The Order in Disorder: Aligning Environmental Disclosure frameworks

Published 17th May 2018 by Lucy Haines

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The sustainability disclosure landscape is a bit of a maze. Fragmented and at times confusing, it has been a source of frustration to many organisations seeking direction on their sustainability reporting choices. However, there is growing endeavour to create alignment and comparability across the frameworks, and the arrival of the TCFD recommendations last year has strengthened the call for continuity.

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: CDP, the Dow Jones Sustainability Index (DJSI), the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the UN Sustainable Development Goals (SDGs) to name just a small handful. 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.

Although each tool varies in purpose, audience and requirements, it is difficult to keep track of what information is required where. Businesses are feeling increasing pressure with 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 what is most appropriate. For example, the GRI and SDGs are intended for global audiences, the DJSI, CDP and SASB are investor focused. DJSI and GRI span a wide range of Environmental, Sustainability and Governance (ESG) issues, whereas CDP focuses exclusively on climate change, water and forests. 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.

CDP has incorporated more alignment with the DJSI, GRI, SASB and the SDGs in its 2018 updates. For example, their new 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.

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.

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.

Last June 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. 100 businesses, including Unilever, Barclays and HSBC, have all committed to implementing the TCFD’s recommendations demonstrating that large organisations are answering the call to bring sustainability into the core of their business.

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.

 

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