CEU Conference Summary: Inter-Relationships of Sustainability Reporting Programs

At our summer virtual conference, certified expert Brad Micheel, Senior Solutions Strategist, conducted the session “Inter-Relationships of Sustainability Reporting Programs,” where he identified key requirements of sustainability report frameworks and standards, highlighted the differences and similarities, and reviewed best practices for developing sustainability programs that satisfy standards and frameworks.

Read the summary below. You can also watch it on-demand and view the slide deck at your convenience!

Sustainability Reporting History

Sustainability reporting began in the 20th century with sustainable development, which is defined as keeping the “developing world” from making the same mistakes as the “developed world.” The history of the evolution:

• 1990s: It became a financial consideration along with a focus on social responsibility.
• 2000s: The emergence of reporting programs, such as Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), Company Sustainability Reports, and Corporate Social Responsibility (CSR) Reports.
• 2010s: There was a further push for the financial considerations of sustainability including the creation of Sustainability Accounting Standards Board (SASB).

Today, there is a massive consideration in financial markets, including investors demanding Environmental, Social, Governance (ESG) information. Additionally, there is mandatory reporting being established in the United Kingdom, New Zealand, and the European Union.

Sustainability Reporting Programs

• Greenhouse Gas (GHG) Protocol establishes comprehensive global standardized framework to measure and manage GHG emissions from private and public sector operations, value chains, and provide mitigation actions. In 2016, 92% of Fortune 500 companies responding to the CDP used GHG Protocol directly or indirectly. Their corporate accounting and reporting standard focuses on emissions. It includes Scope 1 (direct emissions), Scope 2 (indirect emissions), and Scope 3 (emissions as consequences of company activities). GHG Protocol does not require that you communicate your emissions information back to them.
• Science-based Target’s initiative (SBTi) helps to clearly define a pathway for companies to reduce GHG emissions. Targets are considered “science-based” if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement. There is an Excel-based tool for determining targets. SBTi is based on three methods: absolute emissions contraction, sectoral decarbonization approach, and economic intensity contraction.
• Task Force on Climate-related Financial Disclosures (TCFD) aims to develop recommendations for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting decisions. It is committed to market transparency and stability. It helps to identify several categories of risk, including changing weather patterns, and opportunities related to climate. This tool is adoptable by all organizations regardless of industry.
• CDP focuses on climate change, water security, and forests. CDP has collected thousands of reports from different global companies. It can help to protect and improve a company’s reputation via transparency of information. It also helps highlight best practices and benchmark against peers.
• GRI has a mission of enabling organizations to be transparent and take responsibility for their impacts. Through reporting, an organization can understand their impacts on people and the planet, identify and reduce risk, seize new opportunities, and act towards becoming a responsible, trusted organization. The standards are industry independent. If a standard does not apply to your industry, then you can state that the standard is not relevant.
• Value Reporting Foundation SASB Standards has a mission to establish and improve industry specific disclosure standards across financially material environment, social, and governance topics. They help to facilitate communication between companies and investors about decision-useful information. The five dimensions of sustainability are environment, social capital, human capital, business model and innovation, and leadership and governance.

Overall, the six standards request information that describe the organization’s operations, and they require numeric data and key metrics that are tracked over time. Additionally, they all aim to provide clear information to stakeholders. GHS Protocol defines key concepts that are referred to by most other GHG standards. It is important to choose standards that match your stakeholder’s interests. GRI has 34 topic-specific standards universally applied regardless of sector, while SASB has 77 industry-specific standards. If you are just getting started on your sustainability journey, start by building on the information that is already collected and reported, be clear and transparent with it, and set meaningful and achievable targets.

The Session Q&A

Q1: Does the future hold a single global standard, or will this continue to be a world with many different standards to choose from?
A1: I think it will continue to be a world with multiple different standards, however there will be some consolidation. There has already been consolidation with SASB and Value Reporting Foundation. Because it’s voluntary reporting we may see some alignment in terminology, but there will always be nuances that different organizations want to emphasize.

Q2: Is the US moving to any mandatory sustainability reporting?
A2: There is nothing mandatory yet. Nothing has been proposed in the Federal Register. What we are seeing is that any movement in the US is mostly coming from the Securities and Exchange Commission (SEC) as opposed to the EPA or OSHA.

Q3: How would I choose a standard or standards?
A3: It really comes down to looking at the stakeholders to whom you need to report. If you are reporting to be a good neighbor in the community and to the environment, then I think you should look to something like the GRI standards and CDP. They are more geared towards general public communication. If you are being asked a question from a financial perspective, such as people that may provide your company with financial capital, then I think you should look more towards a financial risk-based reporting.