Starting in 2024, the EU will make sustainability reporting mandatory for companies based on the Corporate Sustainability Reporting Directive (CSRD). Although this requirement does not apply to the public sector, except for private and public limited companies, they cannot ignore sustainability either. Public organizations have a societal duty to balance social interests, financial results, and the environment. This transition encourages public institutions to map out their approach to sustainability opportunities and risks.

For that reason, you developed the ESG Quickscan consisting of 28 questions. What is the purpose of this tool?

  Liu: “The Quickscan can provide organizations and us with insights into their sustainability efforts based on how they report on them. It was intentionally not made into an extensive scan because sustainability reporting is still a new topic. Many organizations are still in the early stages, and this Quickscan provides an understanding of where they stand and what next steps can be taken.”

Which institutions were involved in your research?

”Jussen: “In the study, we examined 60 large institutions from the public sector, including hospitals, elderly care and mental health institutions, disability care, universities, and municipalities.”

Liu: “We studied annual reports and financial statements from 2022 and other public data such as budgets and environmental reports. It was a conscious decision to use only publicly available data (and not, for example, conduct interviews) because sustainability reporting is about being transparent about where you stand in the sustainability transition.”

You use four levels for the ESG Quickscan, from 'Exploring Sustainability' to 'Being Sustainable.' Which organizations scored the highest and which the lowest?

Liu: “As expected, no organization scored much higher than level 2: Doing Sustainable. The mental health care sector reports the least about sustainability and is still at the level of Exploring Sustainability. Universities, municipalities, and hospitals mainly score at the level of Doing Sustainable. This was expected, as these organizations are slightly more engaged with sustainability, for example, by committing to the Green Deal Sustainable Care or already having sustainability goals in place.”

What are your main findings?

Liu: “The good news is that we see most organizations are engaged with sustainability to some extent. There are many initiatives, and they are being reported on. However, we also find that this reporting is still highly fragmented. Organizations report on their sustainability activities in various documents—not only in annual reports but also in environmental reports, roadmaps, on their websites, or in separate sustainability reports. This fragmentation made it difficult for us, and therefore also for their stakeholders, to get a complete and integrated picture.”

Jussen: “Additionally, we see that hardly any consistent rules are applied in the reporting. For example, it is rarely specified what the intended goal is and to what extent it has been achieved. What is mostly visible are the activities that are being carried out, but it remains unclear which activities are not mentioned and therefore not executed. This makes the information difficult to interpret and raises questions about how transparency regarding sustainability aspects is ensured.”

That seems like an eye-opener...

Liu: “Absolutely, and now the question arises: how can we, in the public sector, work towards providing more useful information about the sustainability transition?”

Do you have any ideas about that?

Liu: “Ensure there is one comprehensive document per organization in which you report on all sustainability activities. In this document, describe your ambitions and goals, what has been achieved, and what has not yet been accomplished."

Jussen: “And ensure a consistent way of reporting. This makes the information easier to interpret.”Liu: “Consistent reporting and presenting all sustainability activities in one document is also important for all stakeholders in your chain. Financial institutions like insurers and banks are obligated to report on the CSRD, and this involves looking not only at their own activities but also at those of their suppliers. So, be prepared for questions about this in the near future: one clear and balanced report for the various stakeholders saves a lot of time.”

Finally: Companies often see the reporting obligation as an administrative burden, especially in this time of weak economic growth. How do you view this?

” Jussen: “When we sit down with our clients, we notice that while they obviously don't welcome an obligation, they do desire joint action to achieve a more sustainable and inclusive world. Balanced reporting is a means to achieve this. And public institutions, in particular, have an important role model function to fulfill.”

Liu: “Organizations that prominently include sustainability in their strategy stand out in the competition for new talent. The new generation of employees is much more concerned with themes like diversity, inclusivity, and work-life balance. In other words, see reporting as an opportunity to distinguish your organization, define your strategy, and guide the sustainability transition.”