14.1 Global reporting standards and frameworks
5 min read•july 30, 2024
Global reporting standards shape how companies disclose sustainability efforts. They provide frameworks for measuring and sharing environmental, social, and governance impacts. These standards help businesses communicate their sustainability performance to stakeholders and investors.
Different standards focus on various aspects of sustainability reporting. Some, like GRI, offer comprehensive guidelines, while others, like SASB, emphasize financially material information. Adopting these standards can improve , comparability, and credibility in sustainability reporting.
Global Sustainability Reporting Standards
Overview of Major Standards and Frameworks
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- The Standards provide a comprehensive framework for reporting on economic, environmental, and social impacts, making them the most widely used sustainability reporting standards globally
- The Standards emphasize financially material sustainability information, customized for specific industries, and intended to be incorporated into mandatory filings to the U.S. Securities and Exchange Commission (SEC)
- The Framework encourages integrated thinking and reporting, linking financial and non-financial information to illustrate how an organization generates value over time
- The CDP (formerly Carbon Disclosure Project) offers a framework for companies to report their environmental impacts, concentrating on climate change, water security, and deforestation
- The is a principles-based framework that promotes the adoption of sustainable and socially responsible policies by businesses and encourages reporting on their implementation
- The provides recommendations for voluntary, consistent climate-related financial risk disclosures to be incorporated into mainstream filings
Adoption and Alignment of Standards
- Many companies adopt multiple reporting standards and frameworks to address the diverse information needs of their stakeholders (investors, customers, employees, regulators)
- Reporting standards and frameworks are increasingly aligning with each other to enhance consistency and comparability, such as the joint guide published by GRI and SASB to help companies use both sets of standards together
- The , an initiative convened by the International Integrated Reporting Council (IIRC), brings together major standard-setters and framework providers to promote greater coherence, consistency, and comparability between corporate reporting frameworks and standards
- Some jurisdictions, such as the European Union, are developing mandatory sustainability reporting requirements that draw upon existing voluntary standards and frameworks ()
Reporting Standards: Key Features vs Requirements
Scope, Focus, and Materiality
- Scope and focus: GRI Standards cover a wide range of sustainability topics, while SASB Standards concentrate on industry-specific, financially material issues. The IIRC Framework stresses the integration of financial and non-financial information
- : GRI Standards define materiality as topics that reflect an organization's significant economic, environmental, and social impacts or substantially influence stakeholders' assessments and decisions. SASB Standards define materiality as sustainability issues that are reasonably likely to impact a company's financial condition or operating performance
- Target audience: GRI Standards and the IIRC Framework cater to a broad range of stakeholders, while SASB Standards primarily target investors. CDP and TCFD focus on environmental and climate-related disclosures for investors and other stakeholders
Reporting Requirements and Disclosures
- Reporting requirements: GRI Standards provide a comprehensive set of disclosures, while SASB Standards offer a more targeted set of metrics. The IIRC Framework provides a principles-based approach to integrated reporting
- Level of prescription: GRI Standards are more prescriptive, providing detailed guidance on what to report and how to report it. SASB Standards are less prescriptive, focusing on a set of industry-specific, financially material metrics. The IIRC Framework is principles-based, allowing for more flexibility in how organizations report
- Assurance and verification: GRI Standards recommend external assurance to enhance the credibility and reliability of reported information. SASB Standards do not require external assurance, but it is encouraged. The IIRC Framework does not specify assurance requirements, but it emphasizes the importance of credibility and reliability of reported information
Benefits and Challenges of Sustainability Reporting
Benefits of Adopting Reporting Standards
- Improved transparency and accountability lead to increased stakeholder trust and confidence, as organizations disclose their sustainability performance and impacts
- Enhanced risk management results from identifying and addressing material sustainability issues, helping organizations to mitigate potential risks and capitalize on opportunities
- Increased comparability and benchmarking within and across industries enable stakeholders to assess an organization's performance relative to its peers and industry standards
- Potential for improved access to capital and enhanced investor relations, as investors increasingly consider sustainability factors in their decision-making processes
- Driving internal change and innovation by integrating sustainability into decision-making processes, encouraging organizations to adopt more sustainable practices and develop innovative solutions
Challenges in Implementing Reporting Standards
- Resource-intensive process requiring significant time, expertise, and financial investment, as organizations need to collect, analyze, and report on a wide range of sustainability data
- Difficulty in collecting and verifying reliable and accurate sustainability data, particularly for complex global supply chains or when dealing with qualitative or non-financial information
- Potential for "greenwashing" or selective disclosure if not properly assured or validated, undermining the credibility and usefulness of reported information
- Lack of standardization across different reporting frameworks can lead to confusion and inconsistency, making it difficult for stakeholders to compare and interpret sustainability information
- Balancing the need for comprehensive disclosure with the risk of information overload for stakeholders, as organizations strive to provide relevant and material information without overwhelming readers
Stakeholder Engagement in Reporting Standards
