Navigating ESG Reporting Standards: A Comprehensive Mapping Guide

Navigating ESG Reporting Standards: A Comprehensive Mapping Guide

Environmental, Social, and Governance (ESG) reporting is crucial for sustainable business practices globally. As stakeholders demand greater transparency and accountability, navigating the complex landscape of ESG standards becomes more challenging. This article explores the ESG Reporting Standard Mapping, emphasizing its necessity and the strategic integration across diverse frameworks.

The Importance of ESG Reporting Standards:

In an era defined by climate crises and social upheavals, ESG reporting offers stakeholders vital insights into a company’s sustainability practices and risks. With Vietnam needing an estimated USD 368 billion to achieve its net zero goals, transparent ESG disclosures become essential for mobilizing sustainable financial resources.

Several ESG frameworks/standards guide corporate reporting:

  • Global Reporting Initiative (GRI): Focuses on broad sustainability impacts.
  • Sustainability Accounting Standards Board (SASB): Targets industry-specific issues.
  • Task Force on Climate-related Financial Disclosures (TCFD): Concentrates on financial implications of climate risks.
  • Corporate Sustainability Reporting Directive (CSRD): Enforces comprehensive reporting within the EU, with emphasis on the ‘double materiality’ concept.

Source: GRI

Challenges of ESG Reporting:

Organizations face multiple challenges in ESG reporting, including inconsistencies across standards and the high costs associated with data collection and reporting. The lack of standardized frameworks leads to difficulties in comparability and reliability of ESG disclosures.

Strategies for Effective ESG Reporting Standard Mapping

  1. Integration: Embedding ESG metrics