As sustainability reporting becomes an increasingly important aspect of corporate strategy, organizations are looking for ways to ensure that their reporting is consistent, accurate, and relevant. One key way they do this is by aligning their reporting with international reporting standards.
International reporting standards provide a framework for organizations to follow when reporting on their sustainability performance. By following these standards, they can ensure that they are disclosing relevant, accurate, and meaningful information to their stakeholders. This can then help them build trust with their stakeholders, including consumers, investors, and regulators, and demonstrate their commitment to responsible business practices.
The Different Kinds of International Reporting Standards
1. Global Reporting Initiative (GRI)
Established in Boston, Massachusetts in 1997, the Global Reporting Initiative (GRI) is a global, independent standards organization that assists companies, governments, and other organizations in comprehending and presenting their environmental, social, and governance (ESG) impact.
The GRI is one of the most widely recognized international reporting standards and provides a comprehensive framework for sustainability reporting. It covers a wide range of ESG (Environmental, Social, and Governance) topics and includes climate change, energy, human rights, and labor practices. According to a KPMG survey held in 2022, 73% of G250 companies (the world’s 250 largest companies by revenue) use the GRI standards as a way to showcase disclosure to their stakeholders.
To standardize sustainability reporting, the IFRS (International Financial Reporting Standards) Foundation created the ISSB (International Standards Sustainability Board) in 2022. This Board is in charge of developing a global sustainability-reporting standard that will be investor-centric, transparent, and focus on financial-related sustainability reporting by companies. The Value Reporting Foundation had put in place SASB (Sustainability and Accounting Standard Board) standards which helped organizations in different industries report on the risks and the opportunities specific to them. When IFRS merged with the Value Reporting Foundation, in August 2022, the SASB standards came within its purview as well.
These standards focus on the material sustainability issues that are most relevant to each industry and provide companies with a framework for disclosure that is tailored to the specific needs of their industry. By aligning their reporting with the SASB, companies can ensure that they are disclosing information that is relevant and meaningful to their stakeholders, while also meeting the specific reporting needs of their industry. The SASB provides sustainability accounting standards for a range of industries, including energy, materials, financials, technology, consumer goods, healthcare, industrials, and real estate. These standards cover a range of ESG (Environmental, Social, and Governance) topics, including climate change, water management, human rights, and labor practices.
3. Integrated Reporting Framework
Integrated reporting is a modern approach to corporate reporting that seeks to provide a more comprehensive view of an organization's performance and prospects. It is a framework that integrates financial, environmental, social, and governance (ESG) information into a single report, giving stakeholders a more holistic view of the company's value creation process.
The integrated reporting framework was developed by the International Integrated Reporting Council (IIRC), a global organization that aims to promote the integration of financial and non-financial information in corporate reporting. The IIRC's framework, known as the International Integrated Reporting Framework, provides guidelines and best practices for companies that are looking to implement integrated reporting. One of the key features of integrated reporting is its focus on the interconnections between an organization's various stakeholders, including shareholders, employees, customers, suppliers, and communities. This holistic view of the organization is meant to help companies better understand the complex relationships between their activities, outcomes, and impacts.
Integrated reporting also emphasizes the importance of looking beyond short-term financial performance and instead considering the long-term value-creation potential of an organization. This involves taking into account factors such as environmental sustainability, social responsibility, and corporate governance.
4. Task Force on Climate-related Financial Disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD) is an organization established in 2015 by the Financial Stability Board (FSB) to promote greater financial transparency and disclosure in regard to the impacts of climate change on organizations and the financial system. The TCFD was formed in response to the growing recognition that climate change is not only an environmental issue but also a financial one that has the potential to impact the stability and risk of the financial system.
The TCFD develops and recommends voluntary, consistent climate-related financial disclosures that can be used by companies, investors, and other stakeholders to help assess the financial implications of climate-related risks and opportunities. The TCFD provides a set of recommendations for companies to provide relevant and material information on their climate-related risks, including both physical and transition risks, and the actions they are taking to address these risks. The recommendations also cover the disclosure of organizations' governance, strategy, risk management, and metrics and targets related to their climate risks.
The TCFD's recommendations are widely supported by organizations and investors around the world, and their implementation is encouraged by various regulators, governments, and industry groups. The TCFD is seen as an important step forward in promoting transparency and accountability on the issue of climate change and its financial implications. It is a crucial initiative aimed at promoting financial transparency and disclosure in relation to climate change.
5. Climate Disclosure Standards Board (CDSB)
The Climate Disclosure Standards Board (CDSB) is an international organization established to promote and improve climate-related financial disclosure. The CDSB was formed in response to the growing recognition that climate change has the potential to impact the stability and risk of the financial system. The CDSB's primary mission is to provide organizations with guidance on how to report on their climate-related risks and opportunities in a consistent and comparable manner. The CDSB works to develop and promote international standards for climate-related financial disclosure that are relevant, material, and usable by investors, lenders, insurers, and other stakeholders. The CDSB's standards aim to ensure that organizations provide transparent, accurate, and complete information on their exposure to climate-related risks and opportunities, and on the actions, they are taking to address these risks.
In addition to developing disclosure standards, the CDSB also provides organizations with tools and resources to help them implement these standards. This includes training and guidance on how to report on their climate-related risks and opportunities, as well as case studies and best practices from leading organizations.
6. UN SDGs
The United Nations Sustainable Development Goals (SDGs) are not a reporting framework in the traditional sense, but they provide a set of goals and targets that organizations can use as a basis for reporting on their sustainability efforts. The SDGs provide a global framework for sustainable development that organizations can use to align their strategies and activities with the world's most pressing sustainability challenges.
While the SDGs are not a formal reporting framework, many organizations are using them as a basis for reporting on their sustainability performance. For example, organizations may use the SDGs as a way to communicate their impact on specific sustainability issues, such as poverty reduction, gender equality, or climate action. By reporting on their efforts in these areas, organizations can demonstrate their commitment to sustainable development and provide stakeholders with a better understanding of their sustainability impact.
Companies that comply with international reporting standards can benefit in the following ways:
Improved transparency and accountability: This can help companies build trust with stakeholders such as investors, customers, and employees, and can enhance a company's reputation.
Better decision-making: Compliance with international reporting standards can help companies to better understand and manage their risks and opportunities, and to identify areas for improvement.
Increased investor confidence: Investors are more likely to trust companies that provide high-quality and transparent information, and are seen as being responsible and accountable.
Improved access to capital: Investors and lenders are more likely to provide funding to companies that are transparent and accountable in their reporting, and that demonstrate a commitment to sustainability.
Enhanced competitiveness: Compliance with international reporting standards can help companies to stay ahead of their competitors. Companies that provide high-quality and transparent information are better positioned to attract and retain customers, employees, and investors, and to compete in a rapidly changing business environment.
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