If you have had your eye on the sustainability and ESG (Environmental, Social and Governance) landscape in recent years, there is no doubt that you have seen a proliferation in the number of instruments available to report and communicate your performance, risk and management. Similarly, while communicating on sustainability was once a largely voluntary process, more and more mandatory requirements are cropping up—and with them, mandated reporting instruments.
Navigating through the various sustainability tools available for reporting or communicating performance can be daunting—especially if the choice of which to use is your own decision, and not dictated by legislation or other reporting requirements. Therefore, before deciding which ones to make use of, it's important to get a good look at the landscape of available options.
Let’s take a moment to categorise the landscape, and deep dive into some of the biggest names—many of whom you might have already heard of . Classifying these tools into distinct categories provides insight into their overarching purpose and functionality.
Sustainability reporting standards are precisely defined guidelines and requirements for reporting, and usually are provided by a recognised authority. Standard-setters ask for very specific metrics for companies to report, and in the world of sustainability reporting, standards are generally regarded as the most thorough instruments available.
The objectives of the standards is to generate comparable information for investors and other stakeholders alike. And in essense, this is what sustainability reporting standards are all about; establishing a shared language and standardised information system for ESG as well as enabling stakeholders to assess sustainability performance, management, and risk across organisations.
Some of the most prominent sustainability standards include:
A globally applicable standard for reporting on the impact side of materiality. The most widely-used sustainability standards internationally, which are mainly used voluntarily by organisations. For a more extensive breakdown you can read here.
The newly implemented standards for mandatory reporting in the European Union, as part of the Corporate Sustainability Reporting Directive (CSRD). Organisations will start reporting to these in 2025.
Published in 2023, S1 and S2set of standards focuses specifically on the financial impact of sustainability issues on an organisation, leveraging the structure of the Task Force for Climate related Financial Disclosures (‘TCFD’) framework. These standards are therefore mainly risk-focused—looking at the financial risk that a sustainability issue could or will pose to an organisation. Several jurisidctions globally (example, Australia, China, Japan etc) are adopting this standard or building upon it to create their own set of mandatory financial reporting requirements on sustainability matters.
These standards cover a wide variety of topics, even beyond sustainability. However, sustainability-specific standards could include ISO 14001 for environmental management systems, ISO 50001 for energy management systems, and ISO 45001 for health and safety.
Unlike the others, the ISO Standards come with a verification statement that "certifies" the reporting organisation or product. The ISO Certification involves a detailed evaluation of a company's processes and systems across specific areas such as quality management, environmental management, information security, and occupational health and safety.
The certification process requires companies to adhere to standardised procedures and practices related to the topic they are seeking certification for, and regular audits to ensure continuous adherence to ISO standards. Achieving ISO Certification acts as a powerful tool for signaling a company's dedication to excellence and continuous improvement.
Unlike a standard, a framework is a less-stringent set of guidelines that provide a structure or a process to reporting, including concepts and guidance on key sustainability topics. They do not come with strict reporting metrics and requirements.
Nonetheless, frameworks often help guide our thought process around reporting on a particular topic—for example, one that there might not be a standard available to report on.
Some sustainability reporting frameworks include:
TCFD provides broad, recommended disclosures and recommendations on climate-related reporting, but does not specify how to report these disclosures with precise metrics.
Similarly structured to the TCFD, this framework looks at financial disclosure of nature-related risk and opportunity. Again, it does not provide precise metrics for reporting, but a structure in which to consider the effects of nature on financial risk and opportunity.
The above tools —standards and frameworks—are largely used for the practice of sustainability reporting. However, we can expand our view to also take in certifications and rankings and ratings. Whilst these would not be considered as part of the sustainability reporting landscape, they are certainly used by organisations to communicate their impacts, performance and progress on sustainability matters. Let’s take a look at some of the biggest names.
Certifications are used to communicate ESG performance, and are awarded by a third-party after an assessment process. Of course, the assessment methodology per certification is different. Often, certifications focus on a specific topic or target a particular sector, like for example, a certification on health and safety, or a certification specific to the construction industry.
On a principle level, a certification is sought out by an organisation to demonstrate ESG performance, providing stakeholders with assurance regarding certain business practices and processes. Ultimately, seeking certification is a proactive step for organisations looking to showcase their dedication to ESG values.
Some of the biggest global ESG certifications include:
B Corp consists of a comprehensive assessment process about a company’s performance in key areas including governance, workers, community, environment, and customers. It asks companies to legally change core processes to balance both profit and purpose through stakeholder governance—a model that requires an organisation to consider the impact of their decisions on all of their stakeholders.
