What Is Sustainability Reporting?
Sustainability reporting is the practice of measuring, managing, and publicly disclosing an organization’s environmental, social, and governance (ESG) performance by evaluating the impacts of its activities. This encompasses non-financial information, such as greenhouse gas emissions, energy use, and supply chain risks, and workplace practices such as board composition. It is both a communication and an assessment tool that enables investors, regulators, and other stakeholders to understand a business’ impacts, risks, and opportunities.
For private markets, sustainability reporting has moved from voluntary disclosure to a strategic value driver. Investors need comparable portfolio data, regulators are expanding disclosure requirements, and companies are using reporting insights to manage risk, demonstrate resilience, and support long-term value creation.
Why Sustainability Reporting Matters
Sustainability reporting has moved from the margins to become a key indicator of corporate performance and accountability. While financial performance remains critical, shifts in global regulations and consumer perceptions now require businesses to look beyond the bottom line. The question for most organizations today is no longer whether to report, but how to report well.
Three forces are driving the shift:
ESG regulation: Mandatory sustainability disclosures are expanding globally through frameworks and regulations such as the EU’s CSRD, California’s Climate Accountability Package, and the ISSB’s standards, reflecting a push towards increased ESG transparency. These requirements are broadening the scope of organizations expected to report and what they must report on.
Investor and stakeholder demand: Limited partners, institutional investors, and other stakeholders—such as customers requiring CDP or EcoVadis reporting—want comparable, auditable data that ties ESG performance to meaningful business outcomes. In private markets, GPs are translating those expectations into reporting requirements for portfolio companies, and gaps in ESG data can affect business decisions, investor confidence, and fundraising outcomes.
Business value: Beyond compliance, a rigorous sustainability reporting process surfaces operational risks early, supports access to capital, and builds internal systems that strengthen organizational resilience.
Sustainability reporting is inherently complex, made even more challenging by a fragmented regulatory landscape, granular reporting requirements, and data collection gaps. But understanding which frameworks and standards to apply, and what processes need to be in place, can help organizations report consistently and confidently.
Sustainability Reporting Frameworks and Standards
The sustainability frameworks or standards companies need to report against shape everything that follows—what metrics matter, how to collect and measure them accurately, and whether the data can be leveraged meaningfully to improve ESG performance. While the terms “frameworks” and “standards” are often used interchangeably, understanding the distinction enables organizations to choose the right reporting approach.
ESG frameworks establish the “what” and “why” of disclosure and define the purpose, principles, themes, and reporting structure without prescribing specific metrics.
ESG standards set specific and technical requirements, such as the exact metrics and methodologies for collecting, reporting, and verifying sustainability data, ensuring that the data is consistent and comparable across companies and industries.
Most organizations use both: A framework to structure the overall report and one or more standards to ensure the underlying data is rigorous and auditable.
The table below summarizes the commonly used ESG frameworks and standards for sustainability reporting:
|
Name
|
Type
|
Issuer
|
Mandatory/Voluntary
|
Best for:
|
|---|---|---|---|---|
|
GRI
|
Standard
|
Global Reporting Initiative
|
Voluntary
|
Broad impact reporting; most widely adopted standard globally
|
|
ESRS
|
Standard
|
EFRAG (under CSRD)
|
Mandatory (in-scope EU companies)
|
EU companies subject to CSRD
|
|
IFRS S1/S2
|
Standard
|
ISSB (IFRS Foundation)
|
Voluntary → mandatory as adopted
|
S1: Investor-focused financial disclosures S2: Climate-related disclosures
|
|
SASB
|
Standard
|
IFRS Foundation
|
Voluntary
|
Industry-specific financial materiality
|
|
TCFD
|
Framework
|
FSB (now embedded in IFRS S2)
|
Voluntary / referenced in law in several jurisdictions
|
Climate-related risk and opportunity disclosures
|
|
CDP
|
Framework
|
CDP
|
Voluntary
|
Environmental impact disclosure and scoring
|
|
EDCI
|
Framework
|
ESG Data Convergence Initiative
|
Voluntary
|
Standardized ESG metrics across private equity portfolios
|
|
Invest Europe
|
Framework
|
Invest Europe
|
Voluntary
|
ESG reporting for European private equity and venture capital
|
|
SDGs
|
Framework
|
United Nations
|
Voluntary
|
Strategic alignment with global sustainability goals
|
|
VSME
|
Standard
|
EFRAG
|
Voluntary
|
SMEs and companies reporting into larger organizations' value chains
|
|
EcoVadis
|
Rating/assessment methodology
|
EcoVadis
|
Voluntary, but can be mandated by a company’s customers or business partners
|
Companies of any size looking for an external score of performance, especially suppliers responding to buyer requests
|
|
SFDR
|
Regulation
|
European Commission
|
Mandatory (in-scope financial market participants or financial advisers operating or marketing in the EU)
|
Asset managers, fund manager, and financial advisers
|
Mandatory status varies by company size and jurisdiction and is changing quickly. For a closer look, see our guide to ESG regulations.
