PwC View on “From Confusion to Clarity” by Professor Karthik Ramanna

How demand-driven sustainability reporting can deliver value

PwC View on Karthik Ramanna report
  • April 27, 2023

The sustainability data and reporting ecosystem is constantly evolving. Preparers are getting to grips with imminent new reporting frameworks; users are dealing with a broad proliferation of views around sustainability. It’s easy to lose sight of the bigger picture and what the future of sustainability and its reporting should look like in the context of the global crises we are facing today.

PwC1 commissioned Professor Karthik Ramanna to establish an independent view of what the sustainability reporting landscape looks like today and chart a path to tomorrow. We connected Professor Ramanna to our global client base and, as part of a listening exercise, he interviewed people from across the ecosystem, including preparers, users and Non-Governmental Organisations (NGOs). 

It was important for us to get Professor Ramanna’s views and conclusions as an independent academic in this space. So whilst we facilitated interviews between Professor Ramanna and our clients, the report produced is his and contains his conclusions.

Below are our reflections on the practical suggestions and implications of his report.

Karthik Ramanna View

  • While the imperative around progress in sustainability is clear, the actions companies need to take are not always win-win (and even if they are, they are hard to achieve).
  • Demand signals from stakeholders are key to help clarify the ESG reporting companies should focus on. However, these demand signals are difficult to parse, and change over time - you can use engagement around your reporting to clarify this.
  • Such reporting must evolve towards being simple, accurate and comparable and move from disclosure to accounting, that is from a narrative to clear quantifiable measurements.
  • There are three practical steps to follow to get there - focus on three ESG issues informed by demand, measure performance against these issues in a simple, accurate and comparable way, and then iterate your reporting over time

PwC View

  • But if you are able to understand the demand from your stakeholders for sustainability action, there is a value case for actions that may seem like a pure cost.
  • Agreed that demand signals are key to building the value case for change. A consistent framework to capture demand first and then take action and produce summary reporting after allows for quicker global alignment.
  • Yes, but given the importance of strategy and targets, corporate reporters will need a combination of qualitative and robust quantitative disclosures to drive the change we need to see. 
  • Three issues is too few for external reporting but may be the right starting point for meaningful internal management focus to drive change not just in the corporate and its entities but through the supply chain. 

Understanding sustainability demand

One of the consistent themes from the interviews conducted by Professor Ramanna is that companies are feeling, both from retail and corporate customers, increasing demand for sustainability information and action. However, while demand for financial reporting is driven by a more limited number of use cases (e.g. to predict future cash flows), demand for sustainability reporting is more multi-dimensional and making sense of it systematically remains a major challenge.

Measuring demand for sustainability reporting and action across various stakeholders and how it changes over time is not easy. Professor Ramanna suggests using stakeholder engagement around sustainability reporting as a tool to gauge demand. However, given that annual enterprise-level reporting may not be at the right level of granularity for all stakeholders (something we will expand on below) nor the regularity for quick iteration and updates, we would suggest a different approach. Companies should start with a consistent framework to first capture demand from stakeholders in a format that then allows for direct alignment with its corporate sustainability action and resulting reporting for example by elevating particularly high demand topics in narrative summaries. This would bring greater alignment and clarity. Being able to directly draw a line between captured stakeholder demand and resulting actions and reporting is a powerful way to tell a company’s sustainability story. It can also help clarify the value case for any actions that are framed as fundamentally being a cost by Professor Ramanna2

Responding to demand

Professor Ramanna also points to an area of real opportunity as reporting becomes more demand-led: current reporting frameworks exclusively focus on enterprise-level reporting. If you are trying to reach your customers, the likelihood of them analysing a glossy sustainability report before making a purchasing decision is low, even if you do manage to capture their demand. So while Professor Ramanna heard a clear demand for customer-oriented and product-level reporting on sustainability, there is currently no consistent reporting framework for companies to respond to this.

The relevance of such reporting would go beyond just B2C businesses, as most purchasers, including B2B, will want information that is more consistent with the level at which individuals make purchase decisions. The information in such product-level reporting may differ significantly from the enterprise-level view as presented in existing sustainability reporting. For example, whilst a company as a whole may have a very strong record on decarbonisation, a specific product could perform considerably worse in terms of carbon footprint compared to competitive products. This product-level reporting gap is not a fault in the current regulatory reporting framework; instead, current requirements are just not designed to solve this issue yet.

This is clearly an area for innovation and where, as Professor Ramanna indicates, up-and-coming market-wide initiatives such as can play a significant role. Should companies choose to engage with such product-level reporting due to clear demand, we would suggest leveraging and aligning as far as possible with existing enterprise-level reporting frameworks to reduce the already significant reporting burden. Generally accepted principles to underpin such reporting will also need to be developed.

Professor Ramanna points to an area of real opportunity as reporting becomes more demand-led: current reporting frameworks exclusively focus on enterprise-level reporting.

