Merging of ESG standards and frameworks eases reporting struggles for companies

As companies began to integrate environmental, social and governance matters into their business operations, an unexpected problem arose: what exactly to measure to determine how companies are doing on their sustainability goals. A glut of frameworks filled the market — varying in overlap and content — without consensus from business-to-business or industry-to-industry, let alone other countries, on which to use. 

Until a global consensus is reached, or individual countries implement clear regulatory guidelines, companies are left on their own to parse through which metrics they believe should be captured for their stakeholders. Data one company considers operationally critical could be a non-factor for another.

“In the world of ESG, there's so many subcategories when it comes to the framework and the standards,” David Ly, CEO of surveillance tech firm Iveda, told ESG Dive. “Every country is different. There's no consistency yet for reasons of priority.”

Clarity may be on the horizon, as major standard setters have combined in recent years to form the International Sustainability Standards Board and released a set of inaugural reporting standards in July 2023. Overseen by the International Finance Reporting Standards Foundation, the release included frameworks for companies to report climate-risks and other sustainability-related factors that could pose financial risks.

Support is starting to grow for adoption of the standards, as countries begin declaring voluntary adoption of the standards that go into effect in 2024, with compulsory adoption beginning in 2026. The frameworks also received additional endorsements from global market regulators like the International Organization of Securities Commissions, whose membership includes 95% of global securities market regulators.

“This is a critical moment in advancing IOSCO’s goal of improving climate-risk disclosure for investors,” IOSCO Chair Jean-Paul Servais said when announcing the endorsement in July. “ISSB conducted a robust process and have concluded that these standards serve as an effective and proportionate global framework of investor-focused disclosures on sustainability- and climate-related risks and opportunities.”

Reducing fragmentation

Companies looking for best practices for reporting sustainability or climate risks in the past noted difficulties deciphering what is required of them. The ISSB’s creation in 2021 sought to solve that after IFRS members expressed a demand for an organization that could develop a global framework.

IFRS was established in 2001 to create global accounting standards, so its members believed it would be uniquely prepared to bring the work of multiple organizations under one umbrella. 

The new board absorbed the UK’s Climate Disclosure Standards Board, founded in 2007; the U.S.-based Value Reporting Foundation and its Sustainability Accounting Standards Board, founded in 2011; the International Integrated Reporting Framework, founded in 2013; and the Task Force for Climate-Related Financial Disclosures, founded in 2015 by the Switzerland-based Financial Stability Board. 

Each had a number of businesses voluntarily use their framework, but created a disparate landscape for companies to navigate. 

ISSB’s inaugural standards worked to integrate and distill the frameworks, along with metrics from the World Economic Forum, into a single baseline for companies to report sustainability and climate risks that pose a material risk. The board has also taken on oversight accountability for the companies who previously abided by the prior standards, most recently putting TCFD’s portfolio under its wings.

“By consolidating and inheriting the resources of other investor-focused initiatives … ISSB has been able to reduce fragmentation and align international support for a global baseline of sustainability-related financial disclosures from a broad range of stakeholders,” ISSB Vice Chair Sue Lloyd told the Association of German Banks in August.

The July release included the IFRS S1 standards for sustainability-related disclosures and the IFRS S2 standards for climate-related disclosures.

The S1 standards include disclosure requirements for the governance processes, strategies and performance dealing with sustainability risks that could “reasonably” affect a company’s cash flow. The disclosure framework also requires companies to explain how they monitor and assess sustainability risks.

The IFRS S2 standards, which work in concert with the IFRS S1, are more narrowly focused on climate risks to a company’s bottom line. The standards require companies to disclose their scope 1, scope 2 and scope 3 greenhouse gas emissions, as well any targets they set or are required by law related to climate change.

The framework also requires companies to disclose the amount and percentage of assets or activities it engages in that are vulnerable to physical climate or climate transition risks; how much of its assets and activities align with climate initiatives and how it invests in climate risks mitigation and opportunities.

“The effective implementation and application of [ISSB’s reporting frameworks] is critical to delivering the global baseline of sustainability-related disclosures for capital markets and ensuring that the information provided is of a high quality and comparable,” IFRS said in educational material supporting implementation of the two standards.

‘These decisions can change over time’

Now ISSB has to get the message out and sell companies and governments on why their framework should be the global gold standard — or at least the basis for other frameworks.

