Top 5 Gaps We Find in Sustainability Reports

After analysing hundreds of sustainability reports against ESRS and ISSB requirements, clear patterns emerge. The same gaps appear repeatedly—and they're often fixable with the right focus.

If you're conducting a sustainability report review or preparing for your next reporting cycle, here are the five most common gaps we find, why they matter, and how to address them.

Gap #1: Incomplete Scope 3 Emissions

The problem: Companies consistently disclose Scope 1 (direct emissions) and Scope 2 (purchased energy), but Scope 3 (value chain emissions) remains incomplete or absent entirely.

Why it matters: For most companies, Scope 3 represents 70-90% of total emissions. Without it, your carbon footprint is fundamentally understated—and both ESRS E1-6 and IFRS S2 require comprehensive Scope 3 disclosure.

What we typically see:

• Only 2-3 of the 15 Scope 3 categories disclosed
• Categories 1 (purchased goods), 11 (use of sold products), and 15 (investments) most commonly missing
• No methodology explanation for included categories
• Missing base year data for trend analysis

How to fix it:

1. Map your value chain — Identify which Scope 3 categories are material to your business. Not all 15 will be significant for every company.

2. Start with the big ones — For most companies, Categories 1, 3, 11, and 15 account for the bulk of Scope 3. Prioritise these.

3. Use estimation where needed — Perfect data isn't required. Spend-based estimation for Category 1, industry averages for transportation—these are acceptable starting points.

4. Document your methodology — Explain how you calculated each category, including data sources, assumptions, and limitations.

5. Show year-over-year trends — Once you have a base year, track progress consistently.

Gap #2: Vague Climate Transition Plans

The problem: Many reports contain net-zero commitments without credible plans to achieve them. A pledge to be "carbon neutral by 2050" isn't a transition plan—it's an aspiration.

Why it matters: ESRS E1-1 specifically requires transition plans that include decarbonisation levers, financial planning, and alignment with 1.5°C pathways. IFRS S2 requires similar disclosure on climate strategy and targets.

What we typically see:

• Net-zero targets without interim milestones
• No specific decarbonisation actions identified
• Missing CapEx/OpEx allocation to climate initiatives
• No link to science-based pathways or third-party validation
• Absence of board accountability for climate targets

How to fix it:

1. Set interim targets — 2030 and 2040 milestones demonstrate a credible pathway to 2050 goals.

2. Identify specific levers — Operational efficiency, renewable energy procurement, electrification, supplier engagement—be specific about how you'll reduce emissions.

3. Quantify investment — What percentage of CapEx supports the transition? What operational changes require funding?

4. Seek third-party validation — Science Based Targets initiative (SBTi) validation provides credibility. If not validated, explain your alignment with 1.5°C scenarios.

5. Assign accountability — Link executive compensation to climate targets. Name the board committee responsible for oversight.

Gap #3: Missing Financial Effects Quantification

The problem: Reports describe climate risks qualitatively but avoid putting numbers on potential impacts. "Climate change poses risks to our operations" doesn't meet disclosure requirements.

Why it matters: Both ESRS (SBM-3 and E1-9) and ISSB (strategy disclosures) require quantification of financial effects—current and anticipated. This is where sustainability connects to enterprise value.

What we typically see:

• Qualitative risk descriptions only
• No quantified exposure to physical risks
• Missing revenue at risk from transition scenarios
• No connection between sustainability risks and financial statement line items
• Scenario analysis without financial implications

How to fix it:

1. Quantify physical risk exposure — What percentage of assets are in high-risk locations? What's the insured vs. uninsured exposure?

2. Model transition scenarios — Under different carbon price scenarios, what's the impact on operating costs? Revenue?

3. Connect to financial statements — Show how climate risks could affect asset impairment, provisions, or useful lives.

4. Disclose current effects — What sustainability-related costs or revenues are already in your P&L?

5. Provide ranges where appropriate — Uncertainty is expected. "€50-100 million potential impact" is better than silence.

