ESG frameworks

Which ESG Framework is right for you?

Which ESG Framework is right for you?

ESG concerns hold significant importance for businesses, largely pushed by requests from stakeholders and regulatory bodies. These requests, along with the necessity for ESG and similar non-financial disclosures, shape strategic decisions, the generation of financial worth, and the achievement of objectives.

Organisations are under pressure to make public commitments and provide routine updates to ESG-related strategies, goals, and metrics that are accurate and relevant. However, embarking on this journey can be daunting as companies have various frameworks and standards to choose from.

For that reason, we want to help guide your ESG reporting, to help you make an informed decision. The standards below are the most used.

ESG Frameworks and Standards:

International Financial Reporting Standards S1 and S2

Issued by The International Sustainability Standards Board (ISSB), an independent board established by the IFRS Foundation. The comprehensive standards are designed to provide a globally recognised and accepted baseline to help organisations create reports on sustainability-related risks and opportunities, which will allow capital markets and investors to make better informed decisions. The ISSB have recently issued two standards:
  • Standard S1: The General Requirements for Disclosure of Sustainability related Financial Information would require an entity to disclose information about its significant sustainability-related risks and opportunities that is useful to the primary users of general-purpose financial reporting.
  • Standard S2: The Climate-related Disclosures would require an entity to disclose information about its exposure to significant climate-related risks and opportunities to help assess the effects of significant climate-related risks and opportunities on the entity’s enterprise value.

Sustainability Accounting Standards Board (SASB)

SASB Standards enable organisations to provide industry-based disclosures about sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital over the short, medium, or long term. SASB Standards identify the sustainability-related issues most relevant to investor decision-making in 77 industries.

International Integrated Reporting Council (IIRC)20 Integrated Framework 

This framework supports development of integrated reports on an organisation’s strategy, governance, performance, and prospects in the context of its external environment; and how it leads to the creation, preservation, or erosion of value over the short, medium, and long term. (The council formed in 2010, and the framework was published in 2013.). Its aim is to accelerate the adoption of integrated reporting to:
    •    Improve the quality of information available to providers.
    •    Promote a more cohesive and efficient approach to corporate reporting.
    •    Enhance accountability and stewardship for the broad base of capitals.
    •    Support integrated thinking, decision-making and actions that focus on the creation of value over the short, medium and long term.

Revisions were published in January 2021 to enable more decision-useful reporting.

The Task Force on Climate-related Financial Disclosures (TCFD)

  • The TCFD introduced its reporting framework in 2017, which focuses on climate-related financial risk. The goal of disclosures according to this framework is to align to investors, lenders, insurers, and other stakeholders’ expectations.
  • Disclosure recommendations are structured around four thematic areas that represent how companies operate: governance, strategy, risk management, and metrics and targets.
  • Each of the recommendations are interrelated and supported by 11 recommended disclosures that build out the framework with information that should help investors and others understand how reporting organisations think about and assess climate-related risks and opportunities.
  • Reporting under this framework is completed under a ‘comply or explain’ methodology.

Global Reporting Initiative (GRI)

  • The GRI — the most widely used standard — was designed to increase disclosures on a wide range of ESG issues and topics relevant to stakeholders; companies select disclosure topics based on a stakeholder inclusive materiality analysis. They enable any organisation – large or small, private or public – to understand and report on their impacts on the economy, environment and people in a comparable and credible way, thereby increasing transparency on their contribution to sustainable development.
  • The Standards are a modular system comprising three series of Standards: the GRI Universal Standards, the GRI Sector Standards, and the GRI Topic Standards.

As with any risk, the goal of ESG reporting is not to reach a finite end point, rather an Organisation should continue to revise the framework under which it is reporting, dependant on the data available, and mandatory reporting in place. ESG reporting is continually evolving, and so framework changes should remain a part of the general horizon scanning processes.

We can help identify the most relevant framework for your organisation, provide education and training sessions to outline what they cover and walk through how best to report. We have several methods to assist in improving your ESG reporting, regardless of where you are on the journey, for example conducting a gap analysis against the framework to assist initial reporting or provide recommendations to improve reporting.