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For Effectiveness, Should Companies Be Mandated to Submit a Sustainability Report or an ESG Report?

  • Writer: Yen Roxas
    Yen Roxas
  • Jan 19
  • 2 min read

The choice between mandating sustainability reports or ESG reports depends on the specific goals of the mandate and the audience it intends to serve. However, for effectiveness, mandating ESG reports is generally more impactful for the following reasons:

1. ESG Reports Align with Measurable, Comparable, and Standardized Metrics

  • Effectiveness: ESG reports rely on data-driven metrics aligned with globally recognized frameworks like SASB, TCFD, and CDP, enabling comparability and accountability across companies.

  • Why It Matters: Investors, regulators, and stakeholders need standardized, quantifiable information to assess risk, compliance, and performance.

2. ESG Reports Address Financial and Risk-Related Concerns

  • Effectiveness: ESG reporting integrates environmental, social, and governance factors into financial and risk assessments. This ties sustainability to business performance, making companies more likely to take meaningful action.

  • Why It Matters: By connecting ESG factors to financial outcomes, ESG reports ensure that sustainability is treated as a core business priority rather than a peripheral activity.

3. ESG Reports Are Better Suited for Regulatory Oversight

  • Effectiveness: Regulatory bodies increasingly require ESG disclosures (e.g., EU’s Corporate Sustainability Reporting Directive, U.S. SEC’s climate disclosure proposals) because they provide consistent, auditable datafor enforcement and monitoring.

  • Why It Matters: ESG reports ensure compliance with local and global laws, enhancing transparency and accountability.

4. ESG Reports Drive Actionable Insights

  • Effectiveness: ESG metrics highlight areas for improvement, such as reducing carbon emissions or improving governance practices, with clear benchmarks and goals.

  • Why It Matters: Companies can use ESG reports to track progress over time and set tangible, time-bound targets that drive meaningful improvements.

5. Sustainability Reports Are Broader but Less Standardized

  • Limitations:

    • While sustainability reports provide valuable narratives and insights into long-term visions, they are often less specific, harder to compare, and lack the rigor required for regulatory or financial purposes.

    • Sustainability reports are better suited for voluntary communication to customers, employees, and communities but less effective for driving systemic change across industries.

6. Combining Both Approaches for Holistic Effectiveness

  • Best Practice: Mandating ESG reports with a sustainability narrative component strikes a balance.

    • ESG reports provide the data and accountability needed for regulatory and investment purposes.

    • A sustainability narrative helps companies communicate their broader vision and engage stakeholders emotionally.


Our Recommendation

To ensure effectiveness, governments and regulators should prioritize mandating ESG reports because they deliver measurable, comparable, and actionable data.


However, companies should be encouraged to complement ESG reporting with sustainability narratives to communicate their vision and impact to broader audiences.


This dual approach ensures that companies are transparent, accountable, and proactive in addressing sustainability challenges while fostering trust among all stakeholders.



 
 
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