Gap #4: Inadequate Governance Integration

The problem: Reports describe sustainability governance structures but don't show how sustainability is genuinely integrated into decision-making, strategy, and incentives.

Why it matters: ESRS 2 GOV-1 through GOV-3 and IFRS S1 governance requirements go beyond describing committees—they require evidence of integration.

What we typically see:

• Governance structures described, but no evidence of activity
• Missing frequency of board sustainability briefings
• No sustainability expertise identified on the board
• Executive remuneration has no link to ESG KPIs
• Sustainability committee exists but rarely meets

How to fix it:

1. Disclose meeting frequency — How often does the board receive sustainability briefings? What topics were covered?

2. Identify expertise — Which board members have sustainability expertise? What training has been provided?

3. Quantify remuneration links — What percentage of executive compensation is tied to ESG metrics? Which metrics?

4. Show strategy integration — Describe specific instances where sustainability considerations influenced business decisions.

5. Report on due diligence — What processes exist for identifying and managing sustainability risks?

Gap #5: Incomplete Value Chain Coverage

The problem: Reports focus on direct operations while ignoring significant impacts in the value chain—particularly upstream suppliers and downstream product use.

Why it matters: For many industries, the most significant sustainability impacts occur outside direct operations. ESRS requires value chain disclosure for all material topics. ISSB requires disclosure where risks and opportunities extend beyond the reporting entity.

What we typically see:

• Supplier due diligence limited to Tier 1 only
• No visibility into high-risk supply chain segments
• Product lifecycle impacts undisclosed
• Missing supplier engagement metrics
• No assessment of workers in the value chain

How to fix it:

1. Map high-risk segments — Which parts of your value chain have the greatest sustainability risks? Prioritise visibility there.

2. Extend beyond Tier 1 — For high-risk categories (minerals, agriculture, textiles), you need visibility into Tier 2 and beyond.

3. Disclose supplier engagement — What percentage of suppliers (by spend) have you assessed? What issues were identified?

4. Address product lifecycle — For relevant industries, disclose impacts from product use and end-of-life.

5. Leverage the Omnibus value chain cap — Post-Omnibus, SMEs in your supply chain are protected from excessive requests. Focus your asks on genuinely material information aligned with the VSME standard.

Honourable Mentions: Gaps #6-10

#6: Missing biodiversity disclosure — With TNFD gaining traction and ESRS E4 requirements, nature-related impacts are increasingly scrutinised.

#7: Social metrics gaps — Gender pay gap, living wage coverage, and workforce diversity metrics often lack granularity.

#8: Data quality issues — Metrics without methodology explanations, inconsistent boundaries, and missing assurance.

#9: Double materiality assessment gaps — Perfunctory assessments that don't genuinely consider impact materiality.

#10: Missing targets for non-climate topics — Climate targets exist, but water, waste, and social targets are often absent.

The Common Thread

These gaps share a common thread: they represent areas where companies have moved from voluntary, narrative-style reporting to mandatory, quantified disclosure. The transition from "telling your sustainability story" to "meeting specific framework requirements" is where most gaps emerge.

Quick Self-Assessment

Score your report against these five areas:

If you're seeing red flags in multiple areas, prioritise gap closure before your next reporting cycle.

Key Takeaways

• Scope 3 is non-negotiable — Both ESRS and ISSB require comprehensive value chain emissions disclosure
• Transition plans need specifics — Net-zero targets without credible pathways don't meet requirements
• Quantification matters — Financial effects of sustainability risks must be numbered, not just described
• Governance must be substantive — Structures alone aren't enough; show integration and accountability
• Value chains can't be ignored — Material impacts extend beyond your direct operations

Get Your Personalised Gap Analysis

Understanding where your sustainability report falls short is the first step toward improvement. Martin AI analyses your report against 550+ ESRS and ISSB datapoints, identifying specific gaps and providing prioritised recommendations.

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For framework-specific guidance, see our CSRD guide, ISSB guide, or ESRS vs ISSB comparison. For materiality foundations, explore our single vs double materiality guide.