Glossary

11.2 Sustainability Reporting Standards and Frameworks

3 min read•august 9, 2024

Sustainability reporting standards and frameworks guide companies in disclosing their environmental and social impacts. From the Global Reporting Initiative to the , these tools help businesses measure and communicate their sustainability efforts effectively.

These frameworks not only promote transparency but also enable stakeholders to assess a company's performance. By following these standards, businesses can improve their sustainability practices, manage risks, and build trust with investors, customers, and the wider community.

Sustainability Reporting Frameworks

Global Reporting Initiative and SASB

Top images from around the web for Global Reporting Initiative and SASB

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Top images from around the web for Global Reporting Initiative and SASB

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  • provides comprehensive sustainability reporting standards
    • Widely adopted framework used by thousands of organizations worldwide
    • Focuses on economic, environmental, and social impacts
    • Includes sector-specific guidelines for industries (mining, finance, food processing)
    • Allows for comparability across organizations and sectors
  • develops industry-specific sustainability standards
    • Tailored to 77 different industries
    • Emphasizes financially material sustainability information
    • Helps companies disclose sustainability issues relevant to investors
    • Facilitates integration of sustainability data into financial reporting

UN Global Compact and CDP

  • UN Global Compact promotes sustainable and socially responsible business practices
    • Voluntary initiative based on CEO commitments
    • Encompasses ten principles in areas of human rights, labor, environment, and anti-corruption
    • Requires annual Communication on Progress (COP) report from participants
    • Aligns business strategies with universal principles on sustainability
  • CDP (formerly Carbon Disclosure Project) focuses on environmental impact disclosure
    • Collects data on carbon emissions, , and deforestation risks
    • Provides standardized questionnaires for companies to report environmental information
    • Assigns scores to companies based on their environmental performance
    • Helps investors assess climate-related risks and opportunities in their portfolios
  • develops climate-related financial risk disclosures
    • Established by the Financial Stability Board
    • Provides recommendations for voluntary climate-related financial disclosures
    • Focuses on governance, strategy, risk management, and metrics and targets
    • Aims to help companies provide better information to support informed capital allocation
    • Encourages scenario analysis to assess potential business impacts of climate change

Sustainability Standards and Guidelines

ISO 26000 and AA1000

  • provides guidance on social responsibility for organizations
    • Developed by the International Organization for Standardization
    • Covers seven core subjects (organizational governance, human rights, labor practices)
    • Offers practical guidance for implementing social responsibility
    • Not a certification standard, but a voluntary guidance document
  • series of standards focus on sustainability assurance and
    • Developed by , a global consulting and standards firm
    • Includes AA1000 AccountAbility Principles (AP) for ethical and strategic sustainability performance
    • AA1000 Assurance Standard (AS) provides methodology for sustainability-related assurance engagements
    • AA1000 Stakeholder Engagement Standard (SES) offers framework for quality stakeholder engagement

Stakeholder Engagement in Sustainability Reporting

  • Stakeholder engagement crucial for effective sustainability reporting and strategy development
    • Involves identifying and prioritizing key stakeholders (employees, customers, investors, local communities)
    • Utilizes various engagement methods (surveys, focus groups, advisory panels, social media)
    • Helps companies understand stakeholder concerns and expectations
    • Informs assessments to determine most relevant sustainability issues
  • Materiality principle guides selection of topics for sustainability reporting
    • Focuses on issues that significantly impact the organization and its stakeholders
    • Considers both financial and non-financial factors
    • Helps companies prioritize sustainability efforts and allocate resources effectively
  • Stakeholder feedback integration improves sustainability performance and reporting
    • Enhances transparency and builds trust with stakeholders
    • Identifies emerging sustainability risks and opportunities
    • Supports continuous improvement in sustainability practices and disclosures

Key Terms to Review (19)

