Do Sustainability Reports Reflect the Truth?

Companies are increasingly sharing their sustainability efforts. They are focusing on carbon targets, renewable energy commitments, social indicators, and governance policies. However, disclosing more information does not guarantee greater transparency.

A company may publish many metrics, yet still only show part of the picture. Before trusting a sustainability claim, we must ask three questions: What was measured? What was left out? How thoroughly was the information analyzed?

1. What Do Sustainability Reports Actually Measure?

A sustainability report goes beyond simply listing projects. It demonstrates a company’s performance in the environmental, social, and governance areas. It also highlights sustainability risks and opportunities that could impact the future.

Environmental disclosures typically include the following:

Greenhouse gas emissions
Energy consumption
Water consumption
Waste
Biodiversity
Climate risks

Social disclosures may include the following:

Occupational health and safety
Working conditions
Human rights
Diversity
Impact on the community

Governance disclosures typically cover the following:

Board oversight
Business ethics
Anti-corruption measures
Risk management
Internal controls

A company’s value chain is important, particularly when significant environmental or social impacts outside its core operations are involved. However, value chain information constitutes only one part of sustainability reporting.

1.2. Different Standards Measure Different Realities

Not all sustainability reporting systems address the same questions. Some focus on a company’s impact on society and the environment. Others examine how developments in the field of sustainability might affect financial health.

The chosen standard determines which issues are important, sets priorities for indicators, and decides who the target audience will be. An environmental issue can be approached from two angles: its effects on ecosystems or its impact on costs and asset values.

This distinction is very important. In this field, there is no single, universal standard for defining what is most important.

1.3. Why Are Reporting Scopes Important?

Reporting scopes indicate which facilities, subsidiaries, activities, time periods, and data sources the published figures cover.

If a company states that it will reduce its carbon emissions by 25%, we need to know the base year, the scope, and how the calculation was performed. It matters whether total emissions have decreased or if only emissions per unit of production have decreased.

A reduction resulting from a decline in production is not the same as a reduction resulting from operational improvements. Similarly, if there is a significant drop in production, a decrease in water usage does not always indicate better performance.

2. Approaches to Sustainability Reporting

2.1. GRI: Materiality

GRI stands for the Global Reporting Initiative. It helps organizations demonstrate their impacts on the economy, the environment, and people. Its standards bring together universal requirements, sector-specific standards, and topic-specific guidance on areas such as emissions, water, waste, and health.

The core concept is materiality. Companies must identify both the positive and negative impacts of their operations. They must focus on the most significant impacts.

A report should not merely highlight the successes that management wishes to emphasize. A company might describe a small recycling program in detail while overlooking larger emissions or labor risks. Such a report may contain a great deal of data but could still fail to address the most significant impacts.

The use of GRI does not guarantee that every figure is accurate or verified. Reliability depends on data quality, consistent boundaries, internal controls, and assurance.

2.2. ISSB and IFRS S1–S2: Financial Materiality

The ISSB (International Sustainability Standards Board) sets standards for financial disclosures related to sustainability. The Board operates under the IFRS Foundation. Its primary target audience is investors and lenders.

IFRS S1 explains what companies must disclose regarding sustainability risks and opportunities that could affect their future. It addresses cash flow impacts, access to financing, cost of capital, strategy, and business models.

IFRS S2 focuses on climate-related risks and opportunities. It covers physical risks, such as floods, and transition risks, such as carbon pricing.

The key concept is materiality. A sustainability issue is material if it could influence investment decisions.

This differs from GRI’s impact-focused perspective. An environmental issue may be serious for a community but may not affect the company’s financial position. Both perspectives can be compatible. An environmental impact can translate into a financial risk.

2.3. CSRD and ESRS: Double Materiality

CSRD stands for the Corporate Sustainability Reporting Directive. This is the EU’s guideline for corporate sustainability reporting. It mandates reporting in accordance with the European Sustainability Reporting Standards (ESRS).

The fundamental principle of the ESRS is double materiality. Companies must assess how their actions impact society. They must also consider how sustainability trends affect their financial performance.

Double materiality combines external impacts with internal financial impacts. It examines what the company is doing for the world and how changes might affect the company.

