Definitions and distinctions
It is abundantly clear nowadays that ESG reporting is a must have for all firms, regardless of the industry or sector they operate in. ESG reporting can be seen as a differentiator for forward-thinking firms, giving them the opportunity to stand out among their peers, and to secure more financing. There are so many frameworks and standards out there to report against, it can be hard to cut through the noise and figure out who is asking for what data, from whom, and what is the best fit for your organisation.
The most important distinction to start with is between a sustainability reporting framework, a standard, and an initiative. Regulations are much easier to identify as they are mandated by a recognised authority or regulatory body. Regulations are not dealt with in this chapter and are outlined in more detail in the regulatory mapping section of this guide. However, it is important to draw the line between regulations and other voluntary disclosure regimes.
The GRI distinguishes between standards and frameworks as follows:
Standards | Frameworks |
Standards are the agreed level of quality requirements, that people think is acceptable for reporting entities to meet. A standard can be thought of as containing specific and detailed criteria or metrics of 'what' should be reported on each topic. In general, corporate reporting standards have in common the following features:
generating a stronger basis for the information being asked. | Frameworks, on the other hand, provide the 'frame' to contextualise information. Frameworks are those that are normally put into practice in the absence of well-defined standards. A framework allows for flexibility in defining the direction, but not the method itself. A framework can be thought of as a set of principles providing guidance and shaping people's thoughts on how to think about a certain topic, but miss a defined reporting obligation. |
Figure 31: GRI definitions of frameworks versus standards (Source: The GRI Perspective - ESG standards, frameworks and everything in between (10 March 2022))
Put differently:
Standards | Frameworks |
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Frameworks and standards are complementary and are designed to be used together. Standards make frameworks actionable, ensuring comparable, consistent, and reliable disclosure.
One important differentiating factor in the context of frameworks is that of industry groupings. Every reporting framework, or standard, will place a different emphasis on different ESG pillars and different categories within these pillars, but they will also often change what the pillars are composed of depending on the industry to which the organisation being assessed belongs. For example, asking a small car rental firm to provide the same data as a large mining corporation is pointless, as some of that data will be irrelevant to its operations. As such, many frameworks specify exactly how an industry might expect to report on a particular general category with a more industry-specific disclosure topic that asks for the data most relevant to the organisation being assessed.
It is essential for companies to understand their own industry grouping, since it affects benchmarking further down the line, as well as what questions are asked early on in the process and thus could arguably significantly reduce or increase an organisation’s value. Some distinctions can be clear cut – for the vast majority of organisations, the industry grouping they belong to is clear, and for many so is the industry of which they are a part. However, it is very possible that, in some rare cases, there is no clear industry that fits best. In this instance, it may be helpful to consult the industry-specific disclosure topics for each metric and to consider which disclosure topics line up the best with what is relevant to your organisation.
An Initiative or Coalition is a collection of players who self-assemble under an independent governing body and organize towards a shared objective. In the context of this guide, the highlighted initiatives promote or encourage signatories to perform according to the E, S, and G themes that have been mutually decided as most significant. Initiatives such as the United Nations Principles for Responsible Investment (“UNPRI”) rally members to understand the implications of ESG factors and how to embed these factors into their investment decisions.
Regulations are rules created, imposed, and maintained by a regulatory body or authority. These rules mandate the level of commitment and disclosure for firms that are within the regulatory purview of the authority.
For example, the Sustainable Finance Disclosure Regulation (“SFDR”) is an EU legislation that provides for greater transparency concerning the degree of sustainability of financial products and asks financial market participants for detailed reporting on how they approach and mitigate the possible negative impacts that their assets and investments might have on the environment. Not only is it the first of its kind as ESG-related regulation – it is certainly the most developed and extensive example yet – but it is also causing a change in the way many organisations approach their ESG policy. As this is a mandatory framework within the EU, SFDR is quickly increasing its market share as the basis of many ESG policies: simply put, for an organisation that must comply with the SFDR reporting methodology, it is simpler and easier to understand its entire ESG policy using the same framework than it is to ‘translate’ between other regimes.
Explore all sections of the guide
Reporting template and tools
ESG reporting template ESG life cycle tool SFDR tools TCFD tools Timelines
Mapping of voluntary frameworks and standards
Definitions and distinctions Who is who Scope of information
Deep dive for VCs and investors
ESG reporting from a VC perspective ESG reporting from an investor perspective