Turning demand into action

Professor Ramanna lays out a three step process to allow companies to better respond to users’ demands in this area. Firstly, he proposes selecting three sustainability issues that are of material interest to a company’s stakeholders to focus on, then measuring and reporting on these three issues in a simple, accurate and comparable way and, finally, iterating on such reporting over time to better meet demand.

Given the breadth and depth of incoming regulatory regimes that will directly or indirectly affect almost every company, the idea of selecting just three issues to really focus on may seem like a distant dream. However, we would argue that there is value in the idea overall if there is a clear link back to the demand identified by stakeholder groups.

More than three but fewer than 100

Before describing this approach to sustainability reporting, it’s worth drawing a comparison to the development of financial accounting and reporting. That journey started off with merchants using basic bookkeeping to record the information that mattered to them. This over time evolved from increasingly sophisticated, but purely internal, management information into public reporting and disclosures.

In sustainability reporting, the ecosystem is evolving differently. Regulators are driving companies to make public disclosures before this information has been embedded as a key part of internal reporting and decision-making. Given the urgency of the challenges faced globally, this approach is entirely appropriate and we do not have the luxury of allowing sustainability reporting to naturally evolve in the same way. However, the disconnect between internal management reporting and external sustainability reporting has created confusion around the relevance and value of certain metrics and created a barrier to taking meaningful action.

So, bringing it back to Professor Ramanna’s idea of taking three sustainability issues to focus on, while for a lot of companies this may seem at odds with the robust and extensive incoming regulatory frameworks from an external reporting perspective, it may be the right approach to begin to embed meaningful sustainability information into internal reporting and more importantly, actual management at all levels of the organisation. Three as a number may feel too small, but the dozens of KPIs and substantially larger number of data points, as found in some incoming standards, feels too large to be manageable as well. Taking a happy medium of core issues to really embed internally and drive action on, can allow companies to actually begin to move the needle on key issues. These issues should be informed by the business’s strategy as well as the areas of highest demand for action of its core stakeholder groups such as customers, employees, and investors.

As this smaller number of issues and associated KPIs embeds and evolves over time, companies should highlight their management focus, strategy and achievements on these topics in their overarching strategic narrative and stakeholder communication. Regulators and standard setters should provide for this whilst maintaining the opportunity to get a broader, unfiltered view on a company. There may be an opportunity to align both concepts more closely over time by evolution of the regulatory landscape. 

Taking a happy medium of core issues to really embed internally and drive action on, can allow companies to actually begin to move the needle on key issues.

Account and disclose

Whether for internal or external purposes, Professor Ramanna points out that in order for this information to be meaningful and decision useful, the reported metrics need to be simple, accurate and comparable. This is a task that goes beyond a single corporate reporter and requires evolution across the ecosystem. 

A major area of focus for this would be supply chain information. When it comes to this information, such as scope 3 emissions for example, we live in a world of imperfect information and imperfect global accounting for those emissions. This poses a challenge to being able to provide internal and external stakeholders with “decision-grade” information that is comparable and trusted. We see this as both a task for regulators and for the market to work together, supported by increasing clarity and strength of demand for sustainable investments and products, to assemble and make available the data needed for timely action on sustainability.

However, whilst there is a need to move away from largely qualitative disclosures, we should again look to financial reporting for guidance for the future. In financial reporting, companies are able to use qualitative disclosures effectively alongside robust quantitative measures to demonstrate transparency and progress in a way neither element could by itself. Given the importance of disclosures on strategy and targets in sustainability reporting, we see a need for both particularly in areas such as the value chain where data availability can be a challenge. 

From confusion to clarity

So how do you leverage the ideas above to create value for a company? Similarly to Professor Ramanna, we would point to three actions:

  • Adopt a consistent framework to capture stakeholder demand for sustainability actions and information. Use this demand to build a business case for transformation.
  • Informed by this demand and by your overall business strategy, identify a discrete number of sustainability issues to prioritise for internal reporting and business transformation, based on accurate and comparable metrics.
  • Embed these selected sustainability topics in the context of your broader, standard- or regulatory-driven corporate reporting and actively seek to evolve and challenge these topics over time.

We want to thank Professor Ramanna for his contributions.


1.   "PwC" refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.  Please see for further details
2. The other alternative which Professor Ramanna also points out is to explicitly regulate actions which are increasingly being demanded, e.g. recent statement by the Australian Industry Energy Transitions Initiative

Follow us

Contact us

Nadja Picard

Nadja Picard

Global Sustainability Reporting Leader, Partner, PwC Germany

Tel: +49 (0)211 9812978

Andreas Ohl

Andreas Ohl

Global Sustainability Technical Leader, PwC US

Tel: +1 973 236 4000

David Marriage

David Marriage

Sustainability Innovation and Disruption Leader, PwC United Kingdom

Tel: +44 7710 036198