Reporting frameworks

DEFINITION: A reporting framework is an independent tool designed to assist companies in preparing sustainability reports and ESG disclosures. Reporting frameworks require businesses to provide quantitative and qualitative nonfinancial information to supplement financial information to assess the prospects of the company. They enable all organisations worldwide to assess their sustainability performance and disclose the results in a similar way to financial reporting.

What are the business benefits?

Companies can realise a number of benefits from reporting on their sustainability information. The benefits can include influencing stakeholders to choose a particular company over its competitors. Customers, investors and employees may find this information important in their decision-making to work with, invest in, or work for an organisation. Being transparent on this information and asking for their views can positively influence their decisions. By integrating the most important materiality issues into the corporate sustainability strategy, reporting frameworks put in place structures and processes to allow for continuous improvement in performance.

There are a number of other potential benefits such as saving costs, identifying strategic and operational strengths and weaknesses, and working more closely with suppliers, improve internal processes and engagement with employees over sustainability activities.

What reporting frameworks are available?

There are a myriad of reporting frameworks across the globe, with almost 400 reporting initiatives identified in 64 countries.  There are a small number of standards considered to be the most credible by sustainability experts.

Global Reporting Institute (GRI) is the official reporting standard of the UN Global Compact, making it the default reporting framework for the compact’s more than 5,800 associated companies. It is among the oldest and most widely-adopted methodologies in the world.

CDP holds the largest list of corporate GHG emissions and energy use data in the world and is supported by almost 800 institutional investors representing more than $90trn in assets. Its transparent scoring methodology helps respondents understand exactly what is expected of them.

Membership in the Dow Jones Sustainability Indexes (DJSI) is high-level as it represents the top 10% of the 2,500 largest companies in the S&P Global Broad Market Index. Its Corporate Sustainability Assessment brings a sector-specific focus and need-to-know simplicity to disclosure for public companies.

How do I know which reporting framework to choose?

The decision of which framework (or indeed which combination of frameworks) is most appropriate for a company depends on what information needs to be communicated and who the key stakeholders are.

Investors are the main target audience for DJSI, while the primary stakeholders of a GRI report are determined by the material issues for the business and typically include shareholders, employees, suppliers, regulators and NGOs.

Reporting frameworks have overlapping content as well as some major differences. The main focus of CDP is climate change mitigation and protection of natural resources. CDP therefore provides a structure for businesses to measure and disclose their greenhouse gas (GHG), water and supply chain performance. On the other hand, GRI looks at the economic, environmental and social impact of an organisation’s material activities on its stakeholders.

But it is clear there is some similarities. In May 2013, CDP and GRI signed a memorandum of understanding to form a partnership with the goal of improving the consistency and comparability of data between their frameworks. 

Any other key considerations?

Many experts agree that the sheer amount of standards and frameworks on offer to companies can cause confusion. For instance, the GRI, the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB), each have their own approach to how an organisation’s materiality should be determined, reported and assessed.

Even more confusing is when one framework, such as SASB, which is a compliance-driven approach to materiality based on the United States Security and Exchanges Missions, contradicts principle-driven approaches to materiality focused on a global framework, such as the GRI or IIRC.

As the GRI continues to publish linkage documents – how disclosures in the GRI guidelines (now transitioning to GRI Standards) match up to disclosures in other frameworks – and the Climate Standards Disclosure Board (CDSB) continues to squeeze the complexity of a multitude of reporting requirements into one massive cross-linked and cross-referenced matrix, companies are seemingly being expected to report against all or several of the frameworks and use linkage guidance to avoid duplicating data.

This make double work for companies who aspire to satisfy many stakeholders with one core data-set and one core sustainability report. In this environment, companies need to both understand and report and also report and cross-reference.

See also: Sustainability report

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