The standards’ announcement was endorsed by several groups in the global financial community, including IOSCO; the Financial Stability Board, who established the TCFD; and leaders of the G20 and G7 intergovernmental forums.

Chris Fidler, head of industry codes and standards for the CFA Institute, told ESG Dive that while the ISSB has gained a lot of global support, it still has detractors. An issue for some, according to Fidler, is ISSB’s focus on providing a framework based around the information they believe is material to investors and their portfolio decisions, whereas other frameworks have looked to parse out what information would be beneficial for a broader set of stakeholders. What metrics fall into which category depends on your perspective.

“If your lens is, ‘I'm making an investment … and I have a time horizon of five years and my goal is to get dividends or capital appreciation,’ then you will use that to determine whether or not information is relevant to your goals,” Fidler said. “If you're a policymaker, and your job is to take care of society as a whole, you will have a much different perspective.”

“It's also dynamic,” he added. “These decisions can change over time. Just because something was material yesterday doesn't mean it will be tomorrow and vice versa.”

The Global Sustainability Standards Board’s Global Reporting Initiative framework looks to provide that broader perspective and, as of October 2022, was the most widely used sustainability reporting framework, according to KPMG. More than 10,000 organizations across over 100 countries, including 78% of the world’s 250 largest companies by revenue, use GRI’s reporting framework.

The framework uses a modular system of universal, sector- and issue-specific standards. It’s currently building out topic standards on biodiversity, labor, climate change, pollution and economic impacts over the course of 2024, according to a presentation GSSB Chair Carol Adams gave to ISSB in October 2023.

Rather than look to compete over market share, ISSB and GRI signed a March 2022 memorandum to coordinate and align their activities. If companies want to use ISSB’s standards to disclose their company’s sustainability risks to investors, the GRI’s standards can work in conjunction to broaden disclosure to a broader audience.

“GSSB is committed to cooperating with global, national, and other jurisdictional standard-setting bodies to ensure complementarity and interoperability between standards,” GSSB’s two-year work plan says. “[T]his cooperation may take the form of coordinating work programs, joint standard-setting, or the development of guidance materials, including mapping or linkage documents, to explain the complementarity and alignment between standards.”

Some governments and localities have signaled a willingness to align local measures broadly with ISSB’s sustainability standards. The European Commission has confirmed that ISSB’s standards have a “high degree of alignment” with the E.U.'s new climate reporting standards. Meanwhile, Nigeria, Singapore, Brazil, Hong Kong, Japan, Canada, the United Kingdom and Australia have all begun considering what adoption might look like in their jurisdictions, ISSB Chair Emmanuel Faber said in a September 2023 podcast. 

“Now that our standards are out, the international perspective on their application is just going to be critical at that moment where we're finalizing our adoption strategy and where we need to focus our efforts to support those jurisdictions in their own journey,” Faber said.

Brazil recently took it a step further, announcing it will incorporate ISSB’s standards into its regulations on a voluntary basis starting in January 2024, with it becoming mandatory by 2026. On the same podcast, Faber said the organization expects to release its adoption roadmap by the end of the 2023 calendar year.

As far as the U.S. is concerned, Securities and Exchange Commission Chair Gary Gensler has said his office would consult with ISSB when crafting the SEC’s climate disclosure rule, but would ultimately go its own way. That rule was scheduled to be finalized in October 2023, but no timeline was been given. Gensler, however, believes that the investment sector needs mandatory disclosures to have the information it needs.

“I believe it’s with mandatory disclosures that investors can benefit from that consistency and comparability,” Gensler said in 2021. “When disclosures remain voluntary, it can lead to a wide range of inconsistent disclosures.

The Task Force for Climate-related Financial Disclosures issued its sixth and final progress report in October 2023, and said 19 global jurisdictions accounting for 60% of the global GDP have proposed or finalized climate disclosure requirements that align with TCFD’s framework.

The group, using artificial intelligence technology, found that 58% of companies disclosed information aligning with at least five of TCFD’s recommended disclosures in 2022, up from 18% in 2020, according to an analysis of public company reports from 2020-22. Only 4% of companies had disclosures that aligned with all 11 of TCFD’s recommendations. 

The International Sustainability Standards Board absorbed the task force in 2021, and will assume responsibilities for TCFD reporting companies as part of its growing portfolio.  

