Sustainability reporting has become imperative across the global corporate scene and increasingly relevant for SMEs. Organisations are socially or legally required to disclose their environmental, social, and governance performance transparently and regularly. In the US the SEC is in constant discussion on climate disclosure regulations, in the UK if a company has >250 employees reporting is mandatory, in the EU large and publicly listed companies must report annually and recently Singapore announced mandatory reporting for large companies come 2025. In yesteryear, this reporting movement was known as corporate social responsibility (CSR) but these days the reports can come under ESG or just general sustainability. In some countries like Japan, the financial and sustainability reports are one and the same and are integrated in the company’s annual review (these things end up being upwards of 100 pages!!).
Yet, navigating the world of sustainability reporting requires digestion of the alphabet soup and the multitude of frameworks and acronyms, from ESG to SASB, CDP to TCFD. These frameworks offer diverse approaches tailored to specific industries, regions, or stakeholder priorities and each serve a different and necessary purpose. In recent years, the institutions behind these frameworks have worked on aligning the reporting measures to reduce the burden on organisations but even that is a complicated feat. There is no one catch-all sustainability framework for every company in existence. What’s key as sustainability professionals, or students assessing the claims of a company, or investors and analysts is understanding what each framework is about and thus what the reports REALLY say. This article aims to provide a comprehensive overview of key frameworks and acronyms in plain and accessible language and operates a bit like a revision cheat sheet. So let’s digest the sustainability reporting alphabet soup!
Types of sustainability reports
ESG: environmental, social, and governance. This is a hot topic that everybody seems to claim to be an expert on, but what is it in the world of reporting? ESG reports are meant to disclose data related to financial risks imposed by environmental, social, and governance issues.. It is NOT an impact report (the positive impact a business has on the world): ESG reports are a visible track of how E, S, and G financial risks to business are considered and mitigated. They are widely used by analysts, investors, and stakeholders to assess the financial risk posed by various E, S and G factors to these businesses.
CSR: corporate social responsibility. Many reports no longer call themselves this and just incorporate ESG, impact, EHS all under “sustainability report” but these were the original “we did good” reports where corporations disclose the contributions they make to society within the organisation and through their operations. This includes volunteering, charity donations, and employment diversity.
EHS: environmental, health, and safety. These reports are highly internal and related to measures taken by businesses to mitigate operational risks. That is, threats to the health and safety of their employees, customers, and the general public. The report discusses the risks posed within the company and how they are managing them, as well as evidence that these methods are working to prevent harm.
Frameworks
Within reports, a variety of frameworks are used to inform businesses on how to assess sustainability efforts and impacts within their organisation. Some take a regulatory form (legislature that you have to follow) others are recommended but ultimately voluntary. As mentioned previously, it is becoming more common to require reporting to some extent based on industry, geography, and size of company.
ISSB – International Sustainability Standards Board. Developed at COP26, ISSB the board responsible for developing the IFRS Sustainability Disclosure Standards (SDS). The are reporting standards for sustainability-related financial information and build upon SASB standards (see below). Its aim is to streamline sustainability reporting practices, enhance comparability, and facilitate informed decision-making by stakeholders worldwide.
SASB – Sustainability Accounting Standards Board. SASB is an independent organisation focused on developing industry-specific sustainability accounting standards (a tough feat!). They specialise in disclosure standards for companies disclosing financial material ESG information to investors. SASB standards aim to enhance transparency and comparability in reporting by providing frameworks that are industry-specific.
UN SDGs – Sustainable Development Goals. The UN Sustainable Development Goals (SDGs) are a set of 17 interconnected global objectives adopted by all United Nations Member States in 2015. They present the required targets and indicators to achieve the 2030 Agenda addressing environmental, social, and economic crises. These goals provide a universal framework for countries, businesses, and civil society to work collaboratively towards a more sustainable and equitable future.
UNGC – United Nations Global Compact. Adjacent to the UN SDGs, the UNGC provides a reporting framework shaped around the UN SDGs. It is a voluntary initiative aimed to encourage all businesses to consider their contribution to the 2030 Agenda. It is one of the most significant corporate business reporting initiatives across the world.
UNGPR – UN Guiding Principles Reporting Network. The UNGPR places a significant emphasis on human rights and business. It provides principles for companies reporting on their business operations with respect to a variety of human rights concerns and risks. The principles implement the UN’s framework of “protect, respect, and remedy”.
NFRD – Non-financial reporting directive. A mandatory reporting requirement means that businesses are required by EU law to report on their ESG data. The size of business required to report remains at large companies but increasingly legislation is bringing this minimum size down. It aims to foster greater corporate transparency and accountability in non-financial metrics of performance.
CSRD – Corporate Sustainability Reporting Directive. This is new EU legislature that requires businesses to report not just their ESG risk management but also social and environmental impact. For a reminder of the difference, check back up to the types of sustainability reports. It defines a reporting framework and encourages businesses to think beyond their revenue and how they can contribute to social and environmental good.
Hold tight for part 2 where we get into the nitty gritty of sustainability disclosures i.e. the substance of the soup!
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Disclaimer: Content is for informational and educational purposes only. This is not financial or investment advice.