ESG Frameworks: what are they and why do they matter?

04 November 2022 


ESG has historically been viewed as something for environmental and sustainability-focused businesses, however the advantages of ESG reporting span a much broader spectrum of metrics. From tracking good governance and reporting on things like business procedures and ethics to reviewing social responsibility across diversity, inclusion and human rights; companies are using ESG to monitor many aspects of their operations so they can provide transparency to investors, employees and customers.

While there is currently no standardised global requirement for companies to report on ESG performance, legislation and compliance is constantly evolving, which is why aligning to a framework can be vital for both compliance and enhancing business performance.

ESG ratings

Before we delve into the world of ESG frameworks, it’s beneficial to take a step back to understand ratings and how they work.

The easiest way to think of an ESG rating is to think in terms of a business credit rating. A credit rating assesses on a number of factors (such as risk and history), giving a credit score based on its assessment of the company. An ESG rating works in a similar way and is based on how well a company is doing across its environmental, social and governance performance (and how effectively it manages the risks across those three pillars).

Although ESG ratings are a relatively new thing, ranking and ratings are becoming increasingly important and they’re likely to be far more widely used and reliable in the future, meaning more businesses are beginning to look at their ESG strategies now so as to not get left behind.

In order to get an ESG rating, you need to be doing some form of reporting and to do this you need to be working within some form of ESG framework to understand which standards you’re working towards and whether you’re heading in the right direction for your ESG goals.

What frameworks are available?

There isn’t a one-size-fits-all framework (or standard) to align with but some of the most well-known frameworks include:

  • Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was created by the Financial Stability Board (FSB) and helps companies understand the kind of information they need to disclose to support investors and wider stakeholder, specifically looking at financial risks and opportunities associated with climate change.
  • The Global Reporting Initiative (GRI). The GRI “provides the world’s most widely used standards for sustainability reporting”.
  • The Sustainability Accounting Standards Board (SASB). The SASB guides disclosure between companies and investors, connecting them on the financial impacts of sustainability.
  • The Climate Disclosure Standards Board (CDSB). This international consortium of NGOs is committed to “advancing global mainstream financial reporting”. This and the other frameworks all have different and varied standards within them to aim towards – for example, SASB has 77 industry-specific standards.

The majority of organisations won’t simply follow one framework, instead cutting and pasting from multiple frameworks at the same time as they all provide different insights depending on the set up of your business.

How we can help

The most important thing is that you choose an ESG framework, or parts of multiple ESG frameworks that work for your company, the sector and the region you’re in, your budget and the skills and data at your disposal. There is little point in reporting on the wrong areas or interpreting the data incorrectly, and that’s where we can help.

Our team of expert advisors can help you understand the various frameworks, the metrics you should be reporting on and how you can use our technology platform, Sustainion, to carry out ESG reporting within the frameworks that are applicable to you and your business.

Sustainion supports all elements of ESG including environmental, economic, social, health and safety, and risk. The platform allows you to easily collect and aggregate data from a variety of sources across your business and your entire supply chain. This, combined with our advisory team, means we can make sure you’re not wasting valuable time collecting data or spending time trying to interpret complex data that isn’t relevant to your business and your ESG goals.

With our guidance you’ll be able to automatically map data against any relevant regulatory reporting requirements and standards across multiple frameworks. There’s no need to go and research every standard within every framework because it’s all done for you. So, you will only be reporting on areas that are relevant to your business. It really is that simple.

Our built-in data analytics provide you with complete visibility, simplified real-time report generation and alignment with your ESG and business strategies, allowing you to work towards a reporting structure that’s clear and easy to interpret with a fully traceable audit trail.

You’ll be able to calculate your ESG ratings through a fully configurable, intuitive user-interface allowing you to get on with the good stuff, like using Sustainion to highlight significant cost-benefits, boost productivity, minimise risk, attract investors and improve your business performance.

What’s more, our team will be there with you every step of the way.

Whether you’re just starting out or are further along in your ESG journey, our expertise coupled with the scalability of Sustainion will ensure we have the right solution for you. Get in touch today.

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