ESG Sustainability Reporting

October 05, 2022

Companies communicate their performance and impacts on a broad variety of sustainability concerns, encompassing environmental, social, and governance dimensions, through sustainability reporting. It enables businesses to be more open about the threats and chances they face, providing stakeholders with a better understanding of performance outside of the bottom line.

For a sustainable global economy and a thriving society, trust in businesses and governments must be built and maintained. Businesses and governments make decisions every day that directly affect their stakeholders, such as those involving financial institutions, labour unions, civil society, citizens, and the degree of trust they have with them. The risks and possibilities associated with a variety of short- and long-term elements are frequently taken into account, and these decisions are rarely made only on the basis of financial information. These decision-making processes are increasingly incorporating sustainability-related themes. The organization can evaluate its plans and policies using the provided information, and it can also utilize it to make decisions like creating objectives and goals. This information is also useful to stakeholders. Investors, for instance, might review an organization's use of sustainable development in its strategy to identify financial risks and gauge its long-term success using the information provided. The information offered can also assist other information users, such as analysts, policymakers, and academics, in their research as well as in benchmarking and formulating policy.

A number of standards have arisen that allow a wide range of stakeholders to more efficiently review and compare sustainability reports as businesses around the world increasingly adopt sustainability reporting. Sustainability reporting is essential for organizations as it:
● increases awareness of opportunities and threats
● draws attention to the connection between financial and non-financial efficiency
● influences corporate strategies, long-term management strategy, and policy
● streamlines operations, cutting costs and boosting the effectiveness
● evaluates and benchmarks sustainability performance in relation to regulations, codes,
performance benchmarks, and activities that are undertaken voluntarily
● aids businesses in avoiding widely reported failures in governance, the environment, and society
● allows for internal and external performance comparisons between businesses and industries.
● reducing detrimental effects on the environment, society, and government, as well as enhancing brand loyalty and reputation;
● enabling external stakeholders to comprehend the full worth of the firm, along with its assets—both physical and immaterial;
● showing how aspirations for sustainable development have an impact on the organization.

GRI Standards The Global Reporting Initiative Standards are an interconnected modular system of standards. They enable organizations to report publicly on the impacts of their structured activities in a way that is transparent to stakeholders as well as other interested parties. The GRI Standards are the framework that has received the most acceptance globally. It has correlations to corporate social responsibility (CSR) reporting and other non-financial reporting strategies like triple bottom line reporting. The GRI Standards comprise of three series of Standards: 1. GRI Universal Standards The GRI Universal Standards apply to all organizations, and consist of the following: - GRI 1: Foundation 2021 (GRI 1) describes the goals of the GRI Standards, defines key ideas, and provides guidance on how to apply the Standards. It outlines the conditions that a company must meet in order to provide reports that adhere to the GRI Standards. Additionally, it outlines the standards for high-quality reporting, including verifiability, accuracy, and balance. - GRI 2: General Disclosures 2021 (GRI 2) provides disclosures relating to information on an organization's governance, strategy, policies, procedures, activities, and engagement with stakeholders. These provide information on the scope and profile of the organization and aid in setting the scene for comprehending its effects.

GRI 2: General Disclosures 2021 (GRI 2) provides disclosures relating to information on an organization's governance, strategy, policies, procedures, activities, and engagement with stakeholders. These provide information on the scope and profile of the organization and aid in setting the scene for comprehending its effects.

GRI 3: Material Topics 2021 (GRI 3) defines how to apply the Sector Standards to determine an organization's material issues, or the topics that are most pertinent to its impacts. Additionally, it includes disclosures of the organization's list of material topics, how those topics were selected, and how each is managed.

GRI Sector Standards The GRI Sector Standards are designed to improve the accuracy, consistency, and comprehensiveness of organizational reporting. Standards will be developed for 40 sectors, starting with those with the highest impact, such as oil and gas, agriculture, aquaculture, and fishing. The Standards include a list of subjects that are likely to be important to the majority of organizations in a particular industry, together with the appropriate disclosures that should be made. An organization is required ('mandated') to utilize an applicable Sector Standard when reporting in accordance with the GRI Standards.