TCFD, which was formed in 2015 by the Switzerland-based Financial Stability Board, disbanded in conjunction with the release of this report, believing their mission culminated with the release of ISSB’s inaugural standards in July, which incorporated their work into its framework. TCFD said it was encouraged by how companies have progressed in climate disclosures and believes its recommendations helped drive that push. 

The report found that 97 of the world’s 100 largest companies have either declared support or reported in line with the task force’s recommendations, or both. Additionally, over 80% of the largest asset managers and 50% of the largest asset owners reported in line with at least one of the 11 TCFD recommended disclosures.

“The Task Force on Climate-related Financial Disclosures has been instrumental in advancing consistent climate-related financial disclosures around the world,” FSB Chair Klass Knot said in a release. “Its recommendations serve as the basis upon which the ISSB and various jurisdictions have built disclosure requirements.”

The group found that between 2020-22, the percentage of companies that reported on climate risks or opportunities, board oversight and climate targets significantly increased. In 2022, 62% of analyzed companies reported on climate risks and opportunities; 64% reported on board oversight; and 66% reported climate-related targets, up from 36%, 39% and 42%, respectively.

However, TCFD also noted that not enough companies were sharing useful information about how their businesses could be impacted by climate change, which could hinder efforts to assess and price climate risks. The report found just 25% disclose how they integrate climate-related risks into their overall risk management framework, though that stat is up from 11% in 2020.

[A]lthough companies continue to make progress in their disclosures, significant gaps in data remain,” TCFD Chair Michael Bloomberg said in a letter to Knot. “In particular, reporting the impact of climate change on companies’ businesses, strategies, and financial planning is still lagging behind.”

Though the group’s work is drawing to a close, it announced it will create a free, public and global repository of climate-transition related data. The Net-Zero Data Public Utility will provide a central source of emissions and target data, a move Bloomberg described as a “major step forward in the comparability and availability of data.”

ISSB’s assumption of reporting oversight completes its absorption of TCFD’s work. The group, backed by the International Financial Reporting Standards Board, announced at its inception that TCFD’s climate reporting framework would be incorporated into the sustainability and climate disclosure standards. 

With various global governments and jurisdictions — including the European Union, United Kingdom and Japan — signaling alignment or incorporation of the ISSB’s standards, other disclosure platforms are also coming aboard. 

The environmental disclosure platform and climate research firm CDP announced in October 2023 it will align its disclosure questionnaire with the ISSB’s standards starting 2024. The platform also said it had a record 23,000 companies disclosing through the platform.

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• Government regulation and consumer preferences are putting pressure on companies to advance sustainability in their supply chains.
• To measure progress toward sustainability goals, enterprises need to track and report on key environmental sustainability metrics.
• Modern ESG software platforms integrate data sources and supplier sustainability ratings, making it easier to act on sustainability.

In today's world, consumers and businesses alike are increasingly focused on environmental responsibility. Procurement and supply chain play a critical role in ensuring a company's operations are sustainable and minimize environmental impact.

But how do you measure progress and identify areas for improvement? Here's a comprehensive guide to essential environmental sustainability metrics that procurement and supply chain professionals should monitor and track.

Building a Sustainable Foundation: Inventory and Goal-Setting

It's crucial to start by establishing a baseline understanding of your company's environmental footprint. This involves taking an inventory of your current practices. Collaborate with different departments to analyze utility bills, waste disposal records, and transportation data. This initial assessment paints a clear picture of your resource consumption and emissions.

With this knowledge, set clear and measurable environmental goals aligned with your industry and resources. Consider factors like industry best practices and your company's long-term sustainability vision.

Turning Data into Action: Capturing and Tracking Metrics

Once you have a roadmap, it's time to gather the data needed to track your progress. ESG software platforms designed to capture and track sustainability metrics can help you report and take action on opportunities to improve your enterprise’s carbon footprint and point you toward more sustainable suppliers based on ratings from organizations like EcoVadis or CDP.

Some Key Performance Indicators (KPIs) for Environmental Sustainability

Now that you have a data collection system in place, let's explore some key environmental sustainability metrics and KPIs (Key Performance Indicators) relevant to procurement and supply chain functions:

Energy Consumption

Energy Intensity (kWh/unit of output): This KPI tracks energy efficiency across your supply chain. By monitoring how much energy is used per unit of product produced, you can identify areas for improvement, such as optimizing transportation routes or partnering with suppliers who utilize renewable energy sources.

