An Overview of the Sustainability Reporting Standards
The landscape of sustainability reporting standards and regulatory bodies has evolved over several decades, reflecting a growing recognition of the need for organizations to account for their environmental, social, and governance (ESG) impacts. The following are some key milestones in the development of these standards and bodies:
Global Reporting Initiative (GRI): The Global Reporting Initiative, founded in 1997, played a pioneering role in sustainability reporting. GRI developed a framework that provided guidance for organizations to disclose their ESG performance. The GRI Standards, launched in 2016, became widely adopted and are known for their comprehensive nature and stakeholder inclusiveness.
United Nations Global Compact (UNGC): Launched in 2000, the United Nations Global Compact is a voluntary initiative that encourages businesses to adopt sustainable and socially responsible policies. It provides a framework for companies to align their strategies and operations with ten principles related to human rights, labor, environment, and anti-corruption. The UNGC also encourages companies to report on their progress through its Communication on Progress (COP) mechanism.
Task Force on Climate-related Financial Disclosures (TCFD): Established in 2015 by the Financial Stability Board, the Task Force on Climate-related Financial Disclosures aims to improve climate-related financial reporting. The TCFD developed a set of recommendations that guide companies in disclosing climate-related risks and opportunities. Its framework helps organizations assess and disclose the financial implications of climate change on their business models.
Sustainability Accounting Standards Board (SASB): The Sustainability Accounting Standards Board, launched in 2011, focuses on industry-specific sustainability disclosure standards. SASB develops guidelines for organizations to report financially material ESG factors that are relevant to their industries. These standards enable companies to identify and communicate ESG risks and opportunities specific to their sectors.
International Integrated Reporting Council (IIRC): Formed in 2010, the International Integrated Reporting Council promotes integrated reporting, which emphasizes the connectivity between an organization's financial performance and its social, environmental, and governance context. Integrated reports aim to provide a more holistic view of a company's value creation by considering various capitals, such as financial, human, and natural capital.
Climate Disclosure Standards Board (CDSB): Established in 2007, the Climate Disclosure Standards Board focuses on enhancing climate-related disclosures in mainstream corporate reporting. CDSB developed the Climate Change Reporting Framework, which provides guidance for organizations to integrate climate-related information into their annual reports. The framework encourages companies to disclose climate-related risks and opportunities in a consistent and comparable manner. The framework has now been absorbed into the IFRS Foundation.
International Financial Reporting Standards (IFRS) Foundation: The International Financial Reporting Standards Foundation, known for setting accounting standards globally, recognized the need for sustainability reporting standards. As a response, the International Sustainability Standards Board (ISSB) was established in 2021 within the IFRS Foundation. ISSB has now developed the new globally accepted sustainability reporting framework IFRS 1 and 2, that complements existing financial reporting standards.