2.4. KGK and TSRS: Turkey’s ISSB-Based Approach

In Turkey, the Public Oversight, Accounting, and Auditing Standards Authority (KGK) oversees sustainability reporting.

The Turkish Sustainability Reporting Standards (TSRS) consist of two parts:

TSRS 1 covers general financial disclosures related to sustainability.
TSRS 2 focuses on climate-related disclosures.

Turkey has integrated the ISSB Standards into its national system through the TSRS.

The ESRS uses the EU’s dual materiality model. The TSRS, on the other hand, is based on IFRS S1 and S2. It focuses on sustainability risks that could affect financial results.

This does not mean that one system is stronger than the other. Both systems address different questions for different users.

3. Greenwashing: The Gap Between Claims and Evidence

Greenwashing is when companies exaggerate their environmental efforts. They portray their performance as better than it actually is. This does not always involve false statements.

A company might highlight a reduction in emissions intensity while its total emissions are actually increasing. Others announce goals planned for the distant future—without setting intermediate targets—to achieve net-zero objectives. Some even label their products as “green” or “carbon neutral” without explaining their reporting boundaries or calculation methods.

Greenwashing can stem from selective presentation, incomplete boundaries, and the use of vague language.

Scope 3 emissions illustrate this challenge well. These emissions are linked to a company’s value chain but do not stem directly from the company’s operations. Calculations typically rely on estimates and externally sourced data. This leads to uncertainty, and this uncertainty must be disclosed.

A reliable report does not need to present every figure as definitive. The report must clarify where estimates were used, what assumptions were made, and what the data cannot reliably demonstrate.

4. Standards ≠ Verification

Compliance with GRI, ESRS, or TSRS standards does not mean that every figure has been independently verified.

A reporting standard sets criteria for the preparation of information. Verification, on the other hand, checks that the information does not contain material errors and meets the established criteria. Even if a company complies with a standard, it may still produce misleading results. This can occur if the data or methods used are inadequate.

Readers should distinguish which standard was used and which parts of the report were independently verified.

The second question is important because assurance may apply only to selected metrics. A company may obtain assurance for its direct emissions. However, it may not receive assurance for Scope 3 estimates or social indicators. The phrase “independently assured” implies that not every statement in the report has been subjected to the same level of testing.

5. Limited Assurance and Reasonable Assurance

Professional standards distinguish between limited assurance and reasonable assurance. ISSA 5000, the international sustainability assurance standard, addresses both types of engagements.

5.1. Limited Assurance

In a limited assurance engagement, the auditor performs a narrower scope of procedures. This may include interviews, analytical reviews, and testing of selected data.

The conclusion typically states that there is no evidence that the information was not prepared as required. This does not mean that every figure has been verified or that the report is entirely free of errors.

5.2. Reasonable Assurance

Reasonable assurance requires more comprehensive procedures, detailed testing, and extensive evidence.

The professional may examine internal controls, source documents, calculations, estimates, and management assumptions more closely. The opinion provides us with greater confidence that the information has been prepared correctly and meets all material criteria.

However, reasonable assurance is not a guarantee. The work still depends on sampling, professional judgment, estimation uncertainty, and the quality of available evidence.

The reliability of a report depends on several key factors. First, it is important whether assurance has been obtained. Next, the level of assurance is important. Additionally, the indicators examined and the scope of the engagement also play a role.

6. Conclusion: What Makes a Report Reliable?

GRI, IFRS S1–S2, ESRS, and TSRS bring greater structure and consistency to sustainability reporting. They establish common terminology. This helps improve comparability. It also makes sustainability an integral part of corporate responsibility.

However, standards alone do not create a complete or universally shared reality.

A report is shaped by its content, defined boundaries, calculation methods, estimated data, and elements not included in the report. Even if a report complies with a recognized standard, it may still present only a partial picture.

Therefore, trust depends on transparency. Companies must explain what has improved and what has worsened. They must specify in detail what is being measured and what is not included. Furthermore, they must confirm that assurance has been obtained and specify what information this assurance covers.

Do Sustainability Reports Reflect the Truth?

1. What Do Sustainability Reports Actually Measure?