A summary of the sector's aspects, including the activities and commercial ties that may support its impacts, is provided in the first section of each Sector Standard. The likely material subjects for the sector are then listed in the Standard's main section. The most significant effects connected to the industry are outlined in this part, issue by topic. The necessary disclosures in the Topic Standards for the organization to report are referenced in each topic description. When the disclosures from the Issue Standard do not adequately describe the organization's impacts on the topic, for instance, a Sector Standard may also specify additional disclosures that are not in a Topic Standard. The subjects and related disclosures are chosen based on sector-specific data, global laws, and recommendations from industry professionals. As a result, they represent the hopes of many different stakeholders regarding the control of impacts on the industry.

GRI Topic Standards The GRI Topic Standards include disclosures for presenting topical information. Examples include tax, occupational health and safety, and waste standards. Each Standard contains an overview of the subject, disclosures that are specific to the subject, and information on how an organization manages the impacts that are related to it. An organization chooses the Topic Standards that are appropriate for the chosen material themes and applies them to reporting.

The Sustainability Accounting Standards Board (SASB) is an ESG guidance framework that establishes guidelines for how businesses should disclose information on sustainability that is financially significant to investors. Understanding materiality, or who the framework's intended audience is and how they plan to use the information given, is crucial to making the distinction between guidance and reporting frameworks (to make financial decisions, compare performance between organizations, or to ensure compliance). According to the SASB Materiality Map - which is used to explain how investors across multiple asset classes use the standards, in total, SASB standards monitor ESG problems and performance on 26 general sustainability issues like Environment, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance that manifest across 77 industries.

SASB requests that businesses highlight particular disclosures and offer advice on the best ways to present such Environmental, Social, and Governance topics using standardized formatting. The requirements set forth by SASB are concentrated on the information that should be revealed; nevertheless, they simply offer suggestions on where or how to disseminate the ESG-related data. The goal of this flexibility is to give businesses the freedom to disclose these data points in a way that works best for their business, whether that be through annual reports, registration documents, or other financial reporting methods. Numerous quantitative parameters related to GHG emissions, air quality, energy management, water and wastewater, waste and hazardous materials, and ecological impacts are covered by SASB's environmental reporting. Each category becomes more specific, requesting the disclosure of information regarding Scope 1, Scope 2, and Scope 3 emissions, calculated over the entire company's portfolio. The SASB framework is designed to assist businesses in communicating their external ESG impacts in terms that investors, debt holders, and internal financial stakeholders can understand. The Global Reporting Initiative (GRI), which provides more broadly relevant information for reporting to stakeholders who are not merely financial, is the most comparable to SASB of the various ESG reporting frameworks. The sustainability elements that are important to the short-, medium-, and long-term enterprise value are referred to as financial materiality when used in the context of sustainability information.

Companies frequently use the CDP voluntary reporting framework to inform their stakeholders about environmental issues (investors, employees, and customers). Reporting is finished once a year, with submissions due in July and the site opening in April of each year. This information is kept up to date by CDP, which claims to have the largest collection of self-reported environmental data in the world. Currently, CDP provides three questionnaires for businesses (Climate Change, Water Security, and Forests). Different methods are used to score each of them. Along with broad inquiries, the questionnaires target high-impact industries with questions that are industry-specific. Accredited scoring partners that have received training from CDP score the questionnaires for CDP. In 2003, there were only a few hundred CDP reporters. Since that time, the quantity of reports has increased greatly, if not dramatically. According to this graph, over 9,617 businesses disclosed their environmental indicators using the CDP framework in 2020. Organizations must respond to a lengthy list of questions as part of CDP. In 2021 this took the shape of an 88-page paper with over 200 questions. It takes a lot of work to compile the necessary data and respond to a CDP questionnaire. A mix of qualitative and quantitative questions are present in the CDP Climate Change questionnaire. Software for sustainability reporting is very effective at assisting responses to inquiries that call for numerical data. The software can make estimating emissions easier, especially when utilizing the mandatory market-based method to calculate Scope 2 emissions. It can also be helpful for keeping track of a library of emissions factors that are used to determine emission intensity, absolute emissions (Scope 1, Scope 2 location-based, Scope 2 market-based, and Scope 3), and it can split emissions by nation/region, group, facility, and activity.

