Corporate Sustainability Reporting Standards in a Nutshell
In this article, we explore key sustainability reporting standards and their use cases.
A sustainability report has as its target audience a business’s stakeholders. Be it the regulatory authorities, investors, employees, suppliers and vendors, or consumers. Therefore it is important that it provides relevant and accurate information and at least a bare minimum set of disclosures to be classified as a sustainability report. That is where sustainability reporting standards come in handy. These standards provide a framework for companies to measure, track, and communicate their environmental, social, and governance (ESG) performance, offering a transparent, standardized, and accountable approach to sustainability reporting.
This article serves as a comprehensive guide to corporate sustainability reporting standards, providing businesses with an introduction to these frameworks, and equipping them with the knowledge and tools to effectively navigate the sustainability reporting standards landscape.
- What is a sustainability reporting standard?
- Key Sustainability Reporting Standards
- Standards for Climate Risk and Emissions Reporting
- Reporting on SDGs (Sustainable Development Goals)
- How to Choose a Sustainability Reporting Standard?
- Other Sustainability Reporting Standards and Guidelines
- Global Harmonization of Sustainability Reporting
- Related Posts
What is a sustainability reporting standard?
Sustainability reporting has emerged as a cornerstone of corporate responsibility, empowering businesses to demonstrate their commitment to sustainable practices and showcase transparency. This trend is fueled by a compelling set of factors, including evolving government regulations, heightened stakeholder scrutiny, and a growing recognition of the significance of ESG performance for long-term business success.
The increasing prevalence of sustainability reporting is reflected in a remarkable 80% adoption rate among the N100 (top 100 companies by revenue in 52 countries), according to The KPMG Survey of Sustainability Reporting 2020. This represents a significant jump from 64% in 2011, demonstrating a widespread shift towards embracing sustainability principles.
This trend extends beyond large corporations, with a Harvard Law School Forum on Corporate Governance survey revealing that 51% of US-based small and mid-cap companies voluntarily provided sustainability disclosures in 2022, up from 32% in 2019.
The growing adoption of sustainability reporting is not merely a matter of numbers; it also reflects a deeper shift in corporate mindset. Businesses are recognizing that sustainability is not just an afterthought but an integral component of their long-term strategies and day-to-day operations. This realization stems from the understanding that sustainable practices not only mitigate environmental and social risks but also enhance brand reputation, attract investors, and foster employee engagement.
As sustainability reporting continues to gain momentum, the adoption of comprehensive and standardized reporting frameworks becomes increasingly crucial. Frameworks such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) provide a structured approach to measuring, tracking, and communicating ESG performance, ensuring transparency and accountability.
Key Sustainability Reporting Standards
GRI (Global Reporting Initiative)
GRI standards have established themselves as the bedrock of corporate sustainability reporting, gaining global acceptance and forming the foundation for sustainability reporting practices worldwide. These standards are widely accepted as part of regulatory reporting requirement directives of most countries.
They provide a framework of disclosures made under social, environmental, and economic categories. Businesses, depending on their reporting needs, can choose to adopt either the core or comprehensive GRI standards. Notably, as of 2020, an impressive 73% of the world’s largest 250 companies utilize GRI standards for sustainability reporting.
With their robust framework and widespread acceptance, GRI standards have become the gold standard for corporate sustainability reporting. Businesses that embrace GRI standards can be assured they are adhering to the most widely recognized and respected framework, ensuring transparency and accountability to their stakeholders.
IIRF (International Integrated Reporting Framework)
Mainly targeting investors this framework is used to show how a company creates value, its stakeholder relationships, it’s ethics and culture. The standard emphasizes the importance of reporting on all capitals that contribute to an organization’s value creation, preservation, or erosion over time. This extends beyond financial capital to include human capital, intellectual capital, natural capital, and other relevant capitals.
