A guide to sustainability reporting standards and which one to use

Many sustainability reporting standards exist today to give guidance on what to report and how. This article explores different reporting standards and frameworks, as well as factors to consider when choosing one to work with. 

What are reporting standards? 

Sustainability reporting standards or reporting frameworks are guidelines to report ESG (Environment, Social, Governance) impact on an organisational level. Standards are created by experts in various topics and industries. They provide guidance on how to prepare or file disclosures in a structured and appropriate way that can be used by different industries, organizations of different sizes and reporting requirements.

Why reporting standards? 

Any company embarking on sustainability reporting faces the same question at some point: what to report, and how? Thankfully, reporting standards and frameworks exist to make the attempt a lot more manageable. They make it easier to report on how sustainable a company's activities are by giving best practices. This includes detailing specific measurements and indicators that show how impactful the company's actions are.

Overview of the most important sustainability reporting standards 

Here is an overview of the most important ESG reporting standards that exist in the reporting space today: 

ESRS

The EU Sustainability Reporting Standards (ESRS) are being developed to support the Corporate Sustainability Reporting Directive (CSRD), which would make ESRS-aligned reporting mandatory for companies. 

EU Taxonomy

The EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities. The goal is to create more transparency around the sustainability of companies’ business activities.

GRI Standards

Global Reporting Initiative (GRI) Standards is a modular set of universal, sectoral, and topical standards. GRI Standards guide the disclosure of an organisation's economic, environmental, and social impacts and the management of those impacts. 

SASB Standards

Comprised of 77 industry-specific reporting guidelines, the SASB Standards guides organisations to report on the risks and opportunities surrounding the most financially material ESG topics of their industry. 

TCFD

The Task Force on Climate-related Financial Disclosures (TCFD) recommendations is a framework to report on climate-related menace and chance faced by a business. 

CDP

The Carbon Disclosure Project (CDP) is a disclosure system focused on environmental impacts, specifically water-, climate-, and forest-related topics. 

ISSB Standards

The IFRS Foundation is developing a global baseline for sustainability reporting for the capital markets, with a focus on the impact of sustainability on enterprise value. 

GHG Protocol

The GHG Protocol is an accounting standard to measure and report greenhouse gas emissions and is the basis for Scope 1, 2, and 3 classification. ‍

Which sustainability reporting standard to choose? 

Several factors influence the decision to use certain sustainability reporting standards over others. These factors determine which framework you should choose:

• Regulatory requirements: Different countries and regions of the world have their own reporting requirements and frameworks. For compliance purposes, it may be necessary to use the dictated standard, although this does not preclude the use of other standards to support or complement the entire reporting approach. 
• Investor interests: Investors often have their own considerations when it comes to assessing a company's ESG performance. Depending on their focus and investing orientation, investors require sustainability information specific to their investment angle. Many reporting frameworks are investor-led or targeted with an emphasis on connecting sustainability with financial performance, such as the TCFD and CDP. If a company is investor-dependent, using a framework designed for the capital markets would be an advantage. 
• Industry best practices: Every industry faces its own unique risks and opportunities that may not be covered in universal frameworks. For those wishing to add more depth to their reporting, it makes sense to use a reporting framework that dives into the key ESG issues in an industry, such as one of the SASB Standards.

Standards for climate risk and emissions reporting

Growing concerns about climate accountability and the role of business in national low-carbon blueprints are prompting new legislation on climate disclosures, and with it, the development of climate reporting standards. Climate reporting is a new tool to assess and disclose climate-related risks and opportunities. 

All general reporting standards include guidance on climate or emissions reporting, the major difference being the degree and depth of reporting. 

At present, the most recognised climate reporting framework is the TCFD, which has been adopted by several OECD countries in rapid succession.

The GHG Protocol forms the foundational basis for most emissions reporting, even if not explicitly stated. Most companies use its carbon accounting principles to measure their carbon footprint. Even frameworks including the GRI Standards and TCFD build on Protocol concepts, creating a common and consistent language for emissions tracking. 

Other sustainability reporting standards

Ratings agencies such as MSCI, S&P Global, Dow Jones, and FTSE use independent frameworks developed internally to assess companies on a range of sustainability dimensions. These frameworks do not offer guidelines on what ESG indicators to report and how, but can provide useful insights into the aspects that investors take into consideration. Accordingly, companies can refer to these ratings frameworks to inform their reporting approach.

Hybrid models have emerged where traditional financial reporting frameworks are modified to include non-financial information. The Integrated Reporting Framework, for example, adopts a holistic value creation approach that combines both financial and sustainability-related disclosures in its guidelines.

How and where to start with a sustainability reporting standard? 

Our first advice to reporting companies is to determine the reporting objective:

• Is it to respond to an investor request, in which case the report may be defined by the investing angle? 
• Or is it to comply with reporting laws? 
• Is the intent to cover all bases or to highlight one particular stage in the operations with high impact?

But our best advice is to maintain the best of intentions while improving as the reporting journey progresses. Perfection is an unrealistic expectation, more so when the reporting standards themselves are still being developed and refined. 

Conclusion

Set progressive goals for the reporting journey, taking care to set up the processes for data collection. A solid foundation for data collection will enable a smoother reporting experience in the long run. As reporting matures, you may find your chosen framework diverging from your needs or objectives. This can be supplemented with additional standards or by making a transition to a new framework.

How we help you

• We help you decide the most suitable reporting framework and guide you through the data and disclosures required.

• We simplify the collection of ESG data in your organisation by offering one central platform to automate data collection with integrations into ERP, HRM, CRM, EMS etc.

• We facilitate data collection from your suppliers and ensure that relevant information arrives in a complete and accurate manner. We will handle the burden of information exchange with multiple stakeholders.

• We help you complete the information requests from regulators and guarantee the protection of business-critical information, for example about your supplier network.