Percentage of Renewable Energy Used: This metric measures your progress towards using cleaner energy sources within your supply chain. Partnering with suppliers who invest in renewable energy solutions can significantly reduce your company's overall carbon footprint.

Water Usage

Water Withdrawal per Unit of Output (m³/unit): This KPI helps track water efficiency throughout your supply chain. Analyzing water usage can reveal opportunities for conservation, such as implementing water-saving technologies or collaborating with suppliers to reduce water usage in their production processes.

Percentage of Wastewater Treated: Responsible wastewater management is crucial. This metric indicates how effectively wastewater is treated before being released back into the environment. Partnering with suppliers who have robust wastewater treatment systems demonstrates your commitment to responsible water management.

Greenhouse Gas Emissions (GHG)

Total Carbon Footprint (tons CO2e): This metric provides a comprehensive picture of your company's total climate impact, encompassing emissions generated throughout your supply chain.

Reduction in Carbon Emissions Compared to Baseline: Track your progress towards achieving your emissions reduction goals. This helps you assess the effectiveness of your sustainability initiatives and identify areas for further optimization.

Waste Generation and Diversion

Waste Generation per Unit of Output (kg/unit): This KPI reveals how efficiently materials are utilized within your supply chain. By analyzing waste generation, you can identify opportunities for source reduction, such as optimizing packaging materials or implementing recycling programs with suppliers.

Recycling and Composting Rate (%): Track your progress towards waste diversion from landfills. Partnering with suppliers who prioritize recycling and composting demonstrates your commitment to a circular economy.

Material Efficiency

Material Input per Unit of Service (MIPS): This metric tracks how much material is needed to produce a product or service. By monitoring MIPS, you can identify opportunities to reduce material consumption throughout your supply chain.

Percentage of Recycled Content in Products: This metric showcases your commitment to using recycled materials. Prioritizing products with high recycled content minimizes your reliance on virgin materials and reduces your environmental impact.

Beyond Data: Putting Sustainability Into Action

Remember, data collection is just the beginning. Here are some additional tips to get the most out of your environmental sustainability metrics:

Start Small, Scale Up

Don't try to track everything at once. Begin with a few key metrics and gradually expand your data collection as you gain experience.

Invest in Employee Training

Educate everyone involved in procurement and supply chain operations on the importance of data collection and how their actions contribute to the larger goal of mitigating environmental risk and controlling costs.

Ready to accelerate your journey to a more sustainable supply chain? Download our playbook Mapping & Reducing Scope 3 Emissions: A Quickstart Guide for Procurement Pros.

Less than one-third of senior finance and accounting executives have a fully established ESG reporting framework within their company, with 30% disclosing their framework is limited to specific organization initiatives, according to a data report published in October 2023.

While the majority of surveyed executives said their companies have collected key environmental data, less than 40% have analyzed or used the data to establish benchmarks. 

The report found 97% of executives and 100% of CEOs and chief administrative officers at surveyed companies are involved with their organization’s current state of ESG reporting, despite struggles to establish a proper ESG reporting framework. Findings from the report also indicated that prioritizing ESG initiatives remains “top-of-mind” for most senior executives at companies, with 90% looking to enact new sustainability goals within the next two to five years

Lease accounting and administration software provider Visual Lease surveyed 200 senior finance and accounting executives across the U.S. at private, public and government organizations with more than 1,000 employees for this report.

The heightened scrutiny surrounding ESG, both regulatory and political, has put a spotlight on companies’ environmental and social initiatives, impacting just about every aspect of their operations, including lease management, according to the report. From the surveyed executives, 88% said sustainability factors are a high priority when entering into new lease agreements, with many taking measures such as increasing the number of LEED-certified buildings within their lease portfolios, expanding the number of energy-efficient vehicles in their fleets or switching to renewable energy sources.

“Considering that 40% of global carbon dioxide emissions stem from real estate-related assets, effective lease management serves as an organization’s gateway to not only quantifying and disclosing its environmental impact but, also to tracking its progress against internal and external sustainability goals,” Robert Michlewicz, CEO of Visual Lease, said in a press release.

With the impending climate disclosure rule from the Securities and Exchange Commission on the horizon, the introduction of several climate bills and workforce disclosure regulations in California, in addition to the coalescence of reporting frameworks such as the International Sustainability Standards Board and the Task Force for Climate-Related Financial Disclosures, executives are concerned about what these new measures will mean for their businesses, according to findings from Virtual Lease.

