Sustainability reporting: which framework, what to include, where to start. A guide through the confusion.

The first problem: the framework jungle

Before collecting a single data point, many companies get stuck on a seemingly simple question: which standard do I use? And that is where the confusion starts.

GRI (Global Reporting Initiative) is the most widely used framework globally - modular and applicable to any sector and size. A good starting point, but it requires independently defining material topics and can feel dispersive without guidance.

CSRD + ESRS is the mandatory EU regime for large companies (now above 1,000 employees following the 2025 Omnibus Package). The ESRS are the detailed technical standards: structured, precise, and with a double materiality logic that requires specific expertise.

VSME (Voluntary SME Standard) is the voluntary standard developed by EFRAG for companies not subject to CSRD. Modular structure, applicability principle instead of complex materiality assessment, free digital tools. Officially adopted by the European Commission on 30 July 2025.

GRI Sector Standards are GRI's industry-specific standards - for oil & gas, agriculture, mining, finance and others - that complement the general framework with sector-specific indicators. Often overlooked, but often decisive for a credible report.

A report that nobody uses is a cost. A report that guides decisions is an investment. ​

The choice depends on three variables: company size (CSRD obligation or voluntary), sector (which determines which topics are material by definition), and who is asking for the report (banks, clients, investors, supply chain). Ignoring any one of these three variables means starting from the wrong answer.

What changes from one sector to another: three concrete examples

One of the most frequent mistakes is treating a sustainability report as a universal document. It is not. The relevant impacts, the data to collect and the indicators that matter change significantly depending on the industry.

Manufacturing: the core of the report is direct operational impact. Energy consumption and renewable/fossil mix, Scope 1 and 2 emissions (and increasingly also supply chain Scope 3), industrial waste management, water consumption, workplace safety and injury rates. A manufacturing company that does not report on its process emissions and waste material management is producing a report that is missing its most relevant content - and that no industrial client or bank will find credible.

Food & Beverage: here the value chain is everything. Scope 3 emissions (agriculture, transport, packaging) often weigh more than direct ones. Animal welfare, ingredient sustainability, agricultural water footprint, food waste along the production and distribution chain, responsible sourcing practices - these are the topics that banks, large-scale retail and consumers are asking about. An F&B report focused only on offices and warehouses tells less than 20% of the relevant story.

Pharmaceuticals: the sector has unique specificities that many general frameworks do not adequately capture. Management of special waste and expired medicines, solvent emissions from production processes, cold chain logistics impact, access to medicines and pricing policies in emerging markets, governance of clinical trials and the social impacts of R&D. These are material topics for any sector ESG analyst, but they do not surface when limited to generic standards without integrating sector-specific requirements.

 Source: GRI Sector Standards Library; IPCC Supply Chain Emissions data

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The lesson is simple: a pharmaceutical company copying the structure of a mechanical manufacturer's report - or vice versa - produces something technically correct but substantively useless. The right indicators are not the "standard" ones: they are the ones that reflect where that specific company actually has impact.

The regulatory landscape: who is obligated, who is pushed by the market

The European regulatory landscape has changed significantly in recent years. The Omnibus Package of 2025 redrew the boundaries of the CSRD (Corporate Sustainability Reporting Directive), raising the reporting obligation threshold to large companies with more than 1,000 employees. Those with a direct obligation must follow the ESRS (European Sustainability Reporting Standards) with the double materiality regime. Those below the threshold are not obligated - but are under growing market pressure.

But exclusion from the regulation does not mean exemption from market pressure. That is the most dangerous misreading.

Source: European Commission - Omnibus Package, February 2025

Large clients, industrial groups, financial institutions: all are asking their suppliers and partners for ESG data with increasing frequency. Not because a directive requires it, but because transparency has become a condition of market access. An SME that cannot answer these requests does not risk a fine - it risks losing opportunities.

How to build a report that works: four concrete steps

Once the right framework is chosen and the sector context is understood, the real work begins. And here the mistake is common across all company sizes: confusing the quantity of information with its quality. An effective report does not start from the document - it starts from the company.

Start from context. Before touching any standard or framework, it is worth understanding where the company actually stands: what ESG-related activities already exist, what the level of maturity is, and who the stakeholders are who need information and with what priority. Without this step, the risk is building something technically accurate but disconnected from reality.

