How to choose the right Sustainability Reporting Framework

Written by Ian Geldenhuys, Programme Director - ESGCloud Team
11 Nov 2020

There is no doubt that Environmental, Social and Governance (ESG) has become a dominant priority for corporations in recent years, with companies recognising the need for reporting on their sustainability progress.

However, sustainability reporting frameworks are a complex topic, exacerbated by a plethora of reporting frameworks becoming available.

A prevailing question that arises when looking at sustainability reporting frameworks is where to begin, and what is the right framework for your company? Here are some general guidelines:

Identify what needs to be reported

A good starting point is to know what exactly needs to be included in your report, by homing in on your company’s most predominant ESG issues. Depending on your operations not all of these may apply in equal measure.

  • Under Environmental, these would include greenhouse gas emissions, energy efficiency, hazardous waste, resource depletion and risks and opportunities.
  • Under Social, you will want to evaluate issues such as working conditions, human rights, diversity and equal opportunity, occupational health and safety, local communities, and child labour.
  • Finally, under the Governance category, you will look at anti-corruption (including bribery), board independence and diversity, company policies and supply chain management.

In any event, some of the primary ESG considerations that are top of mind for investors and commonly cited in corporate responsibility and sustainability reporting include the impact of climate change; water and waste management, scarcity of natural resources, worker safety and workplace diversity.

Also indicated are employee relations, talent management and a particularly relevant one in lieu of the pandemic, health. Furthermore, labour practices, executive compensation and political contributions similarly garner their fair share of attention under ESG reporting.

Identify who you are reporting to

Before you choose the framework that you will use, it is valuable to pinpoint who you will be reporting to, so that you can ensure your communication is suited for the appropriate audience. Furthermore, some frameworks allow you to limit who can read the sustainability report, while others enable you to make it viewable by the widest audience possible.

As a guideline, ask yourself whether you are planning to address investors and shareholders; government regulators; suppliers and distributors; researchers and the media; partners; non-governmental organisations, the general public, or a particular combination of the above.

Choose your Framework

 

With the above preparation in hand, now you can consider which of the reporting frameworks is best for your needs. A sampling of some of the more popular frameworks include:

Sustainability Accounting Standards Board (SASB)

The SASB issues sustainability accounting standards framework help public corporations disclose material information in their mandatory filings that is useful to investors in their decision-making processes. The standards are relevant to the reporting company’s specific industry and enables corporations to align with existing regulations that require material information to be disclosed.

CDP

Encompassing reporting on climate change, forestry and watery, the CDP framework is ideal for large companies with multiple offices internationally, that create products that have a large environmental impact. It can be used to both inform and attract investors.

Global Reporting Initiative

This framework includes a broader range of impacts than CDP, including economic, social as well as environmental standards. Ideal if you are a first-time reporter and want to report on a broad range of ESG concerns, this framework has global recognition and boasts the most widely adopted standards for sustainability reporting.

Integrated Reporting

This framework helps companies to produce a report that is focused on investors, that considers the issuing company’s performance and prospects measured against six components. These, referred to as ‘capitals’, include Financial, Manufactured, Human, Natural, Intellectual, Social and Relationship based.

Sustainable Development Goals

The most well-known framework due to being promulgated by the United Nations, the Sustainable Development Goals (SDGs) include a set of 17 goals to be achieved by 2030. This framework covers a broad range of global issues that can be reported on. While the goals are interdependent of one another, it is advised that companies focus their efforts on some select goals and combine this framework with another in their reporting.

Task Force on Climate Related Financial Disclosures

The Task Force on Climate Related Financial Disclosures (TCFD) particularly addresses the financial sector. It is ideal for public companies that wish to provide investors and insurers with the disclosure of financial risk related to climate change. One advantage of this framework is that its eleven recommended disclosures can make it easier to report on than some other frameworks available.

Related perspectives

ESGCloud is a SaaS platform that roots ESG in company performance by connecting ESG effort to competitive strategy and opportunities, and in turn profitability.

The software is innovative and intuitive to use, and features have been created with the end user in mind, making data collection and reporting easy through an all-in-one ESG tool.