The ESG reporting standards landscape (2024)

In today's dynamic business landscape, sustainability is a key driver of success.

Embedded within this concept is ESG — or environmental, social and governance — reporting, which serves as a framework to monitor, communicate and improvise an organisation’s non-financial performance.

Unlike traditional financial reporting, ESG reporting offers a holistic view of a company's impact on the society, environment and organisation’s governance.

It empowers investors, customers, and stakeholders to better inform their investment decisions while fostering transparency and accountability.

In this article, we’ll explore the standards that organisations can embrace to showcase its commitments and actions for a sustainable future.

The Task Force on Climate-related Financial Disclosures (TCFD)

The Financial Stability Board (FSB) established the Task Force on Climate-Related Financial Disclosures in 2015 to provide uniform climate-related financial risk disclosures for corporations, banks, and investors — in communicating with stakeholders.

In 2017, the TCFD released its final report on recommendations for climate-related financial disclosures that can help companies provide credible information to support informed capital allocation.

It also enables companies to better navigate the challenges posed by climate change and demonstrate their commitment to a sustainable future.

The G7 nations (Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States) have made TCFD-aligned reporting obligatory.

Carbon Disclosure Project (CDP)

CDP, formerly known as Carbon Disclosure Project, is a global non-profit organisation that provides a platform for companies, investors, regions, states, cities, and public authorities to disclose their environmental impacts.

Established in 2000, CDP initially focused on corporate climate impact.

With time, its scope of impact assessments and disclosure expanded to include wider environmental impacts.

CDP's core mission is to establish environmental reporting and risk management as a standard practice in the business world.

By driving disclosure, insights, and action, it actively contributes to fostering a sustainable economy.

It gathers information on various environmental practices and performance metrics of companies and cities across the world, including greenhouse gas emissions, energy efficiency, water management, and deforestation practices.

Also, CDP incorporates TCFD recommendations into its disclosure questions.

CDP helps businesses to effectively comprehend and address the financial risks linked to climate change. Moreover, it equips investors with valuable data, empowering them to make well-informed decisions.

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International Sustainability Standards Board (ISSB)

The ISSB, led by the IFRS Foundation, creates and endorses the International Financial Reporting Standards (IFRS) Foundation and its Sustainability Disclosure Standards (IFRS SDS).

Launched in 2021 during the UN Climate Change Conference COP26 in Glasgow, the ISSB was developed to meet the global demand for a standardised set of sustainability disclosures that cater to the needs of investors and financial markets.

United Nations Principles for Responsible Investment (PRI)

Principles for Responsible Investment were established in April 2006 with the support of the United Nations.

These Principles seek to unite institutional investors in a collaborative effort to implement six aspirational principles:

Principle 1: incorporate ESG issues into investment analysis and decision-making processes.
Principle 2: be active owners and incorporate ESG issues into ownership policies and practices.
Principle 3: seek appropriate disclosure on ESG issues by the entities institutional investors invest in.
Principle 4: promote acceptance and implementation of the Principles within the investment industry.
Principle 5: work together to enhance investors’ effectiveness in implementing the Principles.
Principle 6: each institutional investor reports on its activities and progress towards implementing the Principles.

Recognising that responsible investment is a customised process, the PRI strive for tailored strategies, approaches, and resource allocation to fit each organisation's unique investment style.

By March 2022, over 4,800 signatories from more than 80 countries, representing assets of approximately US$100 trillion, had voluntarily committed to the Principles and accordingly reported their progress.

Global Reporting Initiative (GRI)

The Global Reporting Initiative is an international independent standards organisation, founded in 1997 in response to public concern over the environmental impact of the Exxon Valdez oil spill in 1989.

The Global Reporting Initiative provides a framework for sustainability reporting.

It helps organisations communicate their impacts on environmental, social, and governance issues in a standardised and credible manner.

Through its standards, the GRI aims to encourage responsible business practices and enhance transparency in non-financial reporting.

Initially, the GRI provided guidelines for sustainability reporting known as the GRI Guidelines (G1), which were published in 2000. Over the years, the scope and focus of these guidelines expanded and were released as: G2 guidelines in 2001, G3 guidelines in 2006 and G4 guidelines in 2013.

In 2016, the GRI transitioned from guidelines to GRI standards — the first global standard for sustainability reporting.

The GRI Standards are modular and consist of three interconnected series:

The GRI Universal Standards: These are applicable to all organisations and provide a broad-level framework for sustainability reporting.
The GRI Sector Standards: These are specific to particular sectors and provide industry-specific reporting guidance.
The GRI Topic Standards: Each topic standard is dedicated to a specific ESG issue and lists the relevant disclosures for that topic.

Sustainability Accounting Standards Board (SASB)

The Sustainability Accounting Standards Board is a non-profit organisation that was established in 2011 with the mission of establishing sustainability accounting standards.

These standards serve as a means of communication between companies and investors, offering decision-useful information that is relevant, reliable, and comparable globally.

Central to SASB's sustainability reporting approach is the identification of critical sustainability issues that can significantly impact a company's financial performance and overall enterprise value.

To achieve this, the organisation employs a transparent standard-setting process, incorporating evidence-based research, input from companies, investors, and experts, and obtaining oversight and approval from the SASB Standards Board.

Comprising 77 different industries, the SASB Standards encompass a wide range of topics across five comprehensive sustainability dimensions:

Environment
Social Capital
Human Capital
Business Model and Innovation
Leadership and Governance.

In November 2020, SASB joined forces with the International Integrated Reporting Council (IIRC) to create the Value Reporting Foundation in June 2021.

This merger was aimed at streamlining and enhancing enterprise value creation reporting, offering a comprehensive suite of resources, including the Integrated Thinking Principles, Integrated Reporting Framework, apart from SASB Standards.

United Nations Global Compact (UNGC)

The United Nations Global Compact is a voluntary initiative for businesses to embrace responsible and sustainable practices.

Operating on a principle-based framework, the UNGC's Ten Principles draw inspiration from foundational documents, including:

The Universal Declaration of Human Rights
The International Labour Organisation's Declaration on Fundamental Principles and Rights at Work
The Rio Declaration on Environment and Development
The United Nations Convention Against Corruption.

These principles encompass critical areas such as human rights, labor rights, environmental protection, and anti-corruption efforts.

Governed by a multi-stakeholder Board that is appointed and chaired by the United Nations Secretary-General, the UNGC includes representatives from business, civil society, labor, and the United Nations.

This Board provides strategic and policy advice for the entire initiative while actively participating in implementing the integrity measures of the UNGC.

ISO 14001

ISO 14001 is an internationally recognised standard for environmental management.

It was established in 1996 by the International Organisation for Standardisation (ISO) in response to growing demands from businesses to demonstrate good environmental performance.

ISO 14001 provides a systematic approach for organisations to manage their environmental impact, reduce resource consumption, and enhance sustainability performance.

ISO 14001 can be used by organisations of any type, regardless of their activity or sector, to manage various environmental aspects.

The standard provides guidelines for developing proactive strategies to address environmental issues, and it emphasises continuous improvement in environmental performance and corporate sustainability policies.

To conclude...

ESG reporting has risen as a crucial tool for companies aspiring to achieve sustainable success in a world increasingly attuned to environmental, social, and governance issues.

By adopting ESG reporting, companies position themselves for a competitive advantage and new opportunities for access to customers and investments, while contributing to a more sustainable future.

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Frequently Asked Questions

What is the difference between ESG rating and ESG reporting?

Is ESG reporting the same as sustainability reporting?

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