Select what truly matters. Not all ESG topics carry the same weight for every company - and as we have seen, they vary significantly by sector. Identifying material topics - those with real impact on the company and its stakeholders - makes it possible to build a system of a few clear, coherent indicators. This is where the most common mistake gets avoided: including indicators simply because they are "expected" or appear in other reports.

Connect data, actions and objectives. An effective report does not merely describe what has been done. It links data to actions taken and future goals, building a narrative that is transparent and - above all - useful for guiding operational priorities. This is not communication: it is management.

Build a monitoring system over time. The value of a report does not end with its publication. A set of indicators tracked over time, with regular review moments, transforms the document from a static snapshot into a continuous improvement tool.

VSME: the European standard for companies not subject to CSRD

For companies not obligated under CSRD - whether manufacturing SMEs, mid-sized F&B businesses or pharmaceutical companies under the 1,000-employee threshold - the reference framework today is the VSME - Voluntary Sustainability Reporting Standard for non-listed SMEs, developed by EFRAG on a mandate from the European Commission and officially adopted on 30 July 2025.

The VSME was created to address a specific problem: companies are overwhelmed by uncoordinated ESG data requests from clients, banks and investors - each with their own questionnaire. The standard aims to replace this fragmentation with a single, comparable format, recognisable to all counterparts.

The difference compared to the CSRD is structural. Instead of a complex materiality assessment, the VSME uses a simpler principle: "if applicable". If a disclosure is not relevant for that specific activity, it is simply not included - and no justification is needed. Less administrative burden, more focus on what matters.

The structure is modular: a Base Module for those starting out, covering the core environmental, social and governance indicators, and a Comprehensive Module for deeper reporting. A company can begin simply and expand progressively as internal maturity grows. EFRAG has also developed free digital tools - including an Excel template in XBRL format - to further simplify data collection and reporting.

How Kyklos Carbon can help

Having the right standard is the starting point - but not the whole picture. The real obstacle, for companies of any size, is rarely the willingness: it is the "how to do it in an orderly way without disrupting day-to-day operations". Building a report that works requires a series of steps that, without a clear method, risk becoming scattered and time-consuming.

At Kyklos Carbon, we work alongside companies throughout the entire journey: from the initial analysis of the company's context and sector-specific material topics, to building a clear, coherent set of indicators that is sustainable over time. We do not start from the standard - we start from the company.

• ESG context analysis: we map existing activities, maturity level and key stakeholders - with a specific focus on what is material for your industry - to build a foundation that reflects the company's actual reality.
• Material topic and indicator selection: identifying what truly matters for that specific business and sector, avoiding information overload and copy-paste from reports designed for different industries.
• Report construction: a readable document, oriented towards objectives and structured according to the most appropriate standard - CSRD/ESRS for obligated companies, VSME or GRI for those operating on a voluntary basis.
• Ongoing monitoring support: because the value of a report does not end at publication, but grows with the ability to measure progress and adapt strategies over time.

Our goal is to turn the sustainability report from a formal exercise into a management tool - something the company actually uses, not just something it produces.

Conclusion

Sustainability reporting is not too complex. It is often approached the wrong way - with frameworks borrowed from different sectors, structures copied from companies of different sizes, and indicators collected because "everyone uses them" rather than because they are relevant.

The right approach starts from three questions: What framework fits my size and obligations? What topics are truly material for my sector? Who will read this report and what do they need to see? The answers are different for a pharmaceutical company, an F&B group and a manufacturing SME. But the underlying method is the same: start from the company, not from the document.

A report that nobody uses is a cost. A report that guides decisions is an investment. ​

Sources

EFRAG - VSME Standard (official text, December 2024)

Economia Circolare - VSME standard for SMEs: European Commission recommendations

Osservatorio Bilanci di Sostenibilità - VSME: what it is and how it works

Piattaforma Italia per lo Sviluppo (PwC) - VSME standard: the guide for SMEs

Bureau Veritas Italia - VSME: the new sustainability standards for SMEs

Consiglio Nazionale dei Dottori Commercialisti - IRS 2024.11: Sustainability reporting for SMEs