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Value chain sustainability reporting frameworks

Companies are under pressure to embrace value chain transparency. The upcoming European Corporate Sustainability Reporting Directive (CSDR), Due Diligence Directive and the consumer demand put a new perspective on this topic. It is no longer the question of how to optimise and make value chains more resilient but how to make them sustainable and transparent. During the pandemic, more leaders pledge their commitments to save our planet. While the ROI still doesn’t reflect investments in sustainability, the shareholders demand it.

Although it is evident that supply chain transparency is of high interest to governments in order to assure proper consideration of human rights, protect the environment, and good governance, it is not necessarily of interest by the firms and suppliers to make operations and processes along the supply chain transparent, especially not towards third parties. Current sustainability reporting frameworks do not combine the sustainability impacts (societal, environmental, and economic) coherently.

The sheer variety of standards, reporting industry-specific data, and the discrepancies between what companies want to and can report on have created a challenging environment for companies to report on sustainability. While larger companies can report extensively and use an array of different standards, this approach is not feasible for SMEs, which seem to be overwhelmed by the multitude of standards and their requirements.

We have reviewed currently available reporting frameworks that would help firms integrate sustainability practices in their businesses and reporting. In this article, we provide an overview of the most common frameworks.

An overview of sustainability reporting frameworks

The sustainability reporting standards we’ve researched tackle a variety of sustainability issues. From industry-specific to cross-industry solutions, the companies can choose an array of sustainability factors to report on.

  1. Environmental, Social and Corporate Governance (ESG)
ESG is one of the most used sustainability reporting standards. (Photo courtesy: Adobe Stock Photo)

ESG is one of the most famous frameworks for sustainability reporting — and not without reason. It gives companies three categories in which sustainability is measured: Environment, Society, and Governance. These categories give companies the freedom on which issues to report on, enforcing no specific set of standards. Most companies disclose GHG emissions, water, and waste management as the most important environmental indicators, while they report on diversity, inclusion, and employee engagement in their societal section. The Governance category includes the most valuable information on how sustainability is dealt with, besides it showcases the company’s achievements on the executive level.

2. Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) provides the world’s most widely used standards for sustainability reporting. Within this comprehensive framework, companies can report on three categories: economic, environmental, and social. The sustainability indicators cover a wide array of topics, from anti-competitive behaviour to marketing and labelling etc. The standards guide the companies to determine the sustainability factors to report on and type of data for each indicator. This makes the GRI framework one of the most comprehensive sets of standards applicable across all industries.

3. Sustainable Development Goals (SDGs)

UN’s Sustainable Development Goals provide a well structured and practical framework for sustainability reporting. (Photo courtesy: Adobe Stock Photo)

SDGs were set by the UN as a means to achieve sustainable development on ecological, social, and economic levels by 2030. The 17 SDGs range from ending poverty to responsible consumption and production. Many companies choose a few SDGs to showcase their commitments and business achievements in their sustainability reports. The SDG principles can be integrated in business activities. SDGs have proved a well structured and practical framework for companies to showcase their activities with regards to sustainability.

4. Sustainability Accounting Standards Board (SASB)

SASB focuses on quantifying and reporting the environmental impacts and risks of a company’s performance across 77 different industry standards. It offers a tailored approach to fit investors’ needs. The SASB was developed based on the fact that not all sustainability factors matter equally to each industry and that the sustainability indicators differ from sector to sector.

The Task Force on Climate-related Financial Disclosures (TCFD) is closely related to SASB. It addresses how climate change might impact the organisation’s ability to create value.

5. Sustainability reporting standards from International Organization for Standardization (ISO)

ISO offers standards on five different topics: quality management, environmental management, health and safety standards, energy management, food safety, and IT security. In particular, the ISO 14000 family of standards is known and defined as a series of international environmental management standards, guides, and technical reports.

Corporate Sustainability Reporting Directive (CSRD)

In November 2022, the European Council approved the new Corporate Sustainability Reporting Directive (CSRD), which replaces the Non-Financial Reporting Directive (NFRD), introducing more detailed reporting measures and applying to more companies. These will need to disclose more sustainability-related information, such as the effects of their business model, strategy and supply chains on sustainability and the influence of external environmental and social actors on their activities. Companies will also be required to report on Scope 3 emissions, the indirect emissions that result from a company’s upstream and downstream activities. The regulation will start to apply from 2024 to 2028.

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