Transparency along the supply chain is not only important from an efficiency perspective. It’s also crucial for consumer confidence and sustainable development: After all, modern companies are facing the challenge of ensuring that their supply chain is designed not only efficient in terms of costs and time, but also environmentally and socially responsible. This responsibility requires companies to report transparently on their efforts in order to gain and maintain the trust and support of their stakeholders. In this article, we shed light on the role sustainability reports play in this context..
More laws and regulations: The importance of sustainability reports is increasing
Where do our goods come from? What raw materials were used for production? How are local workers treated? It’s not just the rise in regulation, but also an increasing number of consumers and stakeholders who expect insight into the manufacturing conditions of the products they buy. Companies are therefore required to provide information on the environmental and social impact of their supply chain. Data on emissions, resource use, working conditions and more is provided in the form of sustainability reporting and made available to interested parties.
Meanwhile, the associated tasks are becoming more complex: Among other things, the CSRD provides for significantly expanded reporting in the EU. Companies must not only report on their direct environmental impact, but also on that of their suppliers. This includes an even more comprehensive presentation of the social, economic and ecological aspects of their business activities. In the supply chain in particular, companies must disclose their due diligence processes and assess the risks and impacts of their activities on the environment and society. The positive side effect of this process is the fact that the detailed implementation ensures significantly increased transparency in the supply chains and strengthens customer confidence.
Sustainability reports: step by step towards greater transparency
So how is a sustainability report prepared and what content is required? Our step-by-step plan provides companies with guidance, although the exact requirements may vary depending on the directive.
Step 1: Defining the reporting framework, sustainability criteria and targets
A clear framework must be defined before the actual reporting begins. This includes deciding which standards and guidelines – such as the ESRS (European Sustainability Reporting Standards), the Global Reporting Initiative (GRI) or the UN Global Compact – the report should be based on. They help to determine the scope and level of detail and ensure that the report meets international requirements. The next step includes the definition of sustainability goals: What is it that your own company wants to achieve, what results are being pursued, what are they based on? Materiality assessments can help to identify the issues that are of greatest importance to the company itself and its stakeholders. The specific criteria and indicators for reporting are derived from these objectives.
Step 2: Collecting data along the supply chain
Collecting relevant supply chain data is one of the most time-consuming stages in the sustainability reporting process. Companies need to implement effective data collection systems that allow to capture the impact of governance practices, environmental aspects such as CO2 emissions, fuel consumption during transportation, waste management, water or energy consumption, as well as social aspects such as working conditions or community work. Technological tools and internal data management systems are essential to collect and process real-time information efficiently and to the required extent. With the help of the Internet of Things, for example, objects are given a digital identity by microprocessors, equipped with electronic intelligence and networked: they are thus able to measure data via the Internet, on the energy consumption of machines or emission values of transport vehicles for instance, and send them directly to central systems.
Step 3: Analyzing and evaluating information
After the extensive data collection, the information is analyzed and classified in order to measure the sustainability performance of companies along their supply chain. Using transportation as an example, the following questions could be addressed: What are the CO2 emissions on certain routes? Which means of transportation and packaging were chosen and why? In this crucial step of analysis and evaluation, the raw data is converted into meaningful key figures that reflect the previously defined environmental targets and indicators. This process requires the use of specialized analysis tools and software that can process and visualize complex amounts of data. The analysis not only helps to evaluate current performance, but also to identify trends and patterns over time – this greatly benefits long-term planning and target setting.
To ensure a consistent and fair assessment, the data evaluation must be carried out objectively and in accordance with defined criteria.These criteria must in turn be communicated transparently in order to increase the credibility of the sustainability report and enable stakeholders to understand the results. In addition, companies can use benchmarks and best practices to provide insights into their performance – this also increases external readers’ confidence in the relevance and reliability of the data presented.
Step 4: Creating a sustainability report
The next step is the preparation of the sustainability report. For this matter, the analyzed data is put into a structured and comprehensible form. The process commences with the selection of a suitable format that both addresses the needs of the stakeholders and ensures compliance with relevant reporting standards such as GRI or SASB (Sustainability Accounting Standards Board). A well-structured report is divided into different sections on topics such as the environment, social issues and corporate governance. Each section should set out clearly defined objectives, progress and the data collection methodology in a transparent manner.
At the same time, it is important that the report not only contains facts and figures, but also provides further information. Case studies that highlight specific measures and their effects are well-suited in this context. Visualizations such as graphs and diagrams play an important role in presenting complex data in a clear and easily understandable way. In addition, to promote the authenticity and transparency of the report, it should include a logical and open discussion of challenges and areas for future improvement.
Last but not least, companies need to ensure that the sustainability report is published in a standard format and is error-free, precise and consistent. These precautions strengthen the credibility of the content and help to avoid misunderstandings.
Step 5: Developing a communication strategy
For the sustainability report to be effective, companies need to develop a clear communication strategy in order to effectively communicate the results to all relevant stakeholders. The strategy should utilize different channels such as the company website, social media, press releases and direct communication in order to reach a broad and diverse audience. The presentation of the report should be both informative and relatable in order to encourage reader interest and engagement.
Interactive elements such as online questionnaires or webinars create space to ask questions and provide feedback – this two-way communication is important for stakeholder understanding and acceptance. Logictics managers can then analyze the feedback and incorporate it into their future reporting and sustainability initiatives.
Step 6: Reviewing and continuously improving the sustainability report
To ensure the credibility of the sustainability report, it is advisable to carry out ongoing internal and external reviews even after publication. That way, any inconsistencies or errors can be identified and corrected. External audits, carried out by independent third parties, also play an important role in validating the information provided in the report.
It is also helpful to implement mechanisms to monitor and evaluate the effectiveness of their sustainability efforts. These include regular progress reports and key performance indicators (KPIs) that measure how well the targets set are being achieved.
Conclusion: Sustainability reports – why it’s worth the effort
Comprehensive sustainability reporting offers companies a valuable opportunity to demonstrate their commitment to ethical behavior and environmental responsibility. By transparently disclosing environmental, social and governance practices, they can strengthen the trust of stakeholders in the long term. After all, the transparency creates a basis of trust that not only improves the relationship with customers and investors, but also strengthens the company’s position and reputation on the market.
By incorporating critical feedback and suggestions for improvement provided by stakeholders into the planning and implementation of sustainability strategies, companies can ensure that their measures remain effective and continue to evolve. Hence, they create an ongoing process of adaptation and optimization that also improves their sustainability performance in the long term – a win-win situation for companies, customers and the environment.