ESG reporting frameworks

Written by Roshni Raheja

The acronym ESG stands for Environmental, Social and Governance. Organizations are increasingly disclosing ESG-related information voluntarily, with the process becoming standardized through the GRI, TCFD, etc. ESG reporting frameworks provide guidance for companies to organize and present this information to their stakeholders. At present, there are two main reporting frameworks, the GRI and SASB, as well as various other sector or topic-specific guidelines.


What is an ESG reporting framework?

An ESG report is a report published by a company or organisation on the environmental, social and governance (ESG) impacts of its business activities. Until early 2022, there is no single global standard or regulation for the structure of an ESG report. In the absence of standards, companies rely on frameworks to develop their ESG reports. 

An ESG reporting framework is a set of general principles that provide guidance on the topics and information that need to be covered, but do not prescribe a methodology for data collection or organisation. It is up to each company to interpret and adapt the framework to its specific context.


How many ESG reporting frameworks are there?

There are more than a dozen different reporting frameworks, varying in specificity depending on the objectives, geographic location, stakeholder profiles and the type of industry in which the reporting organisation operates. While the basic structure is similar, they differ from each other in aspects such as materiality and scope.

To effectively compare information from different frameworks and protect against greenwashing, efforts are underway to achieve global convergence of ESG reporting standards. Following COP26 in 2021, the International Sustainability Standards Board (ISSB) was established and is expected to publish a set of consolidated global standards in 2022. These are likely to be implemented from 2023, with the first corporate reports published in 2024. They will also be the standards for mandatory ESG reporting set by the European Commission.


What are the different ESG reporting frameworks in 2022?

In 2020, five leading framework and standard-setting organisations – Carbon Disclosure Project (CDP), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) – announced a shared vision for a comprehensive corporate reporting system that includes both financial accounting and sustainability reporting disclosure, linked by integrated reporting. In 2021, the IIRC and SASB will merge into a single body to consolidate the standards. 

The GRI and SASB are complementary standards that allow an organisation to consider the topics covered under ‘E’, ‘S’, and ‘G’ from different materiality perspectives. SASB reporting addresses issues that impact a company’s financial performance and is therefore of particular interest to investors and other providers of financial capital. On the other hand, the GRI provides information on the impacts of a company’s activities that are important to a wide range of stakeholders, including investors.

The Global Reporting Initiative (GRI) has a set of interwoven standards and guidelines that allow a company to report information in a way that covers all of its key economic, environmental and human impacts, or to focus only on specific issues such as climate change or child labour. The topics covered can also be very easily aligned with the SDGs from UN. The GRI is very flexible and has three different standards -one universal, one sector-specific and one issue-specific – so that it can best be adapted to the reporting company. 

The Sustainability Accounting Standards Board (SASB) consists of sector-specific standards that help identify and report on the subset of sustainability-related risks and opportunities that are most likely to affect a company’s financial position (e.g. balance sheet), operating performance (e.g. income statement) or risk profile (e.g. market valuation and cost of capital). The SASB standards can be used by companies as a practical tool to implement the principles-based framework recommended by the Task Force for Climate-related Financial Disclosures (TCFD)

In addition to these two major frameworks, various other standards and frameworks can be combined or referred to when structuring certain parts of an ESG report. For example, the CDP or the Science-Based Targets Initiative (SBTi) provide systems for measuring and managing environmental risks and opportunities. The World Economic Forum’s Measuring Stakeholder Capitalism Initiative, on the other hand, has identified a set of universal metrics and disclosures that were deliberately derived from existing standards. The goal was to accelerate convergence among the leading private ESG standards from 2020 onwards and to achieve greater comparability and consistency in reporting ESG metrics and disclosures. 

Ultimately, the most appropriate ESG framework is the one that is consistent with the region’s regulations and provides relevant stakeholders with transparent, relevant and meaningful information.

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