Sustainability reports: Why is it worth a read?
With sustainability reports, Switzerland and the EU are increasing the pressure on large companies to account for the social and environmental impacts of their activities. Why is it important for me as an employee to read my company's sustainability report?
Sustainability reports on the ecological and social footprint are booming. Many companies are outbidding each other with targets to become climate neutral by 2050 or sooner. In general, there is a danger that they present themselves better than they are. It is often difficult for outsiders to recognise this kind of greenwashing. As an employee, on the other hand, you know the company. And you are in a better position to classify information and recognise weaknesses in the reports.
What questions must a sustainability report answer?
Companies usually only report on what they want to report on. To date, no global standard has been established. This makes comparisons difficult. In Switzerland, three quarters of the companies follow the Global Reporting Initiative (GRI), two thirds the 17 UN Sustainable Development Goals. Many apply several standards.
Where do I need to look particularly closely?
Two areas are central:
- Targets: Targets must be specific, measurable, relevant, time-bound and impact-oriented.
- Measures: With which concrete instruments does a company intend to achieve these goals.
Which companies in Switzerland have to prepare a sustainability report?
In Switzerland, large Swiss companies are obliged to do so, but only since 2023. They must provide information on business risks regarding the environment, social issues, human rights and corruption. This was decided by parliament as a counter-proposal to the corporate responsibility initiative. From the beginning of 2024, companies with at least 500 employees must also provide information on how they influence the climate with their activities. And how they intend to reduce greenhouse gas emissions.
Special case: Companies operating in the EU
The EU has stricter regulations. Even companies with 250 employees must provide transparent information about their impact on climate change, water consumption and biodiversity. And also how they treat their own employees and the workers of suppliers. These rules also apply to companies outside the EU, including Swiss corporations. Provided they reach an annual turnover of 150 million euros in the EU and have a subsidiary there.
Do the large companies fulfil the legal obligations?
They will have to disclose their dealings with people and the environment from the 2023 reporting year. Many of the companies are still lagging behind. For the report «Focused reporting» by engageability and öbu, all companies listed on the Swiss stock exchange that are subject to the obligation were examined. Only 60 percent of the companies (128 out of 213) had disclosed sustainability information in the 2021 financial year. In view of the legal mandate, this is «a surprisingly low figure», the study says.
How good are the sustainability goals that companies set for themselves?
For the «Focused Reporting» report, over 150 large companies and SMEs were analysed (they employ 60 per cent of all workers in Switzerland). Nine out of ten companies have not formulated a goal in relevant areas that meets the criteria listed above. Less than 5 per cent of the companies set a target for biodiversity.
Special case: Small companies
What can employees do in smaller companies that do not produce sustainability reports?
It is true that there is no obligation for SMEs to produce such reports. But even here, employees have good arguments to demand more transparency in sustainability issues. Because indirectly, smaller companies are also affected by the regulations. More and more large companies are demanding proof from their suppliers that sustainability criteria are being met.
Isn't it much too costly for small companies to prepare a sustainability report?
For a meaningful report, you need solid data. This ranges from information on energy and water consumption and working conditions to the principles of corporate governance. If a company takes its social and ecological responsibility seriously, it knows this information. The effort required to compile a report from this information can also be kept to a minimum. With esg2go, a platform has recently become available that SMEs can use to precisely measure their sustainability and compare themselves with other companies. The project was developed by the Fribourg School of Economics. So smaller companies no longer have an excuse.
How can I tell if a goal is well or insufficiently formulated?
Good targets refer to the impact. For example, «tonnes of CO2 per unit produced». It is also positive if bonus payments are linked to the achievement of such sustainability targets.
Inadequate targets are not impact-oriented. For example, when companies state how many vehicles with electric motors they want to use. Or how much they want to invest in wastewater treatment measures. With such targets, it remains unclear what the impact on the environment can be.
What do I have to pay attention to if my company sets itself the goal of being climate neutral by 2040 or 2050?
What is relevant is what climate neutrality refers to. Only to the company's own production? Are suppliers included? Or is care taken to ensure that the use of the manufactured products no longer produces any net greenhouse gases? The broader the scope, the more effective the goal. Also relevant are the details of the measures to achieve the targets. You should be cautious if the company wants to compensate the greenhouse gases to a large extent with external projects. The purchase of CO2 certificates should be assessed critically. It is important that measures are primarily implemented in the own company.
Are companies setting sufficiently ambitious climate targets?
Unfortunately, no. The goals of the companies analysed in «Focused Reporting» are not sufficient to meet the targets of the Paris Climate Agreement. In addition, companies are concentrating on their own business activities. Hotspots in the value chain, where climate protection measures can have the greatest impact, are neglected.
And what about the measures to achieve the goals?
They are not satisfactory. Only one third of the companies disclose how they intend to achieve the targets. Most are content with general, unspecific statements.
How can I better classify the information in my company's sustainability report?
It is difficult to judge the information in a report on your own. Also because there is still no binding standard. It is helpful to compare it with good examples. This is made possible by «Focused Reporting», for example, which lists various high-quality reports.