Role of Stakeholder Engagement
- helps organizations identify and prioritize material sustainability topics, ensuring that reporting aligns with stakeholder expectations and information needs
- Engaging stakeholders in the reporting process provides valuable insights, improves the credibility and relevance of reported information, and fosters trust and accountability
- Stakeholder input can help organizations to identify emerging sustainability risks and opportunities, and to adapt their strategies and reporting practices accordingly
- Stakeholder engagement demonstrates an organization's commitment to transparency and responsiveness, enhancing its reputation and social license to operate
Implementing Stakeholder Engagement
- Stakeholder engagement can take various forms, such as surveys, interviews, focus groups, advisory panels, and ongoing dialogue sessions, depending on the organization's size, sector, and stakeholder landscape
- Organizations should develop a stakeholder engagement plan that identifies key stakeholders (investors, customers, employees, suppliers, local communities, NGOs), defines engagement objectives, and outlines communication channels and feedback mechanisms
- The results of stakeholder engagement should inform the selection of appropriate reporting standards and frameworks, as well as the content and structure of sustainability reports, ensuring that reported information is relevant, material, and responsive to stakeholder needs
- Continuous stakeholder engagement throughout the reporting cycle enables organizations to adapt and improve their reporting practices based on evolving stakeholder expectations and feedback, fostering a culture of continuous improvement and accountability
- Effective stakeholder engagement requires dedicated resources, senior management commitment, and a willingness to listen and respond to stakeholder concerns and recommendations, even when they may be challenging or critical of the organization's performance
Key Terms to Review (23)
Assurance Statements: Assurance statements are independent evaluations of an organization’s sustainability reports, providing credibility to the reported information by verifying its accuracy and reliability. These statements help stakeholders, including investors and consumers, trust that the company’s claims about its environmental and social performance are genuine. By aligning with global reporting standards, assurance statements enhance transparency and accountability in corporate sustainability efforts.
Carbon Disclosure Project (CDP): The Carbon Disclosure Project (CDP) is a non-profit organization that helps companies and cities disclose their environmental impact, specifically regarding carbon emissions and climate change. By providing a platform for organizations to report their greenhouse gas emissions, CDP aims to promote transparency, accountability, and sustainability practices in global business operations. The data collected by CDP is used to encourage continuous improvement in environmental performance and supports the establishment of global reporting standards.
Carbon Footprint: A carbon footprint is the total amount of greenhouse gases, specifically carbon dioxide, that are emitted directly or indirectly by an individual, organization, event, or product throughout its lifecycle. Understanding and measuring carbon footprints is essential for assessing environmental impact and promoting sustainability across economic, social, and environmental dimensions.
Corporate Reporting Dialogue: Corporate reporting dialogue refers to the ongoing conversation and collaboration among various stakeholders involved in corporate reporting, such as businesses, investors, regulators, and standard-setters. This dialogue aims to improve the quality, consistency, and comparability of corporate disclosures by aligning reporting practices with global standards and frameworks, ultimately enhancing transparency and accountability in corporate governance.
Corporate Social Responsibility (CSR): Corporate Social Responsibility (CSR) refers to the practice of companies taking responsibility for their impact on society and the environment beyond just making profits. This includes ethical behavior, sustainable practices, and community engagement, reflecting a commitment to being accountable to stakeholders and the wider community. CSR has evolved over time, influencing how businesses operate and communicate their values, aligning closely with global reporting standards and frameworks, as well as initiatives aimed at creating shared value.
Environmental, Social, and Governance (ESG) Criteria: ESG criteria are a set of standards used by socially conscious investors to screen potential investments based on corporate policies and practices related to environmental sustainability, social responsibility, and corporate governance. These criteria help assess the ethical impact and sustainability of an investment in a company or business, pushing organizations to operate in ways that are beneficial to society and the planet.
EU Corporate Sustainability Reporting Directive: The EU Corporate Sustainability Reporting Directive (CSRD) is a legislative framework aimed at enhancing and standardizing sustainability reporting across European Union member states. It builds on the existing Non-Financial Reporting Directive (NFRD) and requires companies to disclose detailed information about their environmental, social, and governance (ESG) performance, thereby promoting transparency and accountability in corporate practices.
Global Reporting Initiative (GRI): The Global Reporting Initiative (GRI) is an international framework for sustainability reporting that helps organizations communicate their environmental, social, and governance (ESG) performance in a transparent and standardized way. GRI promotes accountability and informed decision-making by providing guidelines for measuring and reporting on the Triple Bottom Line, which encompasses economic, environmental, and social dimensions of business operations.
International Financial Reporting Standards (IFRS): International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) that provide guidelines for financial reporting on a global scale. These standards aim to create consistency and transparency in financial statements, making it easier for investors and stakeholders to compare the financial performance of companies across different countries. IFRS is essential for organizations operating internationally, as it helps facilitate trade, investment, and economic growth by standardizing financial reporting practices.
