ESG Reporting Frameworks: Which Should My Company Use?

ESG Reporting Frameworks: Which Should My Company Use?


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With pressure to meet environmental, social and governance (ESG) criteria mounting, many middle market companies are looking to get ahead of the regulatory shifts and revamp their approach to financial reporting and disclosures. But between hundreds of ESG reporting standards and frameworks globally and the lack of comparability among them, those organizations are struggling to choose the right one.

As new ESG and climate-related disclosure rules take effect over the coming years, this decision will become more pressing. The European Union’s European Sustainability Reporting Standards, while recently postponed, are expected to come into force in 2026. In the U.S., the Security and Exchange Commission (SEC) is gearing up to release the final version of its climate disclosure rule, which is expected to transform financial reporting and disclosures as we know them. Both will require certain companies to report a range of direct and indirect greenhouse gas emissions—metrics that few companies are even tracking comprehensively, much less ready to disclose.

To help organizations prepare, we’ve outlined three ESG frameworks that are gaining momentum among businesses and regulators. In what follows, we’ll also discuss what companies should consider as they implement these frameworks.

The State of ESG: Which ESG Reporting Frameworks Are Rising to the Fore

While a common set of standards is beginning to form among different ESG frameworks, there’s a long way to go before a single framework meets the needs of every business. Here are three that have influenced corporate and regulatory policy on a global scale.

  • Global Reporting Initiative (GRI): Many companies around the world adhere to GRI reporting standards. It sets forth standards detailing approaches to materiality, management reporting and disclosure. Taking a generalized approach, GRI centers around a universal set of principles that extend across all sectors.
  • Sustainability Accounting Standards Board (SASB): Unlike the GRI, the SASB takes an industry-based approach. It contains suggested material topics for over 70 different industries, enabling companies to report specific metrics that are more closely aligned with their business goals.
  • Task Force on Climate-Related Financial Disclosures (TCFD): This ESG reporting framework, which influenced the SEC’s drafted proposal for ESG standards, focuses on addressing climate-related risks and opportunities. TCFD’s standards are most valuable for companies aiming to develop long-term business strategies and assess risk management.

What to Consider in Adopting an ESG Reporting Framework

Companies may be tempted to wait for the regulatory hammer to drop. But adopting an ESG framework isn’t an overnight process — it’s a long-term commitment that requires time, dedication, resources and extensive know-how. Below are a few guidelines that will help companies select the right ESG framework and successfully implement it.

1. Assess where you are today.

Some organizations have been reporting ESG metrics for years; others have only researched ESG frameworks and may not know where to start. Publicly traded companies with an international presence will likely face greater pressure from regulators and stakeholders on ESG standards and disclosures than a privately owned, U.S.-headquartered middle market firm. However, private companies with big, publicly traded customers or which rely on federal government contracts may also have to meet a higher ESG bar. All these factors should inform what ESG metrics companies track and disclose.

Take a U.S.-based subsidiary of a European parent company that CBIZ worked with. The parent company had its own reporting goals and reduction targets informed by the EU’s sustainability directive — a framework that the subsidiary had little expertise with or time to manage. To help the client evaluate, calculate and report ESG metrics in the proper manner across international jurisdictions, CBIZ brought in dedicated staff who knew how to navigate complex reporting requirements and ensure that the subsidiary appropriately reported under the ESG frameworks utilized by the parent company.

2. Don’t be afraid to adopt multiple ESG standards.

Because of the lack of uniform standards and the sheer variety of ESG frameworks on offer, many companies adopt multiple ESG frameworks. In fact, most software solutions and processes are set up to support several of them.

Before making that decision, however, organizations should observe similar competitors and determine what’s considered table stakes in their industry. At the very least, companies should aim to disclose similar metrics as their peers—whether it requires the adoption of a single ESG framework or several.

3. Training is a must.

As organizations take steps to gather ESG data and metrics, they’ll also have to educate employees on the best ways to document and collect that data.

For example, employees with responsibilities that center around operations may not be well-versed in external reporting requirements. They’re likely not accustomed to documenting their workflows and processes and may not understand how certain metrics tie to the overall values of an organization. Companies should ensure that their employees not only know how to meet certain reporting requirements but understand why they are gathering such metrics in the first place—and how that information will be used.

4. Stakeholders matter the most.

When it comes to ESG, organizations must assess their clients’ and customers’ expectations and meet them — regardless of the current regulatory landscape. As referenced above, companies that partner with federal government agencies and large accelerated filers — organizations with more than $700 million in freely traded common stock shares — will be subject to scrutiny sooner rather than later. And middle-market private firms that sell goods and services to publicly traded customers may have to shift to meet their customers’ requirements — especially regarding their customer’s Scope 3 emissions, which are indirect emissions that occur in the value chain of the reporting company, such as those created by product shipping activities, for instance.

5. Report consistently, accurately and regularly.

Once companies have taken initial steps to implement an ESG framework, they must ensure that they are reporting at a regular cadence and that their metrics are complete and accurate.

Even companies that have been reporting on ESG metrics for years often struggle to ensure reports include metrics that are consistently calculated with complete and accurate information that could stand up to independent assurance. Some organizations neglect to report certain locations; others miss entire categories of emissions.

The consequences of not reporting consistently, accurately and regularly will only become more dire in the near future. Forthcoming regulatory guidance, including the SEC’s climate disclosure rule, will likely accelerate reporting deadlines by many months to coincide with existing financial reporting requirements, requiring more frequent collection of data to stay compliant. And neglecting to report on a specific metric or reporting on it the wrong way may reduce organizations’ scores at private ESG rating agencies and, in turn, detract from their reputations. Such errors could also land them in hot water during an audit.

The Time to Plan for ESG Is Now

As climate disclosure requirements come into focus in the U.S. and across the globe, they have the potential to impact almost every company down the line — from publicly traded giants to small suppliers. Organizations that put these changes off until the last-minute risk damaging their reputations with external stakeholders and falling behind their competitors.

The SEC’s proposed climate disclosure rules, if enacted as drafted, could be one of the biggest shifts in financial record keeping and reporting since the Sarbanes–Oxley Act. That’s why it’s important for companies to investigate their current ESG-related practices, assess which ESG frameworks are best suited for their industry and size, and implement them as swiftly as possible.

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CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly traded and privately held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

ESG Reporting Frameworks: Which Should My Company Use?https://www.cbiz.com/Portals/0/Images/Hero-ESGReportingFramework.jpg?ver=jxhaWp-KCbYl55AlT3PXjQ%3d%3dhttps://www.cbiz.com/Portals/0/Images/Thumb-ESGReportingFramework.jpg?ver=9pGcjGy5USpEb6rM6t1hrQ%3d%3dTo help organizations prepare, we’ve outlined three ESG frameworks that are gaining momentum among businesses and regulators. In what follows, we’ll also discuss what companies should consider as they implement these frameworks.2023-11-21T18:00:00-05:00To help organizations prepare, we’ve outlined three ESG frameworks that are gaining momentum among businesses and regulators. In what follows, we’ll also discuss what companies should consider as they implement these frameworks.Regulatory, Compliance, & LegislativeEnterprise Risk ManagementYes