As sustainability reporting continues to mature, the concept of connectivity between the sustainability report and the financial statements is gaining prominence and raising more interest. Stakeholders are increasingly focused on how well these two parts of corporate reporting align. Yet despite its importance, connectivity is often unclear or poorly understood.
But what does connectivity really mean in practice, and why does it matter? This blog aims to demystify the concept of connectivity and explain why it is an essential pillar of high‑quality corporate reporting.
Connectivity, what does it mean?
When either of us travel to NYC nowadays, we always take the train from JFK to Grand Central. It’s faster, far cheaper than a car, and remarkably straightforward: a quick AirTrain ride to Jamaica station, an easy connection to the Long Island Rail Road and then a direct trip into Manhattan. The reason that this is a must-do (even for nervous overseas travellers) is because the connection at Jamaica is really easy. It’s simple, easy to navigate, and you genuinely feel that you’re making a single journey, with one destination (Grand Central), with just a quick change in the middle. Obviously, the connection works just as well going in the opposite direction.
That’s what good connectivity looks like. And we need it just as much in corporate reporting as we do whilst commuting. The two parts of corporate reporting (sometimes we call them the ‘front half’ and ‘back half’) need to allow for easy navigation between the two, and the users of corporate reporting should feel that they’re using a single document, with the two halves contributing to a single objective (providing consistent and decision-useful information)—just like our trip from JFK to Manhattan with its one clear destination.
The concept of connectivity in corporate reporting is not new. It has long been used to ensure consistency between the front half of an annual report (for example, Management Discussion & Analysis (MD&A) or management commentary) and the financial statements. However, connectivity between a sustainability report (which is often part of the so called ‘front half’) and the financial statements can feel less familiar. At its worst, the two reports can feel entirely dislocated, like a railway station which is impossible to find from the airport where you landed.
While IFRS Accounting Standards, IFRS Sustainability Disclosure Standards (or ISSB standards) and the European Sustainability Reporting Standards (ESRS) do not provide a formal definition of connectivity, both ISSB and ESRS standards provide high‑level guidance on ‘connected information’. In essence, connectivity is about the interconnection of information (financial and non-financial information) across general purpose financial reports (for example, a company’s annual report). Such information, should, to the extent possible, be consistent between the sustainability reporting and the financial reporting—enabling a smooth experience for users, just as a good connection makes the journey from JFK to Manhattan seamless.
Non‑financial information—such as narrative disclosures about the effects of sustainability-related risks on a company’s strategy and business model—should be consistent across the annual report. Likewise, financial information disclosed within a sustainability report—such as the (current or anticipated) financial effects of sustainability‑related risks and opportunities—is very often interconnected with the information used in the related financial statements. You won’t always see a tidy one‑to‑one link to GAAP but sustainability-related financial disclosures might well affect the future financial prospects (i.e. cashflows, cost of capital, access to finance) of a company, which is key information to investors. In other words: this is not ‘extra’ information—investors care because it can affect the financial trajectory of the business.
Sometimes these connections are straightforward. For example, the current financial effects of actions taken to mitigate sustainability‑related risks will have a direct impact on the financial statements. At other times connections are more nuanced or indirect, such as the use of key assumptions and critical estimates to calculate anticipated financial effects. These assumptions or estimates might not be separately disclosed in the financial statements but should be embedded (to the extent appropriate) within underlying computations such as the impairment testing of non‑financial assets.
Why connectivity is important
Connectivity between the financial statements and the related sustainability report is the backbone of holistic corporate reporting. Sustainability‑related financial disclosures complement the information presented in the financial statements. Connectivity helps investors understand both current performance and indications of areas or matters that may subsequently affect future results. This broader perspective, the connection of ‘current and future’, enhances the overall narrative and storytelling, and provides useful information for investors’ decision-making, resulting in transparent and high-quality reporting. This is why the disclosure of anticipated financial effects is so important to investors as it supports more informed investment decision‑making.
Connectivity also enables consistency and comprehensiveness in information across the entire set of general purpose financial reports (and actually across all corporate reports). Consistency between financial information and sustainability-related financial disclosures in a sustainability report is crucial for investors, who rely on clear and connected information to make informed investment decisions. Strengthening that connectivity of information where possible is important as it leads to more complete and higher quality reporting. Conversely, when sustainability‑related financial disclosures are disconnected from financial reporting, it can create confusion and risks undermining trust in a company’s reporting.
Regulators and standard-setters are increasingly highlighting the importance of connected information. EFRAG recently issued a discussion paper on connectivity, while the ISSB has published several educational materials on the topic. Additionally, in November 2025, the IASB issued illustrative examples on reporting uncertainties using climate‑related scenarios to strengthen the application of existing IFRS accounting disclosure requirements and address concerns about inconsistencies between sustainability reports and financial statements. These developments reflect a broader push to narrow the gap between the two and reinforce the importance of connectivity.
Finally, connectivity is one of the key components that helps bring sustainability reporting to the same level of credibility as financial reporting. Without it, there is a risk that sustainability disclosures might lose relevance and trust among investors.
Connectivity: an imperative for corporate reporting
Connectivity is not just a theoretical concept or a ‘nice to have’. It is imperative for investors and is a key element for high quality and transparent reporting. Just as travellers expect a smooth, seamless journey when commuting, users of corporate reports expect information to link together clearly and consistently.
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