Challenges and opportunities in ESG reporting

THERE is near unanimous agreement that environmental, social and governance (ESG) disclosures are necessary for companies, but there is still a lot of inconsistency in how those disclosures are made.

Some of the key standards and frameworks include:

• Global Reporting Initiative: Addresses disclosures of socially material topics affecting a company's stakeholders. It requires companies to determine which are material issues in consultation with stakeholders.
• Sustainability Accounting Standards Board (SASB): Recommends topics and metrics for 77 different industries across all three ESG pillars. These standards provide guidance on how organisations can align their reporting with investor needs and gather standardised data.
• Carbon Disclosure Project: A global environmental disclosure system to support the measurement of risks and opportunities on climate change, deforestation and water security.
• Task Force on Climate-related Financial Disclosures: Provides 11 recommendations across 4 pillars - governance, strategy, risk management, and metrics and targets - to guide companies in their disclosure of climate-related risks and opportunities. Initiatives towards convergence, however, are gaining momentum. Some developments just last year included:
• Five major framework and standard-setting institutions stated their intention to work together towards a comprehensive corporate reporting system.
• The International Integrated Reporting Council and SASB merged to form the Value Reporting Foundation.
• The IFRS Foundation Trustees progressed on its sustainability reporting initiative, including the potential creation of an International Sustainability Standards Board.

Stakeholder interests