these different types of communication, making internal alignment a potential challenge to overcome.
While it was agreed there was usually goodwill between marketing & communications teams and sustainability teams, it emerged that they can be focused on different objectives and KPIs, leading to misalignment. Some attendees also suggested that upskilling was needed to ensure marketing messages avoided greenwashing, especially in an age of hyper-scrutiny.
Although CSRD will add to the corporate reporting burden, it was agreed that its main objective – making sustainability reporting as robust, standardised and comparable as financial reporting – would be a benefit in the long term.
The CSRD is revolutionising the reporting landscape with a heavily data-driven approach and a clear framework that dictates the specific ESG factors companies must disclose. This will eliminate the ambiguity of subjective interpretations and allow for a clearer comparison of a company's performance against its peers.
The focus on double materiality and stakeholder engagement in the CSRD suggests companies need to move beyond a single reporting format. Shifting away from a “one-size-fits-all” approach could mean changing existing reporting ecosystems and exploring other means to bring the sustainability story to life. While this might mean more work, embracing different communication media could lead to deeper stakeholder engagement and a more comprehensive understanding of a company's sustainability performance.
A multi-channel approach could also allow companies to create a layered narrative to meet the communication needs of different audiences. For example, a core sustainability message can be amplified and shared via targeted website content or interactive social media engagement to reach a company’s employee base and future talent pipeline. By embracing a multi-channel approach, companies can navigate the challenges of the CSRD while unlocking opportunities to enhance stakeholder understanding and strengthen their sustainability communication strategy.
While many companies have begun thinking about collating the additional data needed to comply with CSRD, they have not yet decided how they will adapt their reporting approach in the future. Many will be looking to the early adopters in the first phases of the legislative compliance to gauge how they have addressed the challenge. With that in mind, most participants expected a standalone sustainability report to remain part of their reporting suite for at least the next two to three years as the implementation of CSRD begins in earnest.
At Black Sun and Stratton Craig, we will be keeping a close eye on developments in sustainability reporting and continue to convene thought leaders in this space, bringing industry participants together to share best practices and knowledge. We will also be developing a more in-depth white paper collating our learnings from the Future of Sustainability Roundtable and sharing this in the coming weeks.
If you would like to be included on the distribution list for the forthcoming white paper, or invited to participate in future roundtables, please contact Naomi at nhawkins@blacksun-global.com
Or to speak to one of our experts about any challenges you are facing in your sustainability reporting or communications you can contact:
James Whittingham, Sustainability Director: jwhittingham@blacksun-global.com
Claire Wilson, Head of Copy & Strategy, Stratton Craig: claire@strattoncraig.co.uk
This blog was a collaboration between the teams at Black Sun Global and Stratton Craig.
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