The world of ESG reporting is complex, to say the least. In fact, Ernst & Young estimates there are over 600 ESG frameworks and standards around the world. Some are specific to certain industries or countries. Others are broadly applicable, but haven’t found a mainstream foothold.
In the last year, governments around the globe like like the USA, Canada, and EU have made steps toward enacting ESG-specific regulatory changes. These legislative changes mean that although ESG reporting has been voluntary in the past, certain industry sectors will be required to report going forward, while others will do so to meet the requirements of customers and investors.
In such a rapidly shifting environment, understanding and meeting your ESG reporting responsibilities can be difficult, but with the right support, it is possible to simplify the process of building and managing your ESG program. Ultimately ensuring your methodologies are fit for purpose now – and in the future.
What are ESG Frameworks?
One of the key considerations in ESG reporting is providing meaningful data that can be compared to other companies within an industry or investment portfolio. But being able to compare apples to apples means starting from the same tree or, in this case, the same ESG reporting framework.
Frameworks harmonize reporting. Without them, businesses can pick and choose the metrics that show them in the best light, and investors aren’t able to identify those organizations making strides towards their sustainability goals and reducing their negative impact on the environment and community.
Unfortunately, the terms ‘ESG reporting standards’ and ‘ESG reporting frameworks’ are often used interchangeably. Where ESG reporting remains voluntary, this isn’t always a problem. Where organizations need to meet specific compliance requirements, however, it’s important to understand which ESG reporting frameworks are approved and relevant for your operations.
What are the Different ESG Reporting Frameworks?
Keeping up to date on ESG reporting frameworks can feel like a moving target. Not only are there hundreds of frameworks to choose from, but increasingly, reporting organizations are consolidating and establishing strategic partnerships so that reportable data can be harmonized.
When major frameworks and groups consolidate, as in March 2022 when the IFRS Foundation, home to the ISSB, and GRI announced a partnership to align their frameworks, it can be hard to keep up. The alphabet soup of acronyms is rapidly turning into a rich and hearty stew.
Below is an introduction to some of the available ESG reporting frameworks, to help you understand how these frameworks are typically set up and which industries they apply to. But before you start building your ESG program, be sure to look for the most up-to-date frameworks that apply to you, as well as thinking about how to establish your data collection strategy to match framework requirements.
1. CDP
Formerly known as the Carbon Disclosure Project, CDP is a global non-profit organization that runs disclosure systems for investors, companies, cities and states. Unlike other ESG reporting frameworks, CDP is primarily focused on areas of environmental sustainability, focusing on topics related to climate change, forests and water security.
In 2015, CDP introduced a quality-reviewed GHG modeled emissions data set, which has been widely used for investment decision making and to assess carbon risk.
CDP also provides annual sustainability scoring, based on the depth of company reporting and their level of action year-over-year. Investors will refer to CDP’s annual A-List to help set investment priorities and identify sustainable partners.
2. Corporate Sustainability Reporting Directive (CSRD)
The EU’s Corporate Sustainability Reporting Directive (CSRD) is the next evolution in ESG reporting for EU businesses. The largest organizations may already be familiar with the previous Non-Financial Reporting Directive (NFRD), which will be phased out in favor of the CSRD.
While the CSRD is the directive that sets the groundwork for reporting, companies will be required to follow the European Sustainability Reporting Standards (ESRS) in terms of the disclosures to be provided. These standards include disclosures in the following areas:
- General disclosures
- Environmental disclosures
- Governance disclosures
- Sustainability disclosures
While there are individual documents for each standard and set of disclosures, it’s important that they also be viewed as a whole program.
3. Business Responsibility and Sustainability Report (BRSR)
The Business Responsibility and Sustainability Report (BRSR), which has been in effect since 2023, is the evolution of ESG reporting in India. The top 1,000 listed companies by market capitalization must file a BRSR-compliant report to the Securities and Exchange Board (SEBI) of India.
SEBI has a published guidance document that details everything required to be included in your report. Broadly, these include:
- General Disclosures
- Management & Process Disclosures
- Principle Wise Performance Disclosure
4. Global Real Estate Sustainability Benchmark (GRESB)
GRESB is an investor-led organization striving to provide validated ESG data to the business community. They collect, validate, score and benchmark ESG data from individual companies in order to help their member investors make informed decisions.
