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Clear the "ESG reporting alphabet soup". Choose your battle!

Updated: Sep 25, 2022

ESG, I believe, is no longer a new term. It has been the mainstream within the markets for years, piling the concerns of the government, business leaders, investors and consumers. Yet, ESG terminology is still confusing, drowning businesses in the "Alphabet soup of ESG reporting".



"ESG reporting alphabet soup" refers to the puzzle combination of all ESG reporting kinds which is intimidating and overwhelm sometimes, especially for the new one in this reporting journey.


Hopefully, this article will shed some lights to unveil this puzzle for you.


Basically, ESG reporting is categorized into four kinds: standards, frameworks, indices and ratings. While standards govern the measurement and disclosure's rules of what organizations must report, frameworks are guidelines with principles of how to disclosure the information. Some well recognized standards are: GRI - Global Reporting Initiatives, SASB - Sustainability Accouting Standards Board or the Sustainable Development Goals.... In the frameworks category, we have TCFD - Task Force on Climate-Related Financial Disclosures, CDP - Carbon Disclosure Project, SAM - S&P Global, to name a few. The next category is the third party ratings, which allow the comparison between companies based on methodology to identify industry leader and laggards one. Sustainalytics, MSCI or ISS ESG are the famous ratings type. And finally, we talk about Dow Jones Sustainability Indices (DJSJ) when it comes to indices which compile data into a single metric in order to illustrate the metric improvement over time.


Here under is the comparison of some well-known standards and frameworks.


Describe

Type

Investor focus

Industry specific

Reporter

Scoring

Focus area

GRI

Broader in scope standards

Standards

No

No

Private & public org, municipalities, NGOs..

No score methodology,focus on transparency. Report either in reference or in accordance style

Main: Environmental, social Less: Carbon, climate change, financial, natural capital Very less: Governance

CDP

Global disclosure systems for environmental impacts

Frameworks

No

Yes

Private & public org, municipalities, NGOs..

Score: 100 for disclosure and performance. Top scoring companies will be on Carbon Disclosure Leadership Index

Main: Environmental, carbon, climate change Less: Social, governance Very less: Financial, natural capital

SASB

Guide of specific industry and sector, covering ESG topics across 5 dimensions: the environment, human capital, social capital, business model & innovation, leadership & governance

Standards

Yes

Yes

All

No methodology for score

Main: Environmental, social, governance, financial Less: Climate change, carbon Very less: Natural capital

TCFD

Disclosing on climate-related financial risks and opportunities

Frameworks

Yes

Yes

All

No methodology for score

Main: Climate change Less: Environmental, Social, Governance, Carbon, Financial, Natural capital

GRESB

The Global Real Estate Sustainability Benchmark, assesses the ESG performance of real estate assets, including real estate portfolios and infrastructure

Frameworks

Yes

Yes

Real estate focus

Total score: 140 points places on implementation and asset level performance

Less: Environmental, Social, Governance,Financial, Carbon, Climate change, Natural capital

SAM S&P

Issued by S&P Global, benchmark company's performance on a wide range of industry- specific

Frameworks

Yes

Yes

Public companie

Total score: 100

Less: Environmental, Social, Governance,Financial, Carbon, Climate change, Natural capital

PRI

Focus on provide insights for investors to make investment decision.

Frameworks

Yes

No

Everyone who is keen on investment

Main: Environmental, Social, Financial Less: Governance, Carbon, Climate change Very less: Natural capital

UN SDG

17 goals adopted by the, aims to achieve the 2030 Agenda for Sustainable Development.

Standards

No

No

Everyone who wants to

No score

Main: Environmental, Social, Governance,Financial, Carbon, Climate change, Natural capital


Within the whole pool of ESG reporting, so How could companies choose the right tool?

There are three big questions, every company has to answer before start on picking the ESG report type.

  • What are the company's drivers to disclose ESG?

  • Who are the main company's audience for ESG disclosures?

  • What are the company's resources for ESG disclosures?


These might seem to be simple questions, but it is the whole job of self assessment, stakeholders engagement and more. And of course, the answers for these question will evolve and change all the time. Company need to bear in mind that ESG integral and reporting is an on going journey, not a destination.




Reference:

  1. GRI Standards, https://www.globalreporting.org/standards/

  2. SASB, Implementation primer, https://www.sasb.org/

  3. ESG reporting soup, https://www.gobyinc.com/




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