Mastering ESG reporting: frameworks, standards, and best practices

Mastering ESG reporting frameworks takes time and the right expertise. Here’s how you can get started.

Environmental, social, and governance (ESG) are prickly issues in the news these days. Still, trillions remain invested in ESG-related projects, and multiple governments worldwide are getting serious about ESG reporting, meaning stakeholder expectations around ESG for many companies have never been higher. 

In this arena, investors are paying close attention, using ESG data to pick winners. They know these factors can seriously impact a company’s bottom line and signal a solid bet for the future. It’s a move beyond just the financials, taking a wider look at how sustainable a company really is.

Take the European Union’s Corporate Sustainability Reporting Directive (CSRD) as a shining example of how central ESG has become. It’s forcing many companies to spill the beans on climate and sustainability impacts. This signals a global push for more honesty and accountability.

This rising tide demands solid, standardised ESG reporting. We need numbers and stories that are comparable, trustworthy, and clear. Stakeholders – from investors to employees – need this info to make smart choices.

Standard frameworks bring order to the chaos, boost data quality, and help spot ‘greenwashing’ – when companies talk a bigger game than they play. Plus, the very act of reporting pushes companies to clean up their act internally.

Figuring out the main ESG frameworks is step one. Four big names lead the pack:

Think of GRI as the comprehensive, global standard-setter. It works for almost any organisation, anywhere.

Its core ideas stress reporting impacts within the big picture of sustainability, listening to stakeholders, focusing on what’s genuinely ‘material’ (the big economic, environmental, and social hits), and being thorough. Quality rules ensure reports are accurate, balanced, clear, comparable, reliable, and timely.

GRI’s standards are modular:

• Universal Standards: The basics for everyone (GRI 1, 2, 3).
• Sector Standards: Specifics for industries like oil & gas or coal.
• Topic Standards: Deep dives into issues like emissions or labour practices.

Recent updates simplified things, put a bigger spotlight on human rights, and moved to a single reporting structure.

Under the ISSB umbrella, SASB focuses on what investors need to know. It provides specific guidance for 77 different industries.

Key traits include:

• Industry Focus: Metrics tailored to specific sectors’ sustainability challenges.
• Financial Materiality: Zeroes in on ESG issues that could hit the company’s finances.
• Standard Metrics: Clear definitions and protocols ensure you’re comparing apples to apples.

SASB groups topics like Environment, Human Capital, and Business Model & Innovation, but the specific metrics vary hugely by industry.

Though the TCFD itself wrapped up in 2023, its playbook is still hugely influential, especially as its ideas get baked into new global standards. It’s all about how climate change impacts the money side of things.

The framework hits four key areas:

• Governance: Who’s in charge of climate issues? (Board and management roles).
• Strategy: How do climate risks and opportunities affect the business plan?
• Risk Management: How does the company spot, assess, and handle climate risks?
• Metrics and Targets: What data is used to track progress? (Think GHG emissions).

The TCFD laid out eleven specific disclosures to guide companies, pushing for forward-looking info.

The EU’s CSRD is a game-changer, dramatically expanding mandatory reporting in Europe and for some non-EU players doing big business there.

Highlights include:

• Wider Net: Catches all large EU companies, listed SMEs (though some might get a pass initially), and certain non-EU firms. It’s rolling out in phases through 2029.
• Double Materiality: This is key. Companies must report on their impact on the world (impact materiality) and how sustainability issues affect their bottom line (financial materiality). Get ready to report both ways with CSRD.
• Euro Standards (ESRS): Companies must use these detailed new reporting rules.
• Audits & Digital Format: Reports need checking by a third party and must be filed electronically.

While they all chase transparency, these frameworks aren’t clones:

• Scope: GRI goes wide. SASB is narrow and financial. TCFD is climate-finance. CSRD is wide, demanding double materiality.
• Focus/Materiality: GRI looks at impact for everyone. SASB targets financial materiality for investors. TCFD is about climate’s financial bite. CSRD requires both impact and financial views for a broad audience.
• Where they Apply: GRI is global. SASB is big in the US investor scene. TCFD has worldwide sway. CSRD is the law in the EU.

But don’t get lost in the differences. The trend is towards convergence, especially via the ISSB, aiming for a global baseline. Many smart companies mix and match frameworks anyway.

Getting ESG reporting right means nailing the basics:

Data collection

Good data is everything. You need a clear plan, standard ways to collect info, solid internal checks, and maybe even outside verification. Tech helps – think specialised ESG software and AI to automate and boost accuracy. Make sure someone owns the data process and get different teams involved.

Materiality assessments

You can’t report everything. Figure out what really matters. This means defining your scope, talking to stakeholders (investors, employees, customers), listing potential hot topics, and then ranking them based on business impact and stakeholder concern – often using that ‘double materiality’ lens. Write it down and revisit it often; things change.

Stakeholder engagement

Talk to the people who matter. Figure out who your key stakeholders are and engage them smartly (surveys, chats, workshops). Be open, listen hard, and show how their feedback shapes your ESG plans. Genuine engagement makes reports relevant and builds trust.

Strategic integration

ESG isn’t just a reporting task; it’s strategy. Weave ESG thinking into core decisions, risk management, and how you innovate. Get the board and top execs on board, maybe even tie bonuses to ESG results. Making ESG part of the business DNA drives real value.

Need to boost your ESG IQ? Good news: demand for experts is booming, and learning options are available.

Let’s be clear: mastering ESG reporting is no longer optional. It’s table stakes for businesses wanting to thrive in a world that demands more accountability.

Knowing the key frameworks (GRI, SASB, TCFD, CSRD), using smart data practices, engaging stakeholders honestly, and truly embedding ESG into your strategy are crucial. Don’t forget investing in learning – the field is moving fast.

Challenges exist, but the direction is clear: towards more standardised, transparent, and strategically vital ESG reporting. Companies leading the charge aren’t just ticking boxes; they’re building resilience, spotting opportunities, and shaping a more sustainable economy.