The survey found that 65% of respondent companies will have to report under the SEC’s climate disclosure rule. Without a final rule to compare yet, 37% of the respondent organizations think the SEC’s rule will mirror ISSB’s guidelines, compared to 28% expecting differences. 

Nearly 70% of surveyed senior finance executives said their organizations are not fully prepared to track and measure the environmental impact of their leased and owned asset portfolios in order to comply with new and emerging requirements, according to the report.

The findings indicate companies will need to involve their finance department and evolve their financial strategies to meet regulatory requirements and achieve more strategic ESG outcomes.

The Global Reporting Initiative proposed two standards in November 2023 for how companies should report the effects of climate change and energy use on operations and the broader public. 

The climate change standard incorporates principles of a “just transition” and includes disclosures for climate change transition plans and annual progress on emissions reduction targets. The energy standard would create disclosures for energy management, consumption and generation as part of its framework. 

The organization also timed the standards release with the United Nations’ COP28 climate change forum beginning Nov. 30 2023 in the United Arab Emirates. GRI said it is seeking public input on both documents until Feb. 29, 2024.

The standards, created by the independent Global Sustainability Standards Board, all take a double materiality approach, where companies disclose information material to investors and that could affect a broader set of stakeholders. 

GRI said the two standards will be key to how global organizations are held accountable for their climate change roles. GSSB Chair Carol Adams said the organization timed the releases with the COP28 conference to give decision-makers access to this information before setting new goals or signing new commitments.

“The scientific evidence and international consensus is unequivocal: climate change threatens humanity’s well-being and the planet's health,” Adams said in the release. “That is why there are growing demands for organizations to provide in-depth information about how they are reducing [greenhouse gas] emissions, taking concrete steps to mitigate and adapt to climate change — and how their actions impact on people and the environment.”

The climate change standards will provide guidelines for companies to disclose how they are adapting to climate-related risks and how their operations impact employees, communities, “vulnerable groups” and biodiversity. They would also create disclosure standards for carbon credits and greenhouse gas removals within the supply chain.

The energy standards will give companies a framework to disclose energy policies and commitments, how they use and generate power within the organizations, as well as how power is used both upstream and downstream in the supply chain. The proposed standard would also require companies to report whether energy reductions are happening within their organization or within their larger supply chain.

The standards follow the release of multiple other reports that show how the global community is well off-track in limiting global warming to 1.5° Celsius. The UN Environment Programme released a report earlier that said there’s only a 14% probability that global temperatures don’t rise more than an average of 1.5° C over pre-industrial levels, a target set by the 2015 Paris climate accord.

UNEP’s report said current pledges put the world on track for global temperature rises of between 2.5-2.9°C. UN Secretary General Antònio Guterres said keeping global warming under 1.5°C requires a “just, equitable transition” and jettisoning fossil fuels. 

Sustainability standard-setter the Global Reporting Initiative proposed updates to its standard for how companies report biodiversity impacts throughout their operations and value chain in January 2024, expanding on a topic standard it initially published in 2016. The updates include guidelines for companies to increase transparency throughout their supply chain, how to understand what’s driving biodiversity loss, and requirements for reporting how biodiversity impacts affect specific regions and society overall.

The standard was in development for two years and was released shortly after two prescient warnings on the growing scarcity of biodiversity. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services’ latest assessment found biodiversity is declining in every region, while the World Economic Forum reported half of the global economy is facing threats of biodiversity loss.

The standards were created by the independent Global Sustainability Standards Board and will go into effect for GRI reporting companies in 2026. As with all of GRI’s standards, the biodiversity standards require companies to take a double-materiality approach that examines the material impacts to investors as well as issues that affect a broader set of stakeholders.

The standard will require companies to report biodiversity impacts across their supply chain, an update from its 2016 standards. The update also limits the amount of information companies need to report to the “most significant impacts on biodiversity” rather than all impacts.

The GRI 101: Biodiversity 2024 standard also includes guidelines to report location-specific impacts and reporting on drivers of biodiversity loss, such as climate change, land use, overexploitation and pollution. GSSB Chair Carol Adams said the biodiversity loss is “a multiplying factor in the climate crisis,” and is endangering progress on the United Nations’ Sustainable Development Goals. She said the standards will set a “new bar” for transparency on biodiversity impacts.