SASB (Sustainability Accounting Standards Board)
The Sustainability Accounting Standards Board (SASB) develops and maintains industry-specific standards for reporting on sustainability-related financial information. These standards identify the subset of material environmental, social, and governance (ESG) issues that are most relevant to financial performance in each of 77 industries. SASB standards are designed to help companies and investors make informed decisions about sustainable investments and practices.
ESRS – European Sustainability Reporting Standards
The European Sustainability Reporting Standards (ESRS) are a set of comprehensive reporting standards that provide guidance for companies on how to report on their sustainability performance. Developed by the European Financial Reporting Advisory Group (EFRAG), the ESRS cover a wide range of sustainability topics, including climate change, biodiversity, social and governance issues. The ESRS are designed to help companies produce high-quality, comparable, and reliable sustainability information that can be used by investors and other stakeholders to make informed decisions.
Standards for Climate Risk and Emissions Reporting
CDP (Carbon Disclosure Project)
CDP runs environmental disclosure systems for companies, cities, states and regions. For companies, CDP provides a disclosure questionnaire that requires them to measure their emissions across the scopes and provide additional relevant information.
Thousands of organizations in over 130 countries use CDP to report their environmental impact and set emissions reduction targets. Additionally, CDP’s data is used by hundreds of investors, policymakers and civil society organizations to inform investment decisions, make policy changes, and drive action.
GHG Protocol (Greenhouse Gas Protocol)
The Greenhouse Gas (GHG) Protocol stands as the world’s most widely recognized and utilized corporate accounting and reporting standard for greenhouse gas emissions. Developed collaboratively by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol establishes a standardized framework for companies to effectively measure, manage, and report their direct and indirect GHG emissions.
GHG Protocol provides organizations with detailed and multiple standards for greenhouse gas accounting and reporting. These are:
Reporting on SDGs (Sustainable Development Goals)
The Sustainable Development Goals (SDGs) are a set of 17 global goals adopted by all United Nations Member States in 2015. The SDGs aim to achieve a better and more sustainable future for all by addressing global challenges such as poverty, inequality, climate change, and environmental degradation.
Reporting on the SDGs is a critical tool for businesses, governments, and other organizations to track their progress towards achieving the SDGs. By measuring and reporting on their SDG performance, organizations can identify areas for improvement, communicate their commitment to sustainability, and hold themselves accountable for their actions.
Want to know more about Reporting on SDGs? Click to check out our in-depth article on the topic.
How to Choose a Sustainability Reporting Standard?
As shown through this article, there are various sustainability standards. A company, depending on its needs, can choose which one to follow, or simultaneously what combination of frameworks to base its report upon.
However, a few factors determine which framework you choose:
- If the report is mandated by government regulation you want to check which frameworks the regulation accepts and/or if it has a particular submission format of its own.
- If you belong to a particular industry segment where one framework is more favored for disclosures over others. For e.g., GRESB (Global Real Estate Sustainability Benchmark) for the real estate sector.
- What disclosures the standards are used for, e.g., GHG Protocol for greenhouse gas emissions.
Other Sustainability Reporting Standards and Guidelines
Alongside the above-mentioned more widely used standards, there are various others such as:
- International Standards of Accounting and Reporting (ISAR)
- British Standard on Sustainability Management (BS 8900)
- The United Nations Global Compact (UNGC)
- OECD Guidelines for Multinational Enterprises
- ILO Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy
Global Harmonization of Sustainability Reporting
As legislation, particularly within the EU, works towards bringing in more and more companies under the umbrella of sustainability reporting, the requirement for uniformity in standards is in constant demand. As a consequence, within the EU there is now a new sustainability reporting directive being legislated (read more about Corporate Sustainability Reporting Directive (CSRD)), with new and uniform standards currently being developed by the European Financial Reporting Advisory Group (EFRAG).
Another development is the latest announcement by the International Financial Reporting Standards (IFRS) Foundation at the 2021 United Nations Climate Change Conference (COP26) announcing the formation of a new ‘standard-setting board’ the International Sustainability Standards Board (ISSB), that will provide globally consistent sustainability reporting standards.