How to Choose the Right Sustainability Reporting Framework or Standard
Choosing the right sustainability reporting framework or standard depends on your reporting obligations, business objectives, industry, and stakeholder expectations. While there is no one-size-fits-all approach, evaluating a few key factors can help you identify which best support your compliance needs and sustainability goals.
1. Start with mandatory reporting obligations
Before collecting your sustainability data, identify the mandatory reporting requirements that apply to your business, based on its size, industry, or region of operations.
For example, companies within the scope of the EU’s Corporate Sustainability Reporting Directive (CSRD) must report using the European Sustainability Reporting Standards (ESRS). Large businesses operating in California are subject to California’s Climate Accountability Package (SB 253 and SB 261) and are legally obligated to report on their carbon emissions and climate-related business risks. Globally, many countries are aligning with the ISSB’s IFRS S1 and S2 standards as a baseline for sustainability reporting.
Consider mapping local industry-specific disclosure rules, which can overlap significantly with broader ESG standards and help reduce reporting efforts.
2. Conduct a materiality assessment
Your reporting framework should reflect the ESG topics that are most material to your business, stakeholders, and sustainability goals, including topics that are financially material and existing or emerging risks. Conducting a materiality assessment surfaces these priorities and pinpoints the metrics that matter most, bringing clarity to your reporting strategy and ensuring alignment with the right standards.
3. Consider investor and stakeholder expectations
Investors increasingly want insight into ESG risks and opportunities as they directly impact long-term value creation and investment decisions. Private equity-backed companies, for example, may be asked to report using ESG Data Convergence Initiative (EDCI) metrics, while others may need EcoVadis or CDP reporting from their suppliers. Many GPs also require portfolio companies to report against a standardized set of metrics to ensure consistent fund-level reporting and benchmarking.
4. Assess your company’s capabilities
Collecting and analyzing data takes time, so take stock of your internal capabilities for tracking metrics against a given framework. Identify what capacity, resources, or tools you need to choose the standards and frameworks that work best for you, spot overlapping reporting requirements to reduce reporting burdens, and streamline data collection from end to end.
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How To Produce a Sustainability Report
Producing a sustainability report is a cross-functional effort that involves data collection, stakeholder engagement, materiality assessments, and strong collaboration and governance. Some frameworks and standards require specific formats for reports, so verify these requirements before you begin.
Below are a few general, simplified steps to guide you:
- Define reporting scope: Start by determining which entities, geographies, reporting periods, and sustainability goals the report will cover.
- Identify material sustainability issues: Run a materiality assessment to identify the ESG topics most significant to your business and stakeholders. Many standards—including GRI, ESRS, and IFRS S1—have specific requirements for assessing and documenting materiality. The assessment should engage both internal and external stakeholders to understand their sustainability priorities.
- Select your framework(s) and standard(s): Choose a reporting structure that best fits your regulatory obligations, industry needs, stakeholder expectations, and reporting maturity.
- Collect and analyze ESG data: Gather quantitative and qualitative metrics from across the business, including from portfolio companies if relevant. Establishing clear data governance protocols also ensures the data is traceable and audit-ready for future assurance assessments.
- Draft and structure the report: Combine ESG data with narrative context, covering strategy, governance structures, risk management, targets, and progress. The report should explain not just what the numbers are, but what they mean and what the organization is doing about them.
- Seek assurance: Independent third-party assurance of ESG data is mandatory under regulations such as the CSRD and is crucial to safeguard the credibility and integrity of the reported data.
- Publish the report and communicate next steps: Make the report accessible to stakeholders and use the findings to inform strategic next steps for improved ESG performance.
