What are the ESG Frameworks Have in ESG Reporting? Choose the Right One.

What are the ESG Frameworks Have in ESG Reporting? Choose the Right One.

Manikandan S
September 05, 2024
7 min read

What are EGS frameworks?

ESG Frameworks is a set of principles that provides a framework for organizations to assess their sustainability performance, including ESG risks and opportunities. ESG frameworks are created by various organizations, including governments, NGOs, stock exchange authorities, nonprofit organizations, etc.

There are multiple frameworks available to assess ESG performance for businesses; organizations opt for the frameworks based on their short-term and long-term sustainability objectives.

Frameworks provide accurate information to key stakeholders such as investors, rating agencies, lenders, regulators, boards, customers, and supply chain partners about sustainability performance.

It also helps organizations set goals and implement ESG and sustainability strategies to achieve net zero goals.

Below are some widely used sustainability frameworks that have been used by organizations globally.

List out ESG frameworks:

Global Reporting Initiative framework

1. Global Reporting Initiative framework (GRI ESG Framework):

The GRI is an independent international organization that provides a framework for businesses, governments, and other entities to understand and communicate their sustainability impacts. The GRI Standards are the most widely used framework for sustainability reporting globally.

It does not encourage a scoring process but instead emphasizes transparency, accountability, stakeholder engagement, and materiality assessment.

In addition, GRI encompasses a wide range of sustainability topics including environmental impact, human practice, data privacy, resource use, and many others.

A wide range of organizations across diverse sectors and industries report their ESG performance using the GRI framework. This framework is particularly helpful for multinational organizations that operate in different regions with various sustainability requirements.

Moreover, its framework is publicly available for free, making it accessible to organizations of all sizes.

GRI Standards

GRI Standards are Divided Into Three phase:

  • Universal
  • Sector
  • Topic
  • Universal:
    A set of principles that suits all types of organizations and explains the process and methods for preparing sustainability reports.

    Universal modular is a base for all GRI reporting.

    In GRI, the universal standard is a specialized one, because it covers vast topics and now incorporates human rights topics. It encompasses:

  • GRI 101: Foundations
  • GRI 102: General disclosure
  • GRI 103: General disclosure
  • Sector:
    It provides guidance for specific sectors or industries such as manufacturing and agriculture.

    Topic:
    Topic standards provide guidance on specific topics such as waste management, emissions, and taxes.

    GRI Reporting Framework Benefits:

  • Improve Transparency:

    Transparency is the most significant metric expected by investors and stakeholders. It helps build credibility.

  • Make informed decision making:

    Even in complex circumstances, GRI guides you in the right direction and helps you make informed decisions with the help of meaningful ESG insights.

  • Avoid risks through effective risk management:

    With the help of the report, you can easily predict and forecast upcoming sustainability risk events in your ESG process and develop the best solutions to mitigate the risk.

  • 2. TCFD: TCFD ESG Framework

    TCFD ESG Framework

    The TCFD acronym is Task Force on Climate-Related Financial Disclosures, which was created by the Financial Stability Board in 2015 and published its official guidelines in 2017. It focuses on climate-related financial risks and opportunities for banks, companies, investors, and non-financial sectors.

    Many organizations struggle to determine which metrics to disclose in their annual reports. Therefore, it provides comprehensive guidelines for organizations on how to disclose climate-related information in their financial filings. It is a valuable framework for investors that helps organizations significantly.

    TCFD Framework Benefits:

  • Improved transparency:

    The TCFD framework encourages organizations to provide clear information about climate-related risks and opportunities.

  • Informed investment decisions:

    By providing information about climate-related financial information, the TCFD framework helps investors make informed decisions.

  • 3. CSRD: Corporate Sustainability Reporting ESG Framework

    The acronym for CSRD is Corporate Sustainability Reporting Directives, introduced by the European Commission. It is used by larger organizations, including SMEs, and requires them to disclose their non-financial information according to European standards.

    The CSRD helps investors, stakeholders, and policymakers assess organizations' non-financial performance. It emphasizes transparency and accountability in sustainability practices.

    Who are all comply with CSRD:

    • Organizations listed on the EU market.
    • Organizations that are not listed on the EU market but meet the following criteria: 250 employees, 40 million euros revenue, 20 million euros assets.
    • Listed SMEs.
    • Non-European organizations with subsidiaries in Europe and super-flow revenues of 150 million euros.

    CSRD Reporting Framework Benefits:

    • Organizations: Improve brand reputation, gain potential investors, and improve risk management through transparency.
    • Investors: Easily identify risks and opportunities, making informed decisions.

    4. SASB Framework_ sustainability accounting standard board:

    The SASB framework is used for industry-specific disclosure of sustainability information that focuses on financial performance. It is useful for investors.

    SASB covers 77 different industries and identifies subsets of environmental, governance, and social issues. Its framework emphasizes financial materiality.

    In addition, through the framework, organizations share their sustainability performance with investors. SASB was developed by a non-profit organization in 2011.

    SASB Benefits:

    The SASB framework delivers significant benefits to investors and corporations.

    With the help of the SASB reporting, organizations can compare ESG reporting across various organizations within the same industries.

    The SASB framework is fully customizable, providing industry-specific material metrics. This saves users time and effort without imposing a reporting burden.

    The SASB framework addresses materiality issues, thereby effortlessly identifying risks. It also enables organizations to communicate effectively with their stakeholders and investors.

    5. CDP allies carbon disclosure project framework:

    CDP allies carbon disclosure project framework

    The CDP framework focuses on climate change, deforestation, and water management and includes a series of questionnaires based on these topics. It helps companies, cities, states, and regions report their environmental impact.

    In April 2024, the CDP framework added new questionnaires to provide a more comprehensive environmental assessment.

    The CDP framework was established in 2020 and operates online. It also helps investors make informed decisions.

    Carbon Disclosure Framework Benefit:

    • Risk management:Organizations can effectively identify environmental-related risks, including climate change, deforestation, and water security, and develop a clear roadmap to mitigate them.

    6. BRSR:

    The BRSR reporting framework was introduced in India. To provide a more comprehensive and holistic ESG assessment, the BRSR framework was replaced by the BRSR (business responsibility and sustainability reporting framework), developed by SEBI and based on nine principles.

    The BRSR framework encourages listed Indian companies to adopt sustainable practices and disclose ESG information.

    BRSR Framework Benefits:

    • Informed investment decisions: The BRSR framework provides investors with extensive information about the sustainability performance of organizations, enabling them to make informed decisions.
    • Enhanced transparency: The BRSR framework requires organizations to measure various sustainability parameters. This detailed reporting provides clear insights into ESG performance, promoting transparency.

    In a nutshell:

    Many organizations are making mistakes in preparing ESG reports and selecting ESG frameworks. This can hinder improvements in transparency and brand reputation.

    Therefore, consider using ESG software specifically designed for all industries, including ESG reporting, ESG frameworks, ESG data management, net zero, risk management, and more.

    Partner with us for your ESG journey.