Much of GRESB’s data is focused on the real estate sector with annual benchmarks reported in:
- Real Estate
- Real Estate Development
- Infrastructure Funds
- Infrastructure Assets
5. Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) framework is probably the most well-known of the ESG reporting standards. Companies who already have an existing Corporate Social Responsibility (CSR) program in place may have followed GRI’s requirements to build it. In fact, 73% of the world’s 250 largest companies follow GRI for their ESG reporting.
The GRI standard includes three sets of standards within itself. These are:
- Universal – A set of three standards that apply to every reporting organization. The universal standards cover the basics of the company’s operational activities.
- Topic-specific– These are divided into three series based on material topics – 200 (Economic topics), 300 (Environmental topics), and 400 (Social topics).
- Sector Standards – Four priority groups that make up a sector’s most significant impact areas: Priority Group 1 (basic materials and needs), Priority Group 2 (industrial), Priority Group 3 (transport, infrastructure, and tourism), and Priority Group 4 (other services and light manufacturing).
6. International Sustainability Standards Board (ISSB)
The International Sustainability Standards Board (ISSB) is a new kid on the ESG framework block but is actually a consolidation of the Value Reporting Foundation (VRF) and the Climate Disclosure Standards Boards. The ISSB was established to specifically meet the sustainability information needs of capital markets.
The ISSB is run by the IFRS Foundation, a leader in global accounting disclosure frameworks. The introduction of the ISSB and its partnership with GRI will help harmonize ESG reporting with already accepted standards for financial reporting, giving investors the confidence to make informed risk-based decisions based on clearly-reported sustainability data.
In June 2023, the ISSB published its global sustainability and climate disclosure standards. These finalized standards include the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and the IFRS S2 Climate-related Disclosures. To learn more about the ISSB and its new reporting standards check out our comprehensive blog here.
7. Sustainability Accounting Standards Board (SASB)
The Sustainability Accounting Standards Board (SASB) is a non-profit organization that provides global standards for disclosing financially-material sustainability information to investors. The sustainability accounting standards connect businesses and investors to the financial impacts caused by sustainability issues. The SASB Standards are now a part of the IFRS Foundation as of June 2022.
The SASB Standards are a practical tool for implementing principles-based frameworks, including those provided by the TCFD and IIRC. Many companies use both SASB and GRI Standards to meet the needs of various audiences. SASB offers a set of industry-specific standards covering 77 industries across 11 categories.
8. Science Based Targets initiative (SBTi)
Science Based Targets initiative (SBTi) is focused specifically on reducing carbon emissions in the private sector. The program not only helps companies quantify their carbon emissions, it also provides science-based methodologies for reducing emissions and reaching net-zero targets by 2050.
9. Task Force on Climate-Related Financial Disclosures (TCFD)
Established in 2015 by the Financial Stability Board (FSB), the Task Force on Climate-Related Financial Disclosures (TCFD) is an industry-led organization that develops climate-related financial disclosures.
The TCFD offers disclosure recommendations around four key areas including governance, strategy, risk management and metrics and targets. It also provides best practices for reporting.
Together, this helps companies communicate how climate-related issues are impacting – and will impact – their financial performance. It also helps investors identify climate-related risks and make better-informed investment decisions.
In July 2023, following the publishing of the ISSB Standards, which are consistent with the four core recommendations and eleven recommended disclosures published by the TCFD, the Financial Stability Board announced that the TCFD had completed its work and the IFRS Foundation would take over the monitoring of the progress on companies’ climate related disclosures from the TCFD. Although the work of the TCFD is completed, the TCFD recommendations remain available for companies to use should they choose to.
How to Get Started with Reporting Frameworks
The best time to start implementing an ESG reporting program is now, while the requirements for many industries are still voluntary. This ensures that you can take time figuring out how to compile the necessary information, quantify your findings, and accurately report data in a way that’s meaningful and verifiable to corporate leadership, shareholders, investors, and the community.
Staying on top of the changing framework landscape, however, can be a full-time job on its own. Knowing which frameworks apply to your industry, what to do when your framework consolidates with others, and how to use the methodology to report on the progress of your ESG program is time-consuming.
AMCS can offer a head start by supporting you to streamline data collection, and use verified methodologies to quantify emissions. In fact, with multiple reporting frameworks built in to the AMCS Sustainability Platform, you can implement effective solutions to manage your data, leaving the platform to do the hard work of keeping abreast with evolving frameworks and making sure your methodologies stay up to date.
By partnering with AMCS, you can be sure you’ll set your data up right first time, helping you streamline reporting, and even document your progress in real time, to track and achieve your ESG goals with ease.
To find out more about how you can use the AMCS Sustainability Platform to meet your ESG reporting needs, speak with one of our experts today.