Benchmark frameworks
Benchmark ESG reporting frameworks require responses to all questions in the framework and typically have a scoring element.
Carbon Disclosure Project (CDP)
CDP is a framework for companies to provide environmental information to their stakeholders, including investors, employees and customers, covering environmental governance and policy, risks and opportunity management, environmental targets and strategy and scenario analysis.
CDP offers three questionnaires on the topics of climate change, water and forests, each of which is scored using different methodologies. Each questionnaire includes general questions alongside sector-specific questions that are aimed at high-impact sectors. The scoring of CDP’s questionnaires is conducted by accredited scoring partners that are trained by CDP.
Global Real Estate Sustainability Benchmark (GRESB)
GRESB is a global tool that is used predominately by investors to assess the sustainability performance of real estate and infrastructure portfolios and assets worldwide.
GRESB Assessments provide investors and asset managers with material insights into the sustainability performance of a company’s real assets. These performance insights are aligned with international reporting frameworks such as the GRI and Principles for Responsible Investment (PRI). Assessment participants receive comparative business intelligence on where they stand against their peers, a roadmap with actions they can take to improve their ESG performance and a communication platform to engage with investors. Investors use the ESG data and GRESB analytical tools to improve the sustainability performance of their investment portfolios, engage with managers and prepare for increasingly rigorous ESG obligations.
Voluntary frameworks
Voluntary ESG reporting frameworks allow reporters to select the questions they want to report against, depending on factors such as their industry of operation and their materiality. Scoring is typically not included in these frameworks.
Global Reporting Initiative (GRI)
GRI is a globally applicable guidance framework that provides standards detailing approaches to materiality, management reporting and disclosure for a comprehensive range of sustainability issues. GRI Standards guide many organizations in the production of their own sustainability reports.
The modular, interrelated GRI Standards are designed primarily to be used as a set to prepare a sustainability report focused on material topics. The three universal standards are used by every organization that reports under the GRI framework. An organization also chooses from the topic-specific standards to report on its material topics, whether it be economic, environmental or social.
Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD was explicitly designed to address climate risks to the business, falling squarely within the “E” of ESG reporting. The TCFD helps organizations across the globe articulate how ESG performance is most likely to impact future financial performance and value creation materially.
The TCFD was created in December 2015 after the G20 Finance Ministers asked the Financial Stability Board (FSB) to evaluate the connection between climate-related issues and the financial sector. The FSB is an international body that makes recommendations to the global financial system, so the push toward climate-related finance was significant.
- Governance: How does the organization’s governance structure address climate-related risks and opportunities?
- Strategy: What are the tangible material impacts of climate-related risks and opportunities on the whole business, including strategy and financial planning?
- Risk management: How does the organization define, assess and manage climate-related risks?
- Metrics and targets: What are the measurements used to assess material climate-related risks and opportunities?
Value Reporting Foundation (VRF)—Sustainability Accounting Standards Board (SASB) and International Integrated Reporting Council (IIRC)
In June 2021, SASB and IIRC announced their merger to form the VRF (link resides outside ibm.com), an ESG guidance framework that sets standards for the disclosure of financially material sustainability information by companies to their investors.1 The resources they provide include the Integrated Thinking Principles, the Integrated Reporting Framework and SASB Standards.
In total, the SASB Standards track ESG issues and performance across 77 industry standards. VRF’s framework is built to support companies in sharing their outward ESG impacts through the language of investors, debt holders and internal financial stakeholders.
Of the other ESG reporting frameworks, the GRI is most like SASB but supplies more broadly material information for reporting to stakeholders who are not just from financial portfolios.
Asset management companies such as BlackRock, Goldman Sachs and Morgan Stanley; manufacturing giants such as GM and Nike; and even specialized industries with companies such as Merck and JetBlue use SASB Standards to disclose ESG metrics. SASB also supplies resources to explain how investors across multiple asset classes use the standards. These tools allow organizations to be specific and report with a system that allows for transparency and relevancy with their investors.