A strong sustainability report provides insights into current ESG gaps and operational risks and opportunities, while also providing an actionable roadmap for future improvements.
Common Sustainability Reporting Challenges
Despite growing adoption and tools, many organizations still face a myriad of challenges with sustainability reporting, with poor data quality, evolving regulations, and limited resources cited as common roadblocks.
1. Poor data availability and quality
ESG data is often scattered across different departments, systems, and formats, making it difficult to collect accurate and robust sustainability information. Many organizations also rely on manual processes such as spreadsheets to collect data, leading to errors, inconsistencies, and data gaps that undermine the validity of these disclosures and limit meaningful performance benchmarking.
2. Regulatory complexity and changes
The sustainability reporting landscape is ever-evolving, and due to the absence of a standardized, universal regulatory framework, new localized regimes will continue to emerge while existing ones shift. Monitoring regulatory updates, interpreting new reporting requirements, and tracking timelines can be very time- and resource-intensive, and this burden compounds for companies that must comply with multiple regulations simultaneously.
3. Limited internal resources and expertise
Many organizations—especially those reporting for the first time—lack the dedicated sustainability teams, specialized knowledge, and workflows for effective and efficient ESG reporting. Collecting data, engaging stakeholders, and navigating complex reporting requirements can be overwhelming for those with nascent sustainability efforts, which can place significant demands on already stretched internal teams.
4. Misalignment on stakeholder expectations
Companies often need to engage various internal and external stakeholders, such as investors, board members, and customers, to understand what they expect from ESG reporting and their key sustainability priorities. But when those conversations do not take place, misalignment can emerge later in the process—especially between LPs and GPs, when reported data does not fully reflect investor expectations.
See the Top Metrics Investors Are Tracking
What are investors actually asking for? See the top 30 most-requested ESG metrics as of Q1 2026, plus the trends and regulatory shifts shaping the private markets.
What to Look for in a Sustainability Reporting Software
The right sustainability reporting software should do more than just centralize ESG data—it should provide regulatory alignment, integrate seamlessly with existing systems, and be able to transform data into actionable business insights. As reporting obligations grow more complex, organizations are turning towards dedicated solutions to streamline and manage the reporting process.
While evaluating sustainability reporting software or vendors, consider these capabilities:
1. Robust ESG data management and governance
Consistent sustainability reporting depends on consistent data, and poor data hygiene and fragmented data sources can affect disclosure quality and validity. Look for a centralized platform that supports structured data collection, automated validations, and has built-in controls that ensure reported information is complete, comparable, and audit ready from the start.
2. Regulatory alignment and support
Sustainability software should make it easier to keep pace with a changing global regulatory landscape. Look for a solution that supports widely used standards and frameworks, such as the ESRS, EDCI, and IFRS S1 and S2, and is able to keep templates and metrics up to date as requirements change. Some platforms also offer regulatory tracking tools that flag specific compliance needs and map overlapping requirements.
3. Actionable analytics and benchmarking
A good sustainability platform should make it easy to turn raw ESG data into actionable, decision-useful insights, whether through benchmarking performance against industry peers, tracking progress against targets, or proactively surfacing risks and opportunities. This is critical for enabling continuous year-on-year improvement and measuring the true impact of an organization’s ESG initiatives.
4. Portfolio-level data aggregation
For private market investors, sustainability software needs to do more than collect data. It should aggregate ESG data across portfolio companies and turn it into standardized, fund-level reporting for GPs and LPs. This gives investors a comparable view of performance across holdings, enabling them to benchmark accurately and build engagement plans.
5. Integration with existing systems
Sustainability data rarely lives in isolation. Consider how well a platform integrates with your existing tech stack, such as HR systems, ERP tools, or carbon accounting software. Having such strong interoperability provides a more complete picture of material topics across your portfolio and organization.
6. Strong data security and controls
ESG data often contains confidential information and safeguarding that data is crucial for preserving reporting integrity. Look for features such as role-based permission controls, data encryption, as well as being ISO 27001 and SOC2 Type II compliant.
7. Assurance-ready data and documentation
Independent third-party assurance is mandatory under regulations such as the CSRD, requiring companies to demonstrate that their ESG data is accurate and traceable. Sustainability software can support assurance readiness by maintaining clear audit trails, documenting data methodologies and sources, and structuring reports in a format that assurance providers can review efficiently.