Global Real Estate Sustainability Benchmark (GRESB) GRESB is a global tool used predominately by investors to assess the sustainability performance of real estate and infrastructure portfolios and assets worldwide. The sustainability performance of a company's real assets is materially revealed by GRESB Assessments for investors and asset managers. These performance insights are in line with global reporting systems like the GRI and the Principles for Responsible Investment (PRI). Participants in the assessment receive communication tools to interact with investors, comparative business intelligence on how they compare to their peers, and a roadmap outlining steps they can take to enhance their ESG performance. In order to connect with managers, improve the sustainability performance of their investment portfolios, and get ready for ever-more stringent ESG obligations, investors use the ESG data and analytical tools developed by GRESB. Companies are required by the GRESB Real Estate Assessment to compile asset level data, such as green building certification, stakeholder participation, and automatic asset categorization, and to disclose environmental performance data at the asset level. Data collection and quality control for performance indicator data for energy, emissions, waste, and water are managed with the aid of sustainability software. The energy, emissions, water, and waste data necessary to submit the GRESB - Asset Level Data Spreadsheet can be collected and extracted by sustainability data management and reporting systems that are GRESB data partners. This will facilitate and expedite the submission of the GRESB data needed to complete the GRESB Assessment's Performance Indicators section.

Dow Jones Sustainability Index (DJSI) & the SAM assessment tool The Dow Jones Sustainability Index tracks the performance of the world’s leading companies in terms of economic, environmental and social criteria and is used by investors who wish to jointly assess financial and ESG aspects of company performance. Based on the firms' Total Sustainability Scores from the yearly SAM Corporate Sustainability Assessment, the DJSI implements a clear, rules-based component selection method (CSA). The CSA compares businesses from 61 different industries using surveys that ask between 80 and 100 questions about various industries as a whole. For around 20 financially significant sustainability criteria across economic, environmental, and social aspects, companies obtain scores ranging from 0 to 100 and percentile rankings. The Dow Jones Sustainability Index family only includes the top-ranked businesses in each industry. By focusing their investments on more sustainable companies, investors in these indexes can obtain exposure to the performance potential of well-known common variables like low volatility, dividend yield, value, or momentum without taking on ESG-related risks in their portfolios. Depending on what is pertinent to their business, companies who report to DJSI will be obliged to react to a number of financially important economic, environmental, and social dimensions. DJSI has the right to request information from businesses regarding their Scope 1, Scope 2, and Scope 3 greenhouse gas emissions, total energy use (renewable and non-renewable), water and waste use, and climate-related targets including energy intensity. DJSI respondents may determine Scope 2 emissions using a market-based or a location-based approach. Sustainability reporting software makes it easier to acquire aggregated, auditable data for reporting sustainability dimensions and monitoring their advancement over time.

