The Sustainability Report is a document that shows how the company impacts the environment, society, and its own corporate governance.While financial statements answer "How much money did the company make?", the sustainability report answers "How does the company generate this money and what impacts does it cause?"Why does the sustainability report exist?For a long time, companies were evaluated almost exclusively by profit; equity; and cash generation. But investors realized that two companies can have the same profit and completely different risks.For example: Company A has a profit of R$ 1 billion, emits a lot of carbon, and has a history of environmental accidents; Company B has a profit of R$ 1 billion, controlled emissions, and a low accident rate. The income statement shows the two as equal. The sustainability report shows that they are not.The ESG conceptToday these reports usually follow the ESG logic (Environmental, Social, Governance):Environmental Pillar (E)Shows the company's impact on the environment. Examples: CO₂ emissions; water consumption; * waste disposal; spills; use of renewable energy; recovery of degraded areas.For example, Petrobras has typical indicators: tons of CO₂ emitted; oil leaks; energy consumption; and emissions per barrel produced.Social Pillar (S)Shows how the company relates to people. Includes: employees; customers; suppliers; and communities.Common indicators are number of employees; diversity; female participation; workplace accidents; training; social investments. An example would be reporting that women in leadership reach 38% of the company or that 500,000 hours of training were carried out.Governance Pillar (G)Shows how the company is managed. It includes the composition of the board; independence of board members; auditing; anti-corruption; ethics; and transparency.This part informs whether there is independent auditing; whether there are independent board members; and whether there have been recent scandals.Difference from the DVAThe DVA shows "How the wealth was distributed" while the sustainability report shows "How the wealth was generated and what impacts this generation caused".What do investors observe?Carbon emissionsInvestors want to know whether the company is prepared for the energy transition?Operational accidentsA company may have high profits. But if it has explosions; spills; and deaths; this creates future risk.LawsuitsThe report usually shows environmental fines; contingencies; and social conflicts.Human capitalSome investors observe turnover; training; and talent retention.DiversityInternational funds frequently analyze women in leadership positions; racial diversity; and inclusion.Atypical situations that draw attentionProfit growing and emissions growingMay indicate unsustainable expansion and future regulatory risk.Few accidents and many lawsuitsMay indicate hidden problems.Excellent ESG and weak profitSometimes the company invests heavily in sustainability, but still does not generate adequate economic return.Poor ESG and high profitIt may seem great in the short term. But it may generate fines; regulatory restrictions; and loss of reputation.Criticism of the sustainability reportNot everything is perfect. One of the biggest problems is so-called Greenwashing. When the company tries to appear more sustainable than it really is.For example, it highlights small environmental actions and omits relevant problems.That is why investors analyze quantitative indicators; independent audits; and historical consistency.What has changed recently?The reports are becoming more like financial statements. See here a example of Petrobras' 2024 Sustainability Report.Today many companies follow international standards such as: Global Reporting Initiative (GRI) or International Sustainability Standards Board (ISSB) or Sustainability Accounting Standards Board (SASB).The goal is to make data comparable between companies. For a moment, the CVM required the sustainability report following the ISSB from January 2025, but then reversed course and to this day leaves it optional.What does an experienced investor look for?They usually cross-check:ReportQuestionIncome StatementHow much did it profit?Cash FlowDid it generate cash?Balance SheetIs it healthy?DVAWho received the wealth?SustainabilityWhat environmental, social, and governance risks exist?That is why the sustainability report does not replace financial statements. It complements the analysis, helping to answer whether the company's results are sustainable in the long term and what risks may affect its future profits.Exercises1) (CESGRANRIO - 2023 - Transpetro - Higher-Level Transpetro Professional - Junior: Emphasis 1: Administration) The most widely used sustainability reporting standard in the world is the GRI (Global Reporting Initiative), whose objective is to disseminate among organizations the practice of measuring their performance in environmental, social, and economic terms, disclosing the results as a form of accountability to society.The guidelines for preparing sustainability reports proposed by the GRI are formed by two categories of principles, which are:A) principles for profit distribution and principles for defining investment allocation.B) principles for preserving the organization's image and principles for complying with laws.C) principles for ensuring the organization's profitability and principles for handling crises.D) principles for controlling the organization's advertising and principles for presenting results.E) principles for defining the content of the report and principles for ensuring the quality of the information.2) (FGV - 2015 - CODEMIG - Corporate Accountant) The managers of Ômicron S.A. wish to publish, together, the management report, the financial statements, and the company's sustainability report, in the newspaper with the largest circulation in the municipality where it is headquartered. According to the accounting practices adopted in Brazil, the company must:A) Adopt consistent recognition, measurement, and disclosure criteria between the financial statements and the other reports;B) clearly identify and distinguish the financial statements from the other reports;C) cover the same period of time as the financial statements in the other reports;D) declare that the financial statements and the other reports comply with the accounting practices adopted in Brazil;E) disclose its financial statements in a document separate from the other reports.Answer Key1) E2) B
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