Many local government or regional plans have “a sustainable future for our community” as a goal. However, few local or regional governments have a sustainability reporting tool in place that enables them to understand how far along the pathway to sustainability their community is. There are a range of reasons for this, including current sustainability indicators and indices not matching the needs or capacity of local actors. This paper argues that a collaborative approach to developing sustainability reporting tools, that involves sustainability experts and local actors working together, will be more successful at developing a tool that has a theoretical basis with locally relevant indicators, which is practical for informed decision making. This process will also build the sustainability reporting capacity of local actors. This collaborative approach was tested in South West Victoria, Australia, resulting in a locally relevant, practical and theoretically sound sustainability reporting tool that met the needs of local actors. This outcome shows that a collaborative approach can overcome some of the barriers to sustainability reporting for local actors; however, further testing is required.