❖ Streamlined Energy & Carbon Reporting Framework (SECR) The UK government provides instructions for organizations required to report their energy use, greenhouse gas emissions, and related data in the form of the Streamlined Energy and Carbon Reporting framework. The Carbon Reduction Commitment (CRC) Energy Efficiency Scheme was replaced by the SECR, which went into force on April 1, 2019. Large unquoted firms and limited liability partnerships are given new reporting demands, while the reporting standards for quoted corporations are expanded and built upon (LLPs). Additionally, it may assist all companies with their voluntary reporting on a variety of environmental issues, including the use of key performance indicators and greenhouse gas reporting (KPIs). According to the Climate Change Act of 2008, the SECR is crucial to the UK's strategy for increasing energy efficiency and lowering carbon dioxide emissions. According to the new framework, about 11,900 UK-incorporated businesses will be required to report on their energy and carbon emissions. Quoted businesses that file reports with SECR are required to provide information on their energy consumption, global scope 1 and 2 greenhouse gas emissions (measured in tonnes of carbon dioxide equivalent), and at least one emissions intensity metric of their choice for themost recent and prior fiscal years. While still optional, Scope 3 emissions are advised for sources of emissions deemed important. Organizations should deliberate on the steps 1–7, which give them the knowledge to aid in creating their environmental strategy.
● ACTION 1 Intensity ratios
● ACTION 2 Setting a base year
● ACTION 3 Setting a target
● ACTION 4 Verification & assurance
● ACTION 5 Your upstream supply chain
● ACTION 6 Downstream impacts
● ACTION 7 Business continuity and environmental risks
❖ National Greenhouse and Energy Reporting (NGER) - Australia
The Australian national framework for reporting and communicating firm information on greenhouse gas emissions, energy output, and the energy consumption is known as the National Greenhouse and Energy Reporting (NGER) program. The National Greenhouse and Energy Reporting Act of 2007 (NGER Act) created it, and the Clean Energy Regulator is in charge of overseeing it. Carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulfur hexafluoride (SF6), and specific types of hydrofluorocarbons and perfluorocarbons are among the greenhouse gases that NGERs collects emissions-related data on. The Clean Energy Regulator must be able to determine whether the corporation or individual has complied with its duties under the NGER Act by accessing sufficient records of operations. During an external audit, this information can be utilized to confirm the applicability, thoroughness, consistency, transparency, and accuracy of reported data. Assisting with accurate GHG emission estimates (connecting back to the source) and helping to categorize this data for submission directly to the NGER Emissions and Energy Reporting System, NGERs compliant sustainability software automates the collection of pertinent data (EERS).

❖ Sustainable Finance Disclosure Regulation (SFDR) The EU's SFDR program intends to harmonize the reporting of ESG parameters for financial products and companies. By requiring reporters to produce a Principal Adverse Impact (PAI) statement outlining their disclosures, it accomplishes this. To lay the groundwork for the EU sustainable finance agenda, SFDR will work in tandem with the EU taxonomy and the planned EU Corporate Sustainability Reporting Directive (CSRD). Financial institutions are required to provide a variety of quantitative indicators under the SFDR's PAI statement, including weighted averages of several ESG parameters for their investments as well as emissions from their own operations. In actuality, this implies that businesses must disclose the percentage of activity funded by their investors. The financial body reports 20 metric tons of hazardous waste in its SFDR PAI, for instance, if an investee creates 100 metric tons of hazardous waste and the financial body owns 20% of the stock in the investee.Data collection across a range of investees is required under the SFDR's Principle Adverse Impact (PAI) statement, which can be difficult to do while trying to maintain an audit trail and while gathering significant volumes of various data. ESG software makes it simple to gather data from various stakeholders because it collects information in one place before it is used in final calculations. Workflow capabilities in sustainability software also let stakeholders submit their data to a single platform and monitor information requests.

❖ National Built Environment Ratings Scheme (NABERS) – Australia Using a 6 star scale, NABERS helps Australian building owners understand how their asset impacts the environment, and helps prospective tenants understand how energy efficient their leased space is. NABERS evaluates a building's or tenancy's performance against benchmarks that reflect the performance of other comparable buildings in the same area. An impartial assessor uses 12 months of actual, quantifiable data about a building or tenancy, such as energy and water bills or waste usage data, as the basis for calculating NABERS scores. Currently, commercial office buildings, tenancies, hotels, shopping malls, and data centres all have NABERS ratings available. NABERS has a proposal to include all significant building types in public in 2019. A NABERS rating is required for all structures larger than 10,000 square feet for sale or leasing in Australia under the Building Energy Efficiency Disclosure Act. Governments must rent space from landlords in structures with ratings of 4.5 or better. Based on reliable information from a building or tenancy, such as energy or water bills, NABERS Energy and Water ratings are created.Utilizing the official NABERS algorithm, sustainability reporting software that is "NABERS Equipped" can be used to view and calculate indicative NABERS Office Energy and Water ratings for a portfolio of buildings and locations. Based on reliable information from a building or tenancy, such as energy or water bills, NABERS Energy and Water ratings are created. It is possible to view and calculate indicative NABERS Office Energy and Water ratings using the official NABERS algorithm with sustainability reporting software that is "NABERS Equipped" and has obtained a license from NSW OEH. This software can collect all accredited NABERS rating information and auditing documentation in one location for a portfolio of buildings and locations. In addition, NABERS-equipped software can track and monitor the trend of NABERS Office Indicative ratings month by month and compare it to the most recent accredited rating, review consumption trend month by month and consumption intensity by rated area, store and review NABERS-related consumption and building data in a central location for easy access by NABERS Assessors, and enable stakeholders to review and report NABERS Portfolio Average accredited ratings. These qualities could benefit businesses.