8. Ongoing expert support and advisory
The best vendors are ones that offer continued support past onboarding, such as access to ESG experts, training materials, and other resources as your reporting needs evolve. This is especially valuable for those reporting or building their sustainability program for the first time.
Are Sustainability Reporting and ESG Reporting the Same?
Sustainability reporting and ESG reporting refer to the same practice. Both describe the process of disclosing environmental, social, and governance performance to stakeholders. The difference is mostly one of language and emphasis:
- ESG reporting: The phrase was commonly used in investment and capital market contexts, where the three-pillar ESG framework was the standard way to evaluate non-financial risk.
- Sustainability reporting: A broader term for corporate sustainability disclosure, but one that is increasingly preferred across regulatory bodies.
Both leverage the same frameworks, metrics, and processes to communicate performance, support more strategic decision-making, and build more resilient operations.
How Private Markets Approach Sustainability Reporting
Private market participants face a unique reporting challenge: they must collect consistent, auditable ESG data across a portfolio of companies, many of which have no dedicated sustainability function and may be reporting for the first time.
GPs need fund-level data that is comparable across holdings, but each portfolio company starts from a different baseline—different systems, different capacity, and different levels of understanding of why ESG data matters. Without a standardized approach, investors are left with fragmented data that cannot support meaningful analysis or investment decisions.
Initiatives like the EDCI and Invest Europe have become central to addressing these gaps. By aligning GPs around a common set of metrics and collection processes, these frameworks make it possible to build comparable data across funds for the first time.
For GPs and LPs alike, the goal is the same: transform fragmented ESG data into decision-useful intelligence. Achieving it requires more than a well-designed data collection process. GPs must engage portfolio companies early, invest in capacity building, and have open dialogues with LPs to truly understand their sustainability goals and expectations.
How Novata Supports and Simplifies Sustainability Reporting
Novata combines ESG data management, compliance monitoring, and reporting workflows in a centralized platform, giving investors and companies a secure and streamlined environment to collect, report, and act on their sustainability data.
With built-in platform guidance, access to an expert advisory, as well as sustainability strategy support, our goal is to help companies at every stage of their reporting journey, from first-time data collection to assurance-ready disclosure. Whether you are building a reporting program from scratch or scaling one for future reporting cycles, Novata is designed to grow with you.
FAQs
What is sustainability reporting?
Sustainability reporting is the practice of measuring and publicly disclosing a company’s environmental, social, and governance (ESG) performance, so stakeholders can assess a business’ impacts, risks, and progress against its commitments.
Is ESG reporting the same as sustainability reporting?
Largely, yes. The terms are used interchangeably to describe disclosing ESG performance. “ESG reporting” is more common in investment contexts, while “sustainability reporting” is the broader, increasingly preferred term—but the frameworks, standards, and process behind them are the same.
Is sustainability reporting mandatory?
It depends on your company size and where you operate. Regulations such as the CSRD and California’s climate disclosure laws make it mandatory for companies above certain thresholds, while many other organizations still report voluntarily. See our guide to ESG regulations for more.
What’s the difference between a framework and a standard?
A framework provides the broad structure and principles for what to disclose; a standard prescribes the exact metrics and methodologies. Frameworks shape the report while standards make the data comparable. Most organizations use both together.
Which sustainability reporting framework should I use?
Choose based on your industry, your stakeholders’ expectations, your regulatory obligations, and your reporting maturity. Many companies combine a framework (such as TCFD) with one or more standards (such as GRI or SASB) to meet different needs.
What should a sustainability report include?
A report should cover the environmental, social, and governance topics most material to your business, supported by consistent metrics and a clear audit trail, plus narrative on strategy, governance, risks, and targets.
How do private market investors approach sustainability reporting?
Investors collect data across their portfolio companies with the goal of gaining decision-useful insight across the fund, not just company-by-company disclosure.
How often should companies report?
Most companies report annually, aligned to their financial year and any regulatory deadlines. Data collection, however, is increasingly continuous rather than a once-a-year exercise.
How do you start sustainability reporting?
Begin by defining your scope and stakeholders, then run a materiality assessment to identify your priority topics. From there, select your framework and standards, collect and validate your data, and build toward your first report.
Simplify Sustainability Reporting with Novata
ESG data collection and reporting has never been easier. Novata brings all your sustainability data into one secure platform, making it simple to collect, validate, and report on the metrics that matter.