The World Business Council for Sustainable Development (WBCSD) published Changing Gears: How Are Companies Navigating Higher Expectations and Demands in Sustainability Reporting? (November 2024). The report explores trends in company reporting on sustainability topics and shares case studies. It also includes a benchmarking of the reporting practices of over 180 large public and private companies across the globe and provides detailed recommendations to companies on effective reporting practices.
Human Level’s Take:
- New requirements in sustainability reporting are here, with global implications. Examples: the EU's Corporate Sustainability Reporting Directive (CSRD); over 130 countries adopting frameworks based on the International Sustainability Standards Board (ISSB); and various topic-specific requirements on issues like modern slavery, data privacy and climate risk.
- In response, the WBCSD is seeing a rise in the level of detail and rigour in sustainability disclosures across some of the largest companies globally.
- At the same time, many companies are now facing the challenges of implementation, especially where guidance is still being developed or is open to interpretation. The WBCSD points out that these changes are coming up quickly and require companies to urgently adapt their internal practices through upskilling, enhancing board involvement, investing in data infrastructure and fostering cross-functional collaboration.
- There are many opportunities for companies to to leverage sustainability reporting requirements to strengthen practices on human rights, climate and the environment. For example, reporting on double materiality requires companies to strengthen risk assessments in order to understand impacts that are ‘outside-in’ and ‘inside-out.’ Reporting requirements also expect stakeholder engagement to be formalised and to cover rightsholders across the value chain.
- Reporting on risk management frameworks should include human rights policies, what companies are doing to conduct human rights due diligence, and transparency on both challenges and opportunities. Likewise, reporting should show that company sustainability commitments extend from the top of the organisation, that oversight of these topics is embedded into decision-making at board and executive level, and that sustainability performance is tied to executive compensation.
Some key takeaways:
- Trends in reporting on materiality, and frameworks and standards: The report focuses on general sustainability reporting trends across five different areas: materiality, frameworks and standards, external assurance, timeliness and level of integration, and sustainability governance. In terms of materiality, WBCSD finds that the number of companies disclosing a materiality process stayed steady compared to last year and most companies (90%) now share details of their materiality process, with a notable increase in those reporting on double materiality (from 55% in 2023 to 77% in 2024 — and not only in Europe but also in Asia-Pacific). On frameworks and standards, in alignment with growing requirements to increase the rigour of reporting, more companies are using key frameworks like those of the Sustainability Accounting Standards Board (SASB), Taskforce on Climate-Related Financial Disclosures (TCFD), Taskforce on Nature-Related Financial Disclosures (TNFD) and Science-Based Targets Network (SBTN); companies using GRI stayed steady between 2023 and 2024. The number of companies reporting against the Global Reporting Initiative (GRI) has remained steady at 83%.
- Trends in reporting on assurance, timeliness and integration, and governance: In terms of external assurance, there has not been an increase in the number of reports with external assurance, but the level of assurance is increasing for some indicators. WBCSD finds that 90% of reports have external assurance for sustainability indicators and processes, with 80% seeking limited assurance and 4% seeking reasonable assurance. As the CSRD requires companies to move towards reasonable assurance, WBCSD expects this figure to climb in the coming years. On timeliness and integration, most reports were published within three months of the financial year and there is a shift towards integrated financial and sustainability reporting. Finally, on sustainability governance, reporting on sustainability mandates of the board of directors or executive committees increased from 20% in 2023 to 32% in 2024. In addition, 14% of reports disclose the sustainability expertise and training of board members. And 73% of companies report that they link executive compensation to sustainability performance, with 62% of these describing the specific percentage contribution.
- Some key recommendations for companies: The report contains a large number of detailed recommendations for companies on best practices in sustainability reporting, based on an assessment framework with three overarching categories: principles and fundamentals of reporting; content of reports; and effectiveness of reporting. We have selected a few key recommendations with relevance for company reporting on human rights and due diligence practices, with many more in the full report. The WBCSD recommends strengthening reporting on the operating context impacting the company’s sustainability approach, including by identifying key megatrends impacting the organisation, forward-looking information on how the external environment could impact the company and how the company’s activities could impact people and planet, and the impacts of climate transition plans including specific metrics. The report also recommends reporting on stakeholder engagement including which stakeholders are considered across the full value chain, what formal mechanisms the company uses to engage them, and the needs of stakeholders and what the company has done to respond to them. In terms of reporting on implementation and controls, the report recommends that companies have a human rights policy in place, including a clear commitment to the UNGPs and a robust human rights due diligence process in place that is well-embedded across the business. It also recommends that companies have a balanced report, with transparency about both the positives and negatives over the reporting period. This can include reporting on key sustainability challenges faced with concrete examples, as well as narrative and graphics that point to weak performance and missed targets as well as areas of strong, positive performance. Adding external perspectives (e.g., from NGOs and trade unions) can also enhance transparency. In terms of governance, companies should include a clear leadership commitment to sustainability and describe how decision-making on sustainability topics is embedded into the corporate governance structure. This can include metrics like the number of meetings held and key decisions made by bodies like the board and executive committees. Companies should also disclose details of executive compensation tied to sustainability performance and the relevant sustainability expertise of board members, including training and the member selection process.