Regulatory frameworks
Regulatory ESG reporting frameworks are like benchmark frameworks in that all responses are required, but not always scored. A government body also requires these frameworks and reporting requirements.
Corporate Sustainability Reporting Directive (CSRD)
The European Union’s CSRD prescribes rules for organizations to report sustainability disclosures across several topics pertaining to environmental and social issues. Companies subject to the CSRD must report according to European Sustainability Reporting Standards (ESRS). Informed by the concept of double materiality of financial and societal impacts, the CSRD requires organizations to detail how their business strategy will mitigate the risks that are associated with these environmental and social issues and publish these disclosures publicly.
It values social metrics alongside environmental performance by looking at matters such as employee health, human rights, bribery, anti-corruption and diversity across management.
CSRD applies to organizations with over €20 million in total assets, a net turnover of €40 million and 250+ employees. These include both EU companies and EU subsidiaries of non-EU companies. This would impact 50,000+ companies, nearly 10,000 of which are outside of the EU.
Sustainability reporting will also be required of non-European companies that generate an annual net turnover of €150 million in the EU and that have at least one subsidiary or branch in the EU. Non-EU companies must comply from 2028.
National Greenhouse and Energy Reporting (NGER)
The NGER Scheme (link resides outside ibm.com) is the Australian national framework for reporting and disseminating company information about GHG emissions, energy production and energy consumption. Established by the NGER Act in 2007, it is monitored by the Clean Energy Regulator.
The NGER Scheme collects emissions-related data about GHGs such as carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6) and specific kinds of hydrofluorocarbons and perfluorocarbons. Records of activities must be adequate to enable the Clean Energy Regulator to learn whether the corporation or person has complied with its obligations under the NGER Act.
This includes information that can be used to verify the relevance, completeness, consistency, transparency and accuracy of reported data during an external audit.
Streamlined Energy and Carbon Reporting (SECR)
The SECR taxonomy is the UK government’s guidance for organizations that are required to disclose their energy use, GHG emissions and related information. The SECR was introduced to take effect from April 1, 2019, as the previous Carbon Reduction Commitment (CRC) Energy Efficiency Scheme came to an end. It builds on and extends the previous reporting requirements that are faced by quoted companies while adding new mandates for large unquoted and limited liability partnerships (LLPs).
It can also help all organizations with voluntary reporting on a range of environmental subjects, including GHG reporting and the use of KPIs. The SECR is central to the UK’s strategy for improving energy efficiency and reducing CO2 emissions, as set out in the Climate Change Act 2008.
It is expected that an estimated 11,900 companies incorporated in the UK will need to report on their energy and carbon emissions under the new framework.2
Quoted companies that report to the SECR are required to disclose their energy use, global Scope 1 and 2 GHG emissions in metric tons of CO2 equivalent and at least one emissions intensity metric of their choosing for current and previous financial years. Scope 3 emissions remain voluntary but are recommended for emissions sources that are considered material.
Unquoted large companies and LLPs will also need to report, at minimum, their UK energy use and associated GHG emissions from electricity, gas and transport fuels, as well as at least one intensity metric. Reporting each of these sustainability dimensions and tracking their progress over time requires access to consolidated, auditable data, which can be more easily achieved with sustainability reporting software.
Sustainable Finance Disclosure Regulation (SFDR)
SFDR (link resides outside ibm.com) aims to standardize the reporting of ESG metrics for financial products and entities within the EU. It does this by mandating that reporters publish a Principal Adverse Impact (PAI) statement detailing their disclosures. SFDR acts in concert with the EU taxonomy and the proposed EU Corporate Sustainability Reporting Directive (CSRD) to form the basis for the EU sustainable finance agenda.
SFDR’s PAI statement requires financial bodies to report different types of quantitative indicators, including weighted averages across various ESG metrics for their investments as well as emissions from their own activities. In practice, this means that organizations must report the proportion of their investees’ activities that they finance. For example, if an investee generates 100 metric tons of hazardous waste and the financial body has 20% of the equity in that company, the financial body reports 20 metric tons of hazardous waste in its SFDR PAI.
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