As sustainability continues to be a key consideration in long-term strategic planning, investors, customers, suppliers, and employees are demanding increased transparency and accountability in company reporting. Complex regulations require organizations to clarify how climate-related risks impact their business operations—and how their business operations impact the environment.

For this reason, stakeholders need to be aware of the common pitfalls in sustainability reporting.

Common Pitfalls in Sustainability Reporting

Three big sustainability pitfalls include:

• Greenwashing: Presenting a misleading image of an organization’s environmental efforts, often through inaccurate or inflated claims about a product or service’s true level of sustainability
• Greenwishing: Committing to sustainability goals but without the resources to achieve these goals (essentially, making broad promises without implementing real changes)
• Greenhushing: Reducing the level of public information available on an organization’s sustainability efforts to avoid criticism or scrutiny

Strategies to Avoid Sustainability Reporting Pitfalls

Organizations can avoid sustainability reporting pitfalls and build trust with stakeholders if they:

• Conduct materiality assessments
• Set measurable goals
• Adopt industry standards
• Stay knowledgeable of climate or ESG regulations

Conduct Materiality Assessments

Identify and prioritize key environmental issues that matter to your organization and stakeholders to align sustainability or ESG efforts effectively. This strategic approach enhances stakeholder engagement, aligns sustainability initiatives with overall business goals, mitigates risks, and helps keep reporting relevant, transparent, and ultimately able to contribute to long-term value creation.

Set Measurable Goals

Set clear, measurable sustainability goals and regularly report on progress, for the sake of transparency and accountability. By establishing quantifiable objectives, organizations can focus their efforts, track results, and demonstrate their commitment to sustainability. This approach enhances trust with investors, customers, and employees, reinforcing the integrity of the organization’s initiatives and fostering a culture of responsibility.

Adopt Industry Standards

Align sustainability claims with recognized industry standards and certifications such as the International Sustainability Standards Board’s International Financial Reporting Standards (ISSB IFRS) S1 and S2 or the Global Reporting Initiative (GRI). Adopting industry standards in sustainability reporting is essential for organizations as it supports consistency in their claims. 

Stay Knowledgeable of Climate or ESG Regulations

Understand what’s on your regulatory compliance roadmap to keep your resources a part of your sustainability or climate reporting plan. To stay informed about climate and ESG regulations, organizations should regularly review updates, engage with industry groups, and invest in employee training. Consulting legal experts supports compliance, while monitoring legislative developments helps maintain a proactive approach.

Enhance Internal Controls

Implement segregation of duties in the sustainability reporting process to involve multiple individuals in data collection and analysis. This reduces the risk of errors and fraud by allowing no single person complete control over the process.

Strong internal controls help mitigate risks, facilitate compliance with regulations, and promote a culture of continuous improvement. Ultimately, these efforts reinforce an organization’s commitment to responsible business practices and effective sustainability initiatives.

Strengthen Oversight and Governance

Create a sustainability or ESG committee or appoint an executive leader to oversee the program for accountability and stakeholder engagement. If a governance group is established, it should include representatives from various departments, such as finance, operations, marketing, and legal, to maintain a holistic approach to sustainability opportunities and risks.

Engage Third-Party Auditors

Use independent third-party assurance to validate sustainability claims and obtain limited or reasonable assurance over sustainability reporting. These assurance engagements offer an objective evaluation of an organization’s sustainability practices, evidencing that the claims made in reports are both accurate and credible, while also mitigating the risk of greenwashing.

We’re Here to Help

For guidance on developing a sustainability or ESG strategy, engaging your board, or questions on sustainability or ESG reporting, contact your Moss Adams professional.

Additional Resources

• Environmental, Social & Governance Services
• ESG Assurance Services