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.
Navigating your way through the various sustainability reporting tools available can be daunting—and before you decide 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 players. Classifying these tools into distinct categories provides insight into their overarching purpose and functionality. By and large, we can distinguish between standards, frameworks, certifications, and raters.
Sustainability reporting standards are well-defined guidelines and requirements for reporting, and usually are provided by a recognised authority. Standard-setters provide very specific guidelines and metrics for reporting, and in the world of sustainability reporting, standards are generally regarded as the most thorough reporting instruments available.
The result of this is that reporting with sustainability standards generates comparable information from organisation to organisation. And really, this is what sustainability reporting standards are all about. In essence, establishing a shared language and standardised information system for ESG, 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 mostly voluntarily used 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, this set of standards focuses specifically on the financial impact of sustainability issues on an organisation, leveraging the structure of the TCFD framework. Some global governments are adopting this standard, or building upon it to create their own set of mandatory financial reporting requirements on sustainability matters—like Australia, for example.
Unlike a standard, a framework is a ‘looser’ 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.
This makes them more open to interpretation by the reporting entity, and in practice, means that the information they generate is less comparable from organisation to organisation. Nonetheless, frameworks often help guide our thought process around reporting on a particular topic—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.
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.
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.
All in all, a certification is sought out by an organisation to demonstrate ESG performance, providing stakeholders with assurance regarding business practices. 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:
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.
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.
Raters, or rankers and raters, are independent bodies that use their own developed methodologies to generate a quantitative 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. The score awarded is very frequently based on a financial perspective—that is, looking at the financial impact of a certain sustainability topic on an organisation, both current and in the future.
For this reason, 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.
However, 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.
In fact, the methodologies used by ESG rankers and raters can be complex and opaque, which can make it difficult to understand why a company received a particular rating.
Some of the biggest rankers and raters:
This index measures a company’s exposure to long-term financial risk generated by environmental, social, and governance factors. It also considers how well a company is managing these risks. From this information, it generates a rating used by investors, corporations, and other stakeholders to make sustainable investment and business decisions.
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.
In conclusion, navigating the vast and dynamic landscape of ESG reporting tools requires a strategic understanding of the available options. As we've categorised the terrain into standards, frameworks, certifications, and raters, it’s evident that each plays a unique role in shaping the sustainable reporting 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.