❖ Latest Developments in the ESG Reporting Landscape Longtime advocates of clarity and simplification in the sustainability disclosure landscape include businesses and investors. Significant progress has been made toward this essential clarity as a result of several milestones during the last few years. Collaboration between top framework suppliers and standard-setters was the first achievement. A united vision for a complete corporate reporting system that integrates financial accounting and sustainability disclosure was unveiled by CDP, CDSB, GRI, IIRC, and SASB in September 2020. In the joint statement, it was explained how current sustainability frameworks and standards can be used in conjunction with GAAP (Financial GAAP). Varied frameworks and standards offer complementary approaches, as stated in this joint statement, because they arecreated for distinct sets of stakeholders and based on various definitions of materiality. Companies can create a disclosure system that is specifically suited to the requirements of their stakeholders by using several frameworks and standards as building pieces. The second milestone was a joint work plan that was unveiled in July 2020 to demonstrate how businesses can utilize GRI and SASB Standards in tandem. In order to meet the needs of the majority of investors and other sources of financial capital, SASB Standards concentrate on sustainability concerns that are anticipated to have a financially meaningful impact on the company. A wide range of stakeholders, including investors, are interested in GRI Standards' focus on the economic, environmental, and social aspects of a company in relation to sustainable development. The merger of the IIRC and SASB into the Value Reporting Foundation, which was announced in November 2020 and completed in June 2021, was the third significant accomplishment. This merger was a significant step forward in the effort to streamline the corporate reporting environment by combining two organizations that were committed to generating enterprise value. The Value Reporting Foundation was a multinational non-profit that provided a wide range of tools, such as the SASB Standards, the Integrated Reporting Framework, and the Integrated Thinking Principles. The fourth milestone was the IFRS Foundation's decision to merge with the Value Reporting Foundation and the Carbon Disclosure Standards Board (CDSB) in order to help establish the International Sustainability Standards Board (ISSB), which was announced in November 2021. The goal of the ISSB is to develop a comprehensive global baseline of sustainability disclosure to meet investors' information needs. In August 2022, the VRF merged with the IFRS Foundation. The work of the TCFD, CDSB, SASB, and the Framework is built upon by the ISSB. The ISSB has directly addressed market demand for streamlining the sustainability disclosure landscape by significantly including TCFD and SASB in its exposure draft rules. CONCLUSION ESG reporting is a complicated area, and firms who must submit reports to several frameworks may find it difficult to remain on top of regulations. Organizations can maintain their lead, though, provided they use a systematic strategy. Choosing the best reporting frameworks is the first step. Although important, this choice is not always straightforward. Applying a variety of analytical lenses is one strategy for approaching the selection process. These lenses could consist of: - Where your company can have the biggest impact on the supply chain, taking into account materiality evaluations, impact, and influence. - expectations of various stakeholders with regard to preferred ESG reporting frameworks and how they will use disclosed information. - Geographical context and particular ESG frameworks' applicability to specific regions and legal systems - Sector preference, since companies in one industry may discover that various ESG reporting standards are naturally aligned with that industry. - Key performance indicators (KPIs) related to the environment, society, governance, carbon, energy, waste, and water are covered by each ESG reporting framework. Assuring a robust database to work from, one that adheres to the same criteria as financial data, is also a part of this examination. Sound ESG reporting practices are centred on accuracy, automation, and auditability, and organizations that adopt these practices through a specialized ESG reporting solution.