What are sustainability reporting frameworks?

Sustainability reporting frameworks provide guidelines for companies to disclose data about their environmental, social, and governance (ESG) impacts, risks, and opportunities. These frameworks aim to bring consistency and comparability to sustainability reporting, helping stakeholders like investors, customers, employees, and regulators make informed decisions. While numerous frameworks exist, some are more prominent and widely adopted than others.  

Here's an overview of some key sustainability reporting frameworks:

1. Global Reporting Initiative (GRI) Standards:

• Focus: Comprehensive sustainability reporting covering a wide range of economic, environmental, and social topics.  
   
• Approach: Principles-based, allowing organizations to report on topics material to their stakeholders and impacts.  
   
• Structure: Modular, consisting of Universal Standards applicable to all organizations and Topic Standards that cover specific ESG issues (e.g., climate change, human rights, waste). Sector Standards provide additional guidance for specific industries.  
   
• Key Features: Emphasizes stakeholder engagement and materiality assessment. The GRI Standards are widely used globally and are considered a robust framework for comprehensive sustainability reporting.  
   

2. Sustainability Accounting Standards Board (SASB) Standards:

• Focus: Financially material sustainability information relevant to investors.  
   
• Approach: Industry-specific, identifying the subset of ESG issues most likely to affect a company's financial performance within 77 specific industries.  
   
• Key Features: Focuses on a narrower set of financially material topics and provides specific, quantifiable metrics for each industry.  
   
• Integration with ISSB: As of August 2022, the International Sustainability Standards Board (ISSB) assumed responsibility for the SASB Standards and encourages their continued use as they are valuable for the application of IFRS Sustainability Disclosure Standards.  
   

3. Task Force on Climate-related Financial Disclosures (TCFD) Recommendations:

• Focus: Climate-related risks and opportunities and their financial implications.
• Approach: Structured around four core themes: Governance, Strategy, Risk Management, and Metrics & Targets.  
   
• Key Features: Emphasizes scenario analysis to assess the resilience of a company's strategy under different climate scenarios. It recommends disclosures on greenhouse gas emissions (Scopes 1, 2, and 3 where relevant) and climate-related targets.  
   
• Integration with ISSB: The TCFD recommendations have been fully integrated into the ISSB's IFRS S2 Climate-related Disclosures standard. While the TCFD has fulfilled its remit and disbanded in late 2023, its framework remains influential through the ISSB standards.  
   

4. International Sustainability Standards Board (ISSB) Standards:

• Focus: To create a global baseline of high-quality sustainability disclosure standards to meet investors' information needs.
• Approach: Builds upon existing frameworks, including TCFD, SASB, and Integrated Reporting.  
   
• Key Standards: The ISSB has issued its first two standards:
  • IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information: Sets out the overarching requirements for how a company discloses information about sustainability-related risks and opportunities.  
     
  • IFRS S2: Climate-related Disclosures: Specifies climate-related disclosures and fully incorporates the TCFD recommendations.
• Key Features: Investor-focused, aiming to provide decision-useful, comparable information connected to financial statements. Effective for annual reporting periods beginning on or after January 1, 2024.

Other Notable Frameworks:

• CDP (formerly Carbon Disclosure Project): Focuses on environmental disclosure, particularly on climate change, water security, and forests.  
   
• Integrated Reporting (<IR>): A framework that encourages companies to provide a concise communication about how an organization's strategy, governance, performance, and prospects, in the context of its external environment, lead to the creation of value in the short, medium, and long term.  
   
• EU Sustainable Finance Disclosure Regulation (SFDR): A European Union regulation that mandates ESG disclosure for financial market participants and advisors.
• Corporate Sustainability Reporting Directive (CSRD): A European Union directive that requires a larger number of companies to report on a broader range of sustainability topics, aligning with the GRI's comprehensive approach.  
   

Key Considerations When Choosing a Framework:

• Intended Audience: Who are you trying to reach with your report (investors, customers, etc.)?
• Materiality: What are the most significant ESG issues for your business and stakeholders?
• Industry: Are there industry-specific frameworks or standards that are commonly used?
• Regulatory Requirements: Are there any mandatory reporting requirements in your jurisdiction?
• Resources and Capacity: What resources do you have available for data collection and reporting?

The sustainability reporting landscape is continuing to evolve, with a growing emphasis on standardization and alignment across different frameworks to provide more consistent and decision-useful information for stakeholders. The emergence of the ISSB is a significant step towards a global baseline for sustainability disclosures.