Sustainability 101: What is environmental reporting?
Do you feel a bit lost when people refer to certain environmental sustainability topics and aren’t sure where to start when it comes to learning more? Sustainability 101 is a blog series that you can turn to for information about different environmental terms that may come up at work, during discussions with friends, and even at your annual holiday gathering.
Companies play a pivotal role in addressing the climate challenges of today and tomorrow, with initiatives and innovations helping to build a more sustainable future. Technology companies can especially play a crucial role in helping to reduce global emissions. According to a World Economic Forum (WEF) report published in 2023, “Estimates reveal that the adoption of digital technology solutions in different sectors could help reduce global GHG emissions by 6–20 percent by 2030, depending on modeling scenarios and the sectors taken into account.” And besides the potential from innovation, there is also an expectation from investors, customers, and employees for companies to implement environmental initiatives and transparently report on their progress. Many regulators around the world are requiring companies to report on these initiatives as well. According to WEF, “Stakeholders nowadays are pressing organizations to go beyond expectations, imagine a better way to do business, address environmental, social and governance (ESG) concerns concretely and transparently, and to set goals and report progress for business sustainability.”
Environmental reporting is an important part of this journey; it is how companies disclose their environmental impact and progress on sustainability efforts to stakeholders. According to the Governance and Accounting Institute (G&A), 98% of companies in the largest half of the Russell 1000 by market cap published a sustainability report in 2022. Setting clear public goals, measuring progress against them, and reporting on that progress is a best practice and, increasingly, a regulatory requirement. Not only does reporting help increase transparency and trust, but it also helps promote best practices and collaboration by demonstrating a more proactive approach to sustainability.
Changes in environmental reporting
Many companies have been voluntarily reporting on their environmental performance and progress against their goals for years. Companies have traditionally reported in two ways: by publishing their own public reports aligning with standard environmental reporting frameworks, such as the Global Reporting Initiative (GRI), and by submitting information to formal indices, raters, and rankers, such as CDP (formerly the Carbon Disclosure Project).
In recent years, we have seen a shift from voluntary reporting to mandatory reporting. The need for comparability, accountability, and defendable and auditable data and progress across companies contributes to this change.
For example, in the European Union, the Corporate Sustainability Reporting Directive (CSRD) modernizes and strengthens existing rules concerning the social and environmental information that companies have to report. The CSRD aims to ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment, and for investors to assess the financial risks and opportunities arising from climate change and other sustainability issues. A broader set of companies will now be required to report on sustainability, and companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS).
Mandatory regulations are still evolving in many parts of the world. For example, in the United States, the U.S. Securities and Exchange Commission (SEC) recently finalized a rule to enhance and standardize climate-related disclosures by public companies and in public offerings. And multiple jurisdictions around the world are actively pursuing or considering adoption roadmaps and pathways toward mandatory application of International Sustainability Standards Board (ISSB) IFRS® Sustainability Disclosure Standards (SDS).
Due to the urgency of climate change and the risks it poses, many companies recognize the importance of sustainability initiatives and transparent reporting regardless of the mandatory regulatory status. According to the WEF Global Risks Report, two-thirds of respondents rank extreme weather as the top risk most likely to present a material crisis on a global scale in 2024.
The future of environmental reporting
As we innovate in the climate space, there is also room to innovate on the way we approach environmental reporting.
Scenario modeling can help enhance the quality of environmental reporting by helping us gain a deeper understanding of potential future environmental impacts, risks, and opportunities such as climate change projections, regulatory changes, and advancements in technology.
Transition plans help companies gain a better understanding of how they intend to change their operations, practices, or business models to address environmental challenges. Robust scenario modeling can help project future performance against a defined baseline, and strategies and actions can be developed in response. In addition, these scenarios help us understand and make updates based on the latest climate science.
The complexity of the questionnaires and methodologies that raters and rankers (such as CDP, mentioned earlier) use to assess companies is growing. Reporting into these increasingly detailed frameworks relies on having quality data and estimations, which depends on a collective effort with customers, suppliers, and other partners to help gather the best data.
How Cisco approaches environmental reporting
Cisco has a long history of voluntary reporting on sustainability, and we want to continue to share our progress in an authentic and transparent way. To remain transparent, we publish an annual Purpose Report and maintain an ESG Reporting Hub. The report describes our commitments, goals, progress, and impact for the ESG topics that are important to our stakeholders from our most recent fiscal year. The ESG Reporting Hub includes in-depth information and historical data on all reporting topics.
Cisco’s 2040 net-zero target and near- and long-term targets are approved by the Science Based Targets initiative (SBTi) under its Net-Zero Standard, the world’s first framework for corporate net-zero target setting in line with climate science. This builds on our history of setting meaningful goals, measuring our progress and impact, and reporting on them transparently.
Cisco is trusted in the IT space, and we are committed to maintaining that trust in our environmental reporting. Since quality reporting depends on a collective effort across the value chain to gather reliable data and estimations, we strive to influence our customers, suppliers, and partners to embrace robust reporting as well. For example, our suppliers are expected to report GHG emissions and energy consumption to CDP (a not-for-profit organization that runs a global disclosure system) on an annual basis. We know we must all work together to drive meaningful change for our planet’s health and future generations. Likewise, a collective emphasis on clear and accurate reporting will help inform our efforts and measure the progress we are all making for the planet.
Learn more in our ESG Reporting Hub.
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