International Integrated Reporting Council (IIRC): The International Integrated Reporting Council (IIRC) is a global coalition that promotes integrated reporting, which combines financial and non-financial information to provide a holistic view of an organization's performance and sustainability. This approach encourages companies to communicate their strategy, governance, performance, and prospects in a manner that reflects their true value and impact on stakeholders. The IIRC aims to establish international frameworks and standards that help organizations create reports that foster accountability and transparency.
International Organization for Standardization (ISO): The International Organization for Standardization (ISO) is an independent, non-governmental international organization that develops and publishes voluntary technical standards for a wide range of industries. These standards help ensure quality, safety, efficiency, and interoperability of products and services across borders. ISO standards play a crucial role in global reporting standards and frameworks by providing guidelines that organizations can follow to improve their sustainability practices and enhance transparency in reporting.
Life Cycle Assessment (LCA): Life Cycle Assessment (LCA) is a systematic method used to evaluate the environmental impacts of a product or service throughout its entire life cycle, from raw material extraction through production, use, and disposal. This approach helps businesses identify opportunities for improvement and reduce negative environmental effects, making it a vital tool in sustainable product development and reporting frameworks.
Materiality: Materiality refers to the importance or significance of information in influencing the decisions of stakeholders, especially in the context of sustainability and corporate social responsibility (CSR). It highlights which issues are relevant for reporting and decision-making processes, ensuring that organizations communicate the most critical aspects of their environmental, social, and governance impacts to stakeholders.
Paris Agreement: The Paris Agreement is a landmark international accord that aims to combat climate change by limiting global warming to well below 2 degrees Celsius compared to pre-industrial levels. It brings together countries from around the world to set national targets for greenhouse gas emissions, promoting transparency and accountability in efforts to reduce climate impacts and adapt to changing conditions.
Rio Declaration: The Rio Declaration is a document that emerged from the 1992 United Nations Conference on Environment and Development, also known as the Earth Summit, held in Rio de Janeiro, Brazil. It consists of 27 principles that provide a framework for sustainable development, emphasizing the need for global cooperation to tackle environmental issues while balancing economic growth and social equity. This declaration is a key reference point in establishing global reporting standards and frameworks, as it laid the groundwork for further agreements and policies aimed at promoting sustainability.
Stakeholder Engagement: Stakeholder engagement is the process of identifying, analyzing, and interacting with individuals or groups that have an interest in or are affected by a company's operations. This approach helps organizations understand stakeholders' needs and expectations, ultimately leading to more sustainable business practices and better decision-making.
Sustainability Accounting Standards Board (SASB): The Sustainability Accounting Standards Board (SASB) is an organization that develops and disseminates sustainability accounting standards that help businesses disclose material environmental, social, and governance (ESG) information to investors. These standards are designed to enhance the comparability and reliability of sustainability reporting across industries, ultimately promoting transparency and accountability in corporate practices related to the Triple Bottom Line.
Sustainability impact assessment: A sustainability impact assessment is a systematic process used to evaluate the potential environmental, social, and economic effects of a proposed project or policy. This assessment aims to ensure that decisions made by organizations are aligned with sustainable development goals, providing insights into how actions can impact the planet and communities both positively and negatively. By integrating sustainability into the decision-making process, organizations can make informed choices that contribute to long-term viability and responsibility.
Sustainable Development Goals (SDGs): Sustainable Development Goals (SDGs) are a set of 17 global goals established by the United Nations in 2015, designed to address pressing social, economic, and environmental challenges by 2030. These goals aim to create a more equitable and sustainable future for all, linking closely to the evolution of sustainable business practices, global reporting standards, and the setting of actionable sustainability objectives.
Task Force on Climate-related Financial Disclosures (TCFD): The Task Force on Climate-related Financial Disclosures (TCFD) is an initiative created to develop a set of recommendations for more effective climate-related disclosures that provide investors, lenders, and insurance underwriters with better information about the financial impacts of climate change. Established by the Financial Stability Board, the TCFD aims to promote transparency and encourage organizations to disclose climate-related financial risks, aligning with sustainable business practices and global reporting standards.
Third-party verification: Third-party verification refers to the process by which an independent organization evaluates and confirms the accuracy and reliability of a company's sustainability disclosures. This verification enhances transparency and credibility, ensuring that stakeholders can trust the reported information about a company's environmental, social, and governance (ESG) practices. Such assessments play a crucial role in aligning with global reporting standards and frameworks, as they provide a standardized approach to measuring and validating sustainability efforts.
Transparency: Transparency refers to the openness and clarity with which organizations communicate their practices, decisions, and performance to stakeholders. This concept fosters trust, as stakeholders can easily access relevant information about the organization’s actions and impacts, thereby encouraging accountability and informed decision-making.
United Nations Global Compact (UNGC): The United Nations Global Compact (UNGC) is a voluntary initiative that encourages businesses and organizations to adopt sustainable and socially responsible policies, while aligning their operations with universally accepted principles in human rights, labor, environment, and anti-corruption. By promoting collaboration between companies and the UN, the UNGC aims to create a more sustainable and inclusive global economy, fostering transparency and accountability in corporate practices.