If a company is eligible for certification and reaches a score of more than 80 in their assessment, they are awarded B Corp status. B Corp status is used by organisations to signal to a wide range of stakeholders, like customers, investors, or supply chain actors, that they are meeting high standards of social and environmental impact. You can read a full business case here.
EU Ecolabel certification is granted to products or services as proof of reduced environmental impact. EU Ecolabel involves a rigorous assessment process evaluating products and services based on their environmental performance throughout their lifecycle, from raw material extraction to production, use, and disposal. The certification criteria cover various areas such as energy efficiency, resource conservation, reduction of hazardous substances, and waste minimisation. Achieving EU Ecolabel certification demonstrates a company's commitment to sustainability and offers consumers a reliable way to identify eco-friendly options.
Raters or rankers are independent bodies that use their own developed methodologies to generate a score of an organisation’s ESG performance. These methodologies often involve collecting data from a variety of sources, including company disclosures, public records, and third-party data providers, to assess sustainability performance.
Something important to note is that rating methodologies can vary greatly between providers, so users should understand the specific criteria used by each rating agency when interpreting scores and rankings. An organisation may score completely differently from one rating to the next.
Many raters and rankers deal cater to investors, who use ESG ratings to assess the sustainability risk of companies and make investment decisions. However, these assessments can also help wider stakeholders, including consumers, to make informed decisions based on certain sustainability criteria.
Some of the biggest rankers and raters:
EcoVadis Ratings: A certification that awards platinum, gold, silver or bronze medals (or no medal) after assessment of a company’s sustainability management system. EcoVadis requires an organisation to complete a documentation-based questionnaire about the policies, measures and reporting structures it has in place around certain sustainability topics, such as: :
EcoVadis ratings are multi-purpose, but most frequently used by companies to assess supply chain partners. Furthermore, the EcoVadis platform facilitates this by allowing companies to communicate their scorecard to their supply chain partners.
If you are interested in learning more about EcoVadis, you can download our comprehensive guide for free here.
CDP is the world's largest repository of corporate environmental data, providing a platform for reporting, analysis and sharing of environmental data globally. CDP supports thousands of companies, cities, states and regions to measure and manage their risks and opportunities on climate change, water security and deforestation. This is done based on request of their investors, purchasers and city stakeholders, as well as voluntary action of individual companies.
The CDP disclosure is focused on environmental impacts, enabling companies to track and benchmark their progress against competitors, get ahead of regulation, and attract new market opportunities with environmentally conscious customers and partners.
CDP questionnaires have focused on ESG-related risks and respective governance mechanisms, to mitigate these risks and foster the resilience of companies. This is why investors have a particular interest in our CDP performance.
Learn more about how the CDP questionnaire works.
These ratings measure the financial effects of ESG risks and opportunities on a company in comparison to their peers. Companies are allocated a rating ranging from AAA (“Leader”) to CCC (“Laggard”), based on publicly available relevant data illustrating sustainability gains and controversies. As this score is based on financials, it is most frequently investors who use it as a reference for a company’s ESG management.
Similarly to MSCI ESG Ratings, this index measures a company’s exposure to long-term financial risk generated by environmental, social, and governance factors. However, different to MSCI ESG Ratings, Sustainalytics provides a numerical scale of risk ratings (the lower, the better) considering the total sustainability risk a company is exposed to, and what percentage of that risk is actively managed, whereas MSCI does relative grading in comparison to peer organisations within an industry. From this information, it generates a rating used by investors, corporations, and other stakeholders to make sustainable investment and business decisions.
FTSE4Good Index Series: created by FTSE Russell, this index includes companies that meet specific sustainability criteria. The index is widely used by those looking to invest in companies that demonstrate high standards of environmental, social and governance performance.
It is worth noting that while this categorisation is being done to ease the understanding of the landscape, some of the tools or frameworks do not fit neatly into one category. For example, Carbon Disclosure Platform (‘CDP’) defines itselfas a global disclosure platform. ISO while being a Standard, also serves verification statements that certify reporting organisations.
In conclusion, navigating the vast and dynamic landscape of ESG reporting and communication tools requires a strategic understanding of the available options. As we've categorised the terrain into standards, frameworks, certifications, and ratings , it’s evident that each plays a unique role in shaping the sustainability narrative.
Standards establish a universal language for reporting, frameworks guide the narrative in the absence of strict metrics, certifications offer tangible proof of ESG commitment, and raters provide a quantitative lens for assessing sustainability performance and risk.
When deciding how to report and communicate your sustainability performance, it's vital to acknowledge that each category — standards, frameworks, certifications, and raters — plays a distinctive role in shaping your ESG narrative.
A deliberate selection of these tools is essential to fostering transparency and continuous improvement within your ESG system, ensuring that your organisation aligns with its sustainability goals and effectively communicates its commitment to stakeholders.