AA1000: AA1000 is a set of sustainability standards and principles developed by the AA1000 Series of Standards, aimed at improving the quality of sustainability reporting and stakeholder engagement. It emphasizes accountability, inclusivity, and responsiveness in organizations' decision-making processes, guiding them to better manage their social, environmental, and economic impacts.
Accountability: Accountability refers to the obligation of an organization or individual to account for its actions, accept responsibility, and disclose results in a transparent manner. This concept is vital in fostering trust among stakeholders and ensuring that businesses operate ethically and sustainably.
Carbon Disclosure Project (CDP): The Carbon Disclosure Project (CDP) is an international nonprofit organization that helps companies and cities disclose their environmental impact, particularly in relation to greenhouse gas emissions and climate change. By encouraging transparency in reporting, the CDP enables stakeholders to understand the environmental risks and opportunities organizations face, ultimately promoting sustainable business practices that align with the principles of people, planet, and profit.
Carbon footprint: A carbon footprint refers to the total amount of greenhouse gases, primarily carbon dioxide, that are emitted directly or indirectly by an individual, organization, event, or product throughout its lifecycle. This concept is crucial in understanding the environmental impact of human activities and emphasizes the need for responsible practices to reduce emissions and mitigate climate change.
Corporate social responsibility (CSR): Corporate social responsibility (CSR) refers to the ethical framework that suggests that businesses have a responsibility to operate in ways that benefit society, the environment, and the economy. This concept emphasizes that companies should not only focus on profit but also consider their impact on stakeholders, including employees, customers, communities, and the environment, making it a key aspect of modern business strategies.
Disclosure practices: Disclosure practices refer to the policies and procedures that organizations use to share information about their operations, sustainability efforts, and financial performance with stakeholders. These practices are crucial for transparency and accountability, allowing stakeholders to make informed decisions based on reliable information. Effective disclosure practices align with various sustainability reporting standards and frameworks that guide organizations in their reporting efforts.
European Union Non-Financial Reporting Directive: The European Union Non-Financial Reporting Directive (NFRD) is a regulation that requires large companies to disclose information on their environmental, social, and governance (ESG) practices. It aims to provide transparency regarding how businesses manage their impact on society and the environment, aligning with broader goals of sustainability reporting frameworks.
External assurance: External assurance refers to the process where an independent third party evaluates and verifies a company's sustainability reporting, ensuring that the information disclosed is accurate and credible. This process helps to enhance transparency, build trust among stakeholders, and improve the overall quality of sustainability reports by providing an objective assessment of the data presented.
Global Reporting Initiative (GRI): The Global Reporting Initiative (GRI) is an international independent organization that provides a comprehensive framework for sustainability reporting, enabling organizations to measure and communicate their environmental, social, and economic performance. GRI helps businesses adopt a triple bottom line approach by encouraging transparency in reporting on their impacts on people, planet, and profit, fostering accountability, and facilitating informed decision-making by stakeholders.
ISO 26000: ISO 26000 is an international standard that provides guidelines for social responsibility, helping organizations operate in a socially responsible manner. It emphasizes the importance of ethical behavior, sustainable development, and transparency in business practices, impacting various aspects such as corporate governance and stakeholder engagement.
Materiality: Materiality refers to the significance of information that could influence the decision-making of stakeholders regarding a company’s sustainability and performance. In the context of sustainability reporting, it emphasizes the need for organizations to disclose information that is relevant and impactful for their stakeholders, ensuring transparency and accountability in their operations.
SEC Guidelines: SEC guidelines refer to the rules and regulations set forth by the U.S. Securities and Exchange Commission (SEC) that govern the disclosure of information by publicly traded companies. These guidelines ensure transparency and accountability in financial reporting, allowing investors to make informed decisions. They are essential for sustainability reporting as they help standardize how companies disclose their environmental, social, and governance (ESG) practices.
Stakeholder Engagement: Stakeholder engagement is the process of involving individuals, groups, or organizations that have a vested interest in a company's operations and decisions. This approach fosters open communication, collaboration, and mutual understanding between businesses and their stakeholders, which is essential for building trust and achieving sustainable outcomes in various aspects of business practices.
Sustainability Accounting Standards Board (SASB): The Sustainability Accounting Standards Board (SASB) is an independent organization that develops and disseminates sustainability accounting standards to help businesses disclose material sustainability information to investors. SASB standards focus on financially material information that is relevant to the health of the environment, social equity, and economic performance of companies, promoting transparency in corporate sustainability efforts. This contributes to a broader understanding of how companies impact society and the environment, which aligns with efforts to measure 'People, Planet, Profit.'
Task Force on Climate-related Financial Disclosures (TCFD): The Task Force on Climate-related Financial Disclosures (TCFD) is an initiative established to develop and promote voluntary climate-related financial disclosure standards for companies. Its main goal is to provide investors and stakeholders with information about the financial risks and opportunities related to climate change, thus helping businesses to align their strategies with sustainability objectives and facilitate informed decision-making.
Third-party verification: Third-party verification is the process where an independent organization assesses and validates the accuracy and credibility of information provided by a business, particularly in sustainability reporting. This practice enhances transparency, reliability, and trustworthiness of the reported data, helping stakeholders make informed decisions based on credible information. By involving an external party, businesses can ensure their sustainability claims are validated against established standards and frameworks.
Triple Bottom Line: The triple bottom line is a framework that encourages businesses to focus on three key areas: social responsibility, environmental impact, and economic performance. By evaluating success through these three dimensions—people, planet, and profit—organizations can better understand their overall impact and contribution to society, rather than solely focusing on financial gains.
UN Global Compact: The UN Global Compact is a voluntary initiative that encourages businesses worldwide to adopt sustainable and socially responsible policies, aligning their operations with universal principles in areas such as human rights, labor, environment, and anti-corruption. This initiative not only helps companies to act responsibly but also serves as a framework for them to contribute positively towards global goals like the Sustainable Development Goals (SDGs). By participating, organizations commit to integrating these principles into their strategies and operations, impacting CSR strategies, sustainability reporting, and non-financial disclosures.
Water Usage: Water usage refers to the consumption of water resources for various purposes, including agricultural, industrial, and personal use. It is a critical component of environmental management, as it directly impacts sustainability and corporate responsibility efforts. Effective water usage strategies not only conserve this precious resource but also promote ethical practices within businesses, aligning with broader objectives of social and environmental accountability.
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