Reporting frameworks and standards
Sustainability frameworks provide principle-based guidance on how sustainability information is structured, how it is prepared and what broad topics are covered.
Sustainability standards provide specific, detailed and repeatable requirements for what should be reported for each topic, including metrics.
1. Global Reporting Initiative (GRI)
Launched in 1997, the GRI pioneered the concept of sustainability reporting, offering a comprehensive framework for reporting on environmental, social and government impacts. It was designed for universal applicability across organisations of all sizes and sectors. GRI standards cover a broad array of sustainability topics, emphasizing materiality1 and stakeholder engagement.
2. CDP
Formerly known as the Carbon Disclosure Project, CDP is a global environmental impact non-profit, providing a platform for companies, cities, states and regions to report information on their climate, deforestation and water security impacts. Founded in 2000, its aim was to create a system that empowers investors to use their influence to encourage disclosure from companies. Through CDP, companies can proactively demonstrate to hundreds of capital market signatories their commitment to tackling issues such as climate-related risks and opportunities, thereby enhancing their reputation. Additionally, they can take meaningful steps to address climate change and water security, helping to ensure long-term sustainability and profitability. Moreover, disclosing through CDP helps companies to understand best practice and benchmark against peers, both nationally and globally, across a wide range of material factors. Lastly, CDP enables companies identify possible partnerships to improve water security and build a stronger company.
3. Sustainability Accounting Standards Board (SASB)
Established in 2011, SASB focuses on the materiality of sustainability issues to financial performance, offering industry specific reporting standards. It provides 77 standards covering 11 sectors, addressing the unique ESG issues pertinent to each industry, from energy management to business ethics.
4. Non-Financial Reporting Directive (NFRD)
The EU adopted the NFRD in 2014 making it effective in FY 2017 to enhance the transparency and comparability of non-financial information provided by companies. The NFRD applied to large public-interest entities and mandated disclosures on environmental protection, social responsibility, human rights, anti-corruption and diversity on company boards. Two major criticisms of the NFRD were its lack of standardisation and enforceability. Regulators and other stakeholders felt that companies had too much leeway in interpreting “non-financial information” and reporting on it. This fuelled inconsistencies, difficult comparisons, and reports that weren’t ultimately usable. Moreover, the scope of NFRD was limited, only targeting large public-interest entities, which excluded many companies that significantly impacted sustainability2. The NFRD was eventually replaced by the Corporate Sustainability Reporting Directive (CSRD) in 2021.
6. EU Taxonomy
The EU Taxonomy was established in 2018 as part of the EU Sustainability Finance framework. It establishes a common language for sustainable finance. It acts as a classification system, establishing a list of sustainable economic activities. By setting clear and comprehensive assessment criteria, it standardizes the concept of sustainability across a diverse range of sectors and industries, creating a universal language for what is considered sustainable. This prevents greenwashing and fosters trust in sustainable investments. More information about the EU Taxonomy can be found here.
7. Sustainable Finance Disclosure Regulation (SFDR)
The SFDR was established in 2019 to be applied from March 2021. The SFDR requires financial market participants and financial advisors in the EU to disclose how they integrate ESG risks and opportunities into their investment decisions and advisory processes. It aims to create transparency and inform investors regarding the sustainability aspects of financial products. The SFDR provides investors with transparent, standardized information, enabling them to direct capital towards more sustainable economic activities. It also aims to eliminate greenwashing by ensuring that investors are not misled by false or exaggerated sustainability claims.
8. International Sustainability Standards Board (ISSB)
The ISSB was announced in November 2021 at the COP26 summit. Developed by the IFRS foundation, the ISSB was established to develop a set of global sustainability disclosure standards. Focused on creating a global baseline on sustainability reporting, the ISSB standards (IFRS S1 and IFRS S2) aim for compatibility with other frameworks, addressing a wide spectrum of sustainability issues with an emphasis on climate change.
9. Corporate Sustainability Reporting Directive (CSRD)
The CSRD was proposed by the European Commission in April 2021 to take effect from FY 2024. It was proposed to replace the NFRD. The CSRD is designed to enhance the scope and quality of sustainability reporting among companies. The CSRD mandates a detailed disclosure of sustainability related information from certain companies operating within the EU. This information includes how sustainability matters affect the company’s business model and strategy. It introduces rigorous reporting standards and requires that sustainability information is audited (assured) for reliability. The CSRD is aligned with the EU Taxonomy by design, requiring companies to report KPIs and specific ratios related to their economic activities. This information must be included in a specific section within the management report, alongside the sustainability statement. More information about the CSRD can be found here.
10. European Sustainability Reporting Standards (ESRS)
The ESRS are at the heart of the CSRD. They were developed by the European Financial Reporting Advisory Group (EFRAG) and adopted as a delegated act by the European Commission on July 31, 2023. EFRAG was tasked with ensuring that the standards comprehensively address the sustainability reporting needs of the CSRD. The ESRS cover the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights. They provide information for investors to understand the sustainability impact of the companies in which they invest.
The ESRS support the goals of the EU Green Deal and the EU Sustainability Finance framework. The ESRS reporting requirements are aligned with the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI) standard, ensuring interoperability among the standards.
The ESRS are a set of 12 standards, 2 cross-cutting disclosures and 10 topical disclosures. The cross-cutting disclosures are ESRS 1 (General requirements) and ESRS 2 (General disclosures). The topical disclosures are categorised into three groups: Environmental standards (ESRS E1 - ESRS E5), Social standards (ESRS S1 - ESRS S4) and one Governance standard (ESRS G1). More information about the ESRS can be found here.
11. Corporate Sustainability Due Diligence Directive (CSDDD)
Published on July 5th, 2024, the CSDDD3 sets out a corporate due diligence duty for large companies to identify and address adverse human rights impacts (such as child labour) and environmental impacts (such as pollution) in their own operations, those of their subsidiaries and in their value chain. Additionally, CSDDD sets out an obligation for large companies to adopt and put into effect a transition plan for climate change mitigation which aims to ensure, through best efforts, that the business model and strategy of the company are compatible with the transition to a sustainable economy and with the limiting of global warming to 1.5° C in line with the Paris Agreement and the objective of achieving climate neutrality.