A Comprehensible Guide To Sustainability Reporting Frameworks

27th Apr 2020
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Due to the increased pressure from the stakeholders and the proven business case, sustainability reporting has soared over the last two decades. Non-financial reporting is not uniformly regulated, but more and more companies are eager to make it part of their practice. Thus, there appeared a lot of sustainability reporting initiatives that provide companies with the framework and guidelines on how to collect and organize the necessary data. 

Here are just a few leading ones: 

  • Carbon Disclosure Project (CDP), 
  • The Global Reporting Initiative (GRI), 
  • The Sustainability Accounting Standards Board (SASB), 
  • The International Integrated Reporting Framework (IR), 
  • The UN Sustainable Development Goals (SDGs).

While the frameworks are created to facilitate environmental, social and governance (ESG) reporting, the variety of sustainability reporting frameworks makes many companies wonder how the frameworks differ and which one they should better use for reporting. Below, you will find a comprehensible overview of the major sustainability reporting frameworks that will help you answer these questions.   

Carbon Disclosure Project (CDP)

The CDP has been launched to facilitate GHG emissions reporting, but has grown and now includes reporting on water, forestry, and supply chain issues too. Social aspects of sustainability remain uncovered. CDP framework provides the highest visibility to investors and customers who now expect companies to report to CDP.  

If you choose to report to CDP, you will have to disclose and provide evidence on an extensive list of questions pertaining to your current and future sustainability strategy: the framework consists of three questionnaires (Climate Change, Water Security, and Forestry), each including a supply chain module. Thus, CDP will score your company from A to D to mark your sustainability maturity and display the report to the public on its website. 

Reporting companies may choose to receive non-public results so that only the requesting investor will view the scoring. Still, this will make you lose some points due to the insufficient transparency.  

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is the most popular and widely adopted framework referenced in 125 governmental and capital market policies in 60 regions and countries worldwide. GRI unites a wide range of standards and gives detailed guidelines on the best practice for ESG reporting. 

GRI is equally focused on environmental, social, and governance factors and emphasizes the importance of stakeholder engagement for determining materiality. A company can use the GRI Standard to prepare a sustainability report or use selected standards to report specific information. 

Since GRI wishes to promote transparency in reporting, it doesn’t have any scoring methodology. What is more, GRI offers extensive support, training and review services to help companies, especially those in the developing countries, with sustainability reporting.  

The Sustainability Accounting Standards Board (SASB)

The SASB is a nonprofit organization that sets financial reporting standards. Its sustainability reporting framework is industry-specific and maintains a strong focus on investors as a key audience of the report (defines materiality by what investors deem material).  

Material issues fall under one of the five reporting categories: Environment, Social Capital, Human Capital, Business Model and Innovation, Leadership and Governance. 

SASB has no scoring system but it allows comparison and benchmarking of performance within an industry. It can be used in conjunction with other reporting frameworks to cater to the needs of investors interested in financially material issues.  

Integrated Reporting (IR)

The International Integrated Reporting Counsil (IIRC) and its International Integrated Reporting Framework (<IR> Framework) establish Guiding Principles and Content Elements that allow companies to produce integrated reports - the ones that consolidate financial and non-financial reporting. 

The eight Content Elements to be covered are: Organizational overview and external environment, Governance, Business model, Risk and opportunities, Strategy and resource allocation, Performance, Outlook, and Basis of preparation and presentation     

The IR requires reporting organizations to maintain a strategic focus throughout the report, explain the overall business model and explain how it uses resources in the creation of value. This way, it pursues a larger mission of promoting “intergrated thinking” about companies performance and value creation over time. 

The UN Sustainable Development Goals (SDGs) 

The Sustainable Development Goals (SDGs) are developed by the United Nations as an overall aim that the global community wants to achieve by 2030. 

SDGs comprise 17 sustainability-based goals and 169 associated targets. Companies worldwide may choose what goals they want to contribute to, depending on how those align with their corporate vision and values. Thus, SDGs serve a useful framework for companies to disclose the sustainability purposes they charish and report on their sustainability initiatives.

Concluding Words

All the mentioned ESG reporting frameworks are voluntary and it is up to a company to choose one or several frameworks to report relevant sustainability data to its stakeholders. Although it might be confusing for companies to choose among the diverse guidelines first, it is important to give it a try and engage in sustainability education and reporting. The bottom line of the business and a sustainable future of the global society depend on this simple move.   

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