The order in disorder: Aligning environmental disclosure frameworks
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The sustainability disclosure landscape is a bit of a maze for businesses. In fact, it has been a source of frustration to many organisations that there are so many requirements and expectations and the reporting burden to fulfil them all seems huge. In addition to this, there are so many different voluntary frameworks (each another seemingly indistinguishable acronym!), it’s hard to know which one/s to choose.
However, there is growing endeavour to create alignment and comparability across the reporting frameworks, and this is now evident in both the mandatory and voluntary reporting space.
This article seeks to show the emerging order in the disorder and why establishing more alignment in disclosures is becoming an increasingly important common goal in the field of sustainability.
An Overview of Sustainability Reporting Frameworks
Organisations have choices to grapple with when it comes to reporting. There are a wide range of frameworks, standards and benchmarks that can be reported to. In fact, according to the World Business Council for Sustainable Development (WBCSD) Reporting Exchange programme, there are now a total of 182 frameworks across 60 major nations. 81% are ‘mandatory’ in some form. Businesses are feeling increasing pressure from continual updates, new initiatives and requests for information. The burden of reporting feels heavier by the year.
No organisation can or needs to report against every set of standards. A choice will need to be made about which are most appropriate. For example, CDP and SASB are investor focused. DJSI and GRI both span a wide range of Environmental, Sustainability and Governance (ESG) issues but one is an index recognising high performance in sustainability; the other a very broad set of standards and specific indicators which companies can use to formulate their own sustainability reports.
There are also frameworks to obtain additional certifications. Sometimes these might be vital contract-winning credentials, other times it might demonstrate proactivity on environment and credibility to stakeholders. Businesses should take a strategic approach to reporting and choose only the tools that generate the most value and are most relevant to them.
How reporting initiatives are trying to help
We need to make reporting consistent, comparable and current, to tap into the transformative power of transparency – Tim Mohin, Chief Executive GRI.
Many of the major frameworks now recognise the need for coordination and are formulating partnerships and developing their criteria to work on doing so. Experts from many of the major reporting frameworks have publicly communicated their understanding about the challenges of fragmentation in the sustainability reporting landscape and have sought to help. There is still a way to go but the good thing is, the mindset is to achieve alignment where possible to reduce the reporting burden for companies.
In the Autumn of 2018 several major international corporate reporting standards and framework providers announced their involvement in a 2-year project to push forward better alignment between frameworks and make it easier for companies to effectively disclose on sustainability and to meet the demands stakeholders and investors.
However, alignment has already been well underway prior to this. SASB claims to use metrics already in use across 200 other initiatives in its disclosures and has formulated a partnership with the GRI to show that contrary to assumption, they are not designed to be competitive but to fulfill difference purposes for difference audiences.
The new Streamlined Energy & Carbon Reporting regulations in the UK come into effect this year and replace the old CRC regulations and directly align with the requirements of Mandatory Greenhouse Gas Reporting (MGHGR) and the Energy Savings and Opportunities Scheme (ESOS) in order to assist in minimising the burden of new data collection.
CDP has incorporated more alignment with the DJSI, GRI, SASB and the SDGs in its 2018 updates. For example, their recent sector-specific approach is more in line with the DJSI. They also have a downloadable guidance document with tables of linkages between CDP and GRI, the most widely used framework for sustainability reporting.
Whilst frameworks look to align they will always need to be evolving in other ways as sustainability best practices changes. However, despite how it might feel, the objective is not obfuscation but rather to assist companies in being more transparent.
To facilitate this, frameworks have to attend to alignment to help reduce the reporting burden for businesses and increase uptake of sustainability reporting. After all, the goal of better disclosures and more successful climate action should be the collective priority, which we’re not going to achieve when lost in a disclosure maze.
Integrated Reporting: Aligning sustainability with business
The push towards integrated reporting in recent years has brought about a potentially more important shift: a better understanding within organisations of the value of sustainability issues. It has ushered in a new era of cohesion between overall business objectives and sustainability, two traditionally unconnected realms. This has lead some experts to hypothesise eventual abandonment of the stand-alone sustainability report altogether.
In 2017 the Task Force on Climate-related Financial Disclosures (TCFD) released their recommendations which have been a driver for more specificity and alignment in disclosures in order to effectively communicate climate-related risks to stakeholders and investors. They recommend integrating these disclosures into the mainstream annual financial filings. SECR has followed this lead by asking for disclosure to appear in the Director’s Report of a company rather than a separate report or submission.
As frameworks and businesses begin to digest the developments in the field, further evolution in disclosures can be anticipated in the coming years but we’re likely to see much more convergence in the information required of businesses from investors and stakeholders, particularly as we all aim to align ourselves to the common goal of the Paris Agreement. It will be increasingly important, therefore, for reporting frameworks to assist and for us to find clear direction in the disclosure landscape.
If you find yourself lost in the maze and need assistance in understanding what your business must comply to or which voluntary disclosure frameworks it should choose, our new eBook provides an overview of 26 of the major environmental frameworks, outlining their requirements and to whom they are best suited. Hopefully this will help you find some clarity.
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