Loading site navigation and page content
Updated By Vasilis Aggelou
Sustainability reporting explains how environmental, social and governance matters affect an organisation, and how the organisation affects people and the environment. A useful report connects those matters to governance, strategy, risk management, metrics and targets. It is not a catalogue of charitable activities, and it should not read like marketing.
The difficult part is rarely the final document. It is deciding what is material, agreeing who owns the data, applying a suitable reporting basis and making sure the numbers can be traced back to evidence. Companies that begin with design and data control usually produce a shorter, more credible report than those that begin by drafting prose.
A sustainability report is a structured account of an organisation’s material sustainability-related impacts, risks, opportunities, policies, actions and performance. Depending on the reporting basis, the primary audience may be investors, a wider group of stakeholders, or both.
The report may sit within an annual report, accompany the financial statements, or be published separately. Its location matters less than whether the information is connected to the organisation’s actual decisions. Readers should be able to see who is accountable, which topics matter, how performance is measured, what changed during the year and where uncertainty remains.
ESG groups sustainability matters into three broad headings. The headings are useful, but they do not tell a company what it must disclose or how materiality should be assessed.
Environmental matters can include greenhouse gas emissions, energy, water, waste, pollution, biodiversity and exposure to physical or transition risks.
Social matters can include workforce conditions, health and safety, human rights, customers, supply chains and affected communities.
Governance matters can include board oversight, executive accountability, ethics, controls, remuneration, risk management and the reliability of reported information.
A company should not select topics simply because they fit neatly under E, S or G. The materiality assessment determines which matters deserve attention and which disclosures are needed.
There is no single reporting framework for every organisation. The right basis depends on legal scope, user needs, industry, geography and the purpose of the report.
| Standard or framework | Primary focus | Materiality lens | Typical use |
|---|---|---|---|
| IFRS S1 | Sustainability-related risks and opportunities that could affect an entity’s prospects | Financial materiality for users of general purpose financial reports | Investor-focused sustainability-related financial disclosures |
| IFRS S2 | Climate-related physical risks, transition risks and opportunities | Financial materiality for users of general purpose financial reports | Climate disclosures used together with IFRS S1 |
| SASB Standards | Industry-specific sustainability risks, opportunities and metrics across 77 industries | Investor decision-usefulness | Industry guidance when applying IFRS S1 and S2 or preparing investor-focused reporting |
| GRI Standards | An organisation’s most significant impacts on the economy, environment and people, including human rights | Impact materiality | Reporting to a broad range of stakeholders |
| ESRS | Environmental, social and governance impacts, risks and opportunities under the EU reporting regime | Double materiality | Companies within the applicable scope of the CSRD and organisations responding to related value-chain requests |
IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024, subject to adoption or other legal requirements in each jurisdiction. IFRS S1 covers sustainability-related risks and opportunities that could reasonably affect cash flows, access to finance or cost of capital. IFRS S2 applies the same investor-focused approach to climate.
The ISSB amended IFRS S2’s greenhouse-gas emissions disclosure requirements in December 2025. The amendments apply for periods beginning on or after 1 January 2027, with early application permitted.
The International Sustainability Standards Board maintains the SASB Standards. They help preparers identify industry-specific matters and metrics and play a formal role in the IFRS sustainability disclosure architecture.
GRI takes a different starting point. It asks an organisation to identify its most significant impacts on the economy, environment and people. Many companies use GRI alongside investor-focused standards because the audiences and materiality lenses are not identical.
ESRS uses double materiality, covering both the organisation’s impacts and the sustainability matters that can affect its financial position or prospects. The European Commission adopted revised ESRS on 3 July 2026. As of 13 August 2026, the delegated act was not yet in force. It remained under European Parliament and Council scrutiny and would take effect only after that scrutiny and publication in the Official Journal. Companies should confirm the version in force and whether they fall within the legal scope before reporting.
Materiality is not a survey in which every topic with a high score enters the report. It is a reasoned assessment supported by evidence, stakeholder input and governance.
Financial materiality considers whether a sustainability-related risk or opportunity could reasonably be expected to affect cash flows, access to finance or cost of capital over the short, medium or long term.
Impact materiality considers the organisation’s actual and potential positive and negative impacts on the economy, environment and people.
Double materiality applies both perspectives. A matter can be material because of its impacts, its financial effects, or both.
The assessment should record the scope, evidence, thresholds, judgements, stakeholder input and approval process. That record is often more important than the final matrix graphic because it explains why information was included or excluded.
Greenhouse gas information is often the first large data set in a sustainability report. Under the GHG Protocol, Scope 1 covers direct emissions from sources owned or controlled by the organisation. Scope 2 covers emissions from purchased or acquired electricity, steam, heat and cooling. Scope 3 covers all other indirect emissions in the organisation’s upstream and downstream value chain.
Scope 3 is often the hardest part because it depends on supplier, customer and estimation data. A report should explain the categories included, calculation methods, material exclusions, use of estimates, changes in methodology and any restatement of the base year. A precise-looking total without that explanation can be misleading.
The result does not have to be long. It has to be specific enough for a reader to understand performance and for an independent reviewer to reproduce the main numbers.
Lux supports organisations with materiality assessments, IFRS S1 and S2 readiness, GRI and ESRS reporting, greenhouse gas inventories, target design, climate-risk analysis and the data controls behind sustainability disclosures. The work begins with the reporting objective and the available evidence, not a pre-written report template.
For support with investor-focused sustainability disclosures, see our IFRS S1 and S2 services. For a broader ESG programme, visit ESG and Sustainability or contact our team.
IFRS Foundation: IFRS S1 General Requirements and IFRS S2 Climate-related Disclosures.
IFRS Foundation: SASB Standards.
Global Reporting Initiative: GRI Standards resource centre.
European Commission: revised ESRS adopted on 3 July 2026.
GHG Protocol: standards and guidance.
A sustainability report is a structured account of an organisation’s material sustainability-related impacts, risks, opportunities, policies, actions and performance. A credible report links those matters to governance, strategy, risk management, metrics and targets.
ESG is a broad way of grouping environmental, social and governance matters. Sustainability reporting is the process of deciding what is material, applying a reporting basis, collecting controlled data and publishing disclosures for a defined audience.
The answer depends on legal scope, audience and purpose. IFRS S1 and S2 focus on sustainability-related financial information for investors. GRI focuses on significant impacts. ESRS applies double materiality within the relevant EU reporting regime. Some organisations use more than one basis, with a clear mapping between them.
Double materiality considers both how sustainability matters affect the organisation and how the organisation affects people and the environment. A topic can be material from either perspective or from both.
It depends on the organisation, jurisdiction, listing status, size, sector and reporting period. Requirements continue to change, including the EU framework. Companies should confirm the law and standards in force for the relevant reporting date rather than relying on a generic checklist.
We combine global expertise with local on-the-ground presence to provide auditor-ready valuations and risk consulting. Explore our core services:
True ESG integration extends far beyond surface-level policy statements. Learn how intensive operational training bridges knowledge gaps, allowing employees across hierarchies to execute and maintain complex corporate sustainability workflows.
Severe climate catastrophes are producing cascading economic impacts globally. Understand why deep actuarial expertise is now indispensable for accurately pricing accelerating weather-related risks and developing resilient macro-financial strategies.
In a rapidly evolving business landscape, sustainability reporting secures corporate resilience. Learn why integrating comprehensive environmental and social return on investment (SROI) evaluations is essential for sustainable operation.