“Understanding the impacts that organizations have is therefore a crucial aspect of implementing global solutions to halt and even reverse the damage and address existential threats,” Adams said in the release. 

GRI said its standards build off a foundation laid by the Kunming-Montreal Global Biodiversity Framework — established at COP15 — Science Based Targets Network’s work on biodiversity and the Task Force on Nature-Related Financial Disclosures. 

TNFD published its final recommendations in September 2023 and announced in January 2024 that 320 global companies and financial institutions will start reporting nature-related disclosures in 2024. Those companies hail from 46 countries and include $4 trillion in market cap and 100 financial institutions with more than $14 trillion in assets under management, according to the organization.

Packaging companies Crown Holdings, International Paper, Smurfit Kappa and Stora Enso are among the inaugural cohort of companies that have committed to begin making nature-related disclosures, the task force announced during the World Economic Forum meeting in Davos, Switzerland earlier this month.

TNFD Executive Director Tony Goldner said in the release his organization collaborated closely with GRI on the standard and GRI’s guidelines are “to a high extent consistent” with the TNFD’s recommendations.

The International Ethics Standards Board for Accountants proposed compliance standards for sustainability reporting in January 2024 to help companies and asset managers mitigate greenwashing and for evaluating outside sustainability experts’ credentials. 

The standards, which are both profession and framework agnostic, include five “fundamental principles” all sustainability assurance practitioners should abide by: Integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

IESBA said it developed the ethics standards due to the rise in importance of sustainability information to capital markets, consumers, companies and the broader society. “It is of public interest that sustainability assurance practitioners act ethically in order to maintain public trust and confidence in sustainability information,” the ethics proposal stated.

IESBA began developing the International Ethics Standards for Sustainability Assurance in December 2022, after the International Organization of Securities Commissions, whose membership comprises 95% of global securities market regulators, and the Financial Stability Board expressed support. The proposal would update existing IESBA codes relating to sustainability reporting.

The accounting ethics standard-setter said a global ethics baseline for sustainability reporting ethics will help ensure the integrity and objectivity of sustainability reporting. IESBA Chair Gabriela Figueiredo Dias said in the release the standards will serve as a “cornerstone of ethical behavior with far-reaching benefits.”

“Ethics is about acceptable behaviors and right decisions to avoid bias in sustainability information and foster trust,” Dias said. “All users of sustainability disclosures have a vested interest in ensuring ethical choices by the preparers and assurers of such information.”

The organization said entities that perform the sustainability assurance engagements should follow the “most stringent ethics requirements” given the level of public reliance placed on climate-related disclosures as this information is used by a wide range of stakeholders to assess and compare companies’ performances and to make investment and business decisions.

The IESSA standards’ updated glossary of terms defines sustainability information as “information about the opportunities, risks or impacts” of economic, ESG or other sustainability factors on an entity or an entity’s operation on the economy, environment or public. The organization also includes any sustainability information as defined by law, regulations or reporting and assurance frameworks.

In its explanatory memorandum that accompanied the IESSA standards, IESBA said it made the definition “intentionally broad and sufficiently generic” to make it perennially relevant and interoperable with different reporting, regulatory or assurance frameworks.

“The reference to ‘other’ factors is intended to keep the definition flexible and thus evergreen,” the memo said. “Moreover, it is broad enough to cover disclosures made under both single and double materiality perspectives.”

The International Accreditation Forum, comprising 97 global accreditation bodies, plans to stipulate that the IESSA standards be used when authorizing assessment organizations to do assurance work on corporate sustainability disclosures, according to the release.

“Sustainability disclosures are undeniably high on the agenda of investors globally,” IOSCO Chair Jean-Paul Servais said in the release. “Trust in such disclosures will be enhanced when they receive external assurance based upon globally accepted standards regarding ethical behavior and independence that have been developed in the public interest.”

The standards come amid a global push for sustainability reporting regulations and frameworks: From the European Union’s Corporate Sustainability Reporting Directive and the Securities and Exchange Commission’s upcoming climate disclosure rule to global frameworks coalescing around standards from the International Sustainability Standards Board and the Global Reporting Initiative. 

The importance of sustainability reporting has risen alongside issues of greenwashing and social washing — companies making misleading social claims. ESG data and research firm RepRisk found issues of greenwashing rose 35% from September 2022 to September 2023, and companies’ greenwashing incidents made up 25% of climate-linked risk incidents over the same time period.