In recent years, there has been a significant increase in the amount of nonfinancial reporting conducted by companies. This growth can be attributed to the growing demand from stakeholders for companies to be more transparent about their environmental and social impacts. As a result, companies are facing pressure to report on a wide range of issues such as greenhouse gas emissions, climate risk, board diversity, and gender pay gap. To assist in this reporting process, companies are turning to sustainability reporting frameworks. These frameworks provide guidance for companies to effectively report on their nonfinancial aspects. It is worth noting that while nonfinancial reporting is mandatory in certain countries, particularly across the European Union, it remains primarily voluntary in many parts of the world, as there are no standardized regulations in place.
However, the existence of multiple sustainability reporting frameworks can be overwhelming. For companies venturing into nonfinancial reporting, it can be challenging to differentiate between the various frameworks and comprehend the objectives of each one. According to The Conference Board, Inc. in 2018, These frameworks helps organizations report different aspects of their nonfinancial impact;
GRI has purpose in helping organizations report on economic, environmental & social impacts considering a wide range of interests. GRI has broad set of stakeholders as its audience. The report is filled up on corporate sustainability report. The focus are in Environmental, Social and Governance areas. The information to report are; (1) general disclosure, about the organization's profile, strategy, ethics and integrity, governance, stakeholder engagement practices, and reporting process, (2) Economic, about the performance, market presence, indirect economic impacts, procurement practices, anti corruption and anti-competitive behavior, (3) Social, about employment labor/management relations, occupational health and safety, training and education, diversity and equal opportunity, nondiscrimination, freedom of association and collective bargaining, child labor, etc. GRI is prescriptive and the sector focus is agnostic (+some sector-specific guidance).
2. CDP (cdp.net)
CDP has purpose in capturing environmental performance data related to GHG emissions, water, forests, and supply chain. CDP has investors, buyers, and other stakeholders as its audience. The report is filled up on CDP's online reporting platform. The focus are in Environmental and Governance areas. The information to report are; (1) climate change, about the risks and low-carbon opportunities, (2) forest, about how organizations produce, source, and use major soft commodities associated with detrimental impacts on natural resources, (3) water security, about the company's management, governance, use, and stewardship of water resource. CDP is prescriptive and the sector focus is specific.
3. IIRC (integratedreporting.org)
IIRC has purpose in establishing Guiding Principles and Content Elements allowing companies to produce "integrated reports". IIRC has investors as its audience. The report is filled up on stand-alone integrated report. The focus are in Environmental, Social and Governance areas. The information to report are; (1) organizational overview and external environment, (2) governance structure, about how it supports ability to create value in the short, medium & long term, (3) business model of organization, (4) risks and opportunities that affect the ability to create value over the short, medium & long term; how those issues are dealt with, (5) strategy and resource allocations, (6) performance, about extent to which objectives were achieved for the period; outcomes and their effect on capitals, (7) outlook, about challenges and uncertainties likely to be encountered; implications for the business model and future performance, (8) basis of presentation, about how the organization determines what to include in its integrated report. IIRC is flexible and agnostic.
4. SASB (sasb.org)
SASB has purpose in facilitating disclosure of material sustainability information in SEC filings. SASB has investors as its audience. The report is filled up on SEC Form 10-K, 20-F filings. The focus are in Environmental, Social and Governance areas. The information to report are; (1) environment, about corporate impacts on the environment, (2) social capital, about human rights, protection of vulnerable groups, local economic development, access to and quality of products, and services, affordability, responsible marketing, and customer privacy, (3) human capital, about issues affecting employee productivity (e.g., employee engagement, diversity, and incentives and compensation), (4) business model and innovation about impact of sustainability issues on innovation and business models, and the integration of these issues in a company's value-creation process, (5) leadership and governance, about management of issues inherent to the business model or common practice in the industry that are in potential conflict with the interest of broader stakeholder groups. SASB is prescriptive and specific.
5. TCFD (fsb-tcfd.org)
TCFD has purpose in encouraging firms to align climate-related risk disclosures with investors' needs. TCFD has investors, lenders and insurers as its audience. The report is filled up on annual financial filings (e.g., annual report). The focus are in Environmental and Governance areas. The information to report are; (1) governance around climate-related risks and opportunities, (2) strategy, about how the actual and potential impacts of climate-related risks and opportunities on the organization's business, strategy, and financial planning where such information is material, (3) risk management, about how the organization identifies, assesses, and manages climate-related risks, (4) metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material. TCFD is flexible and agnostic (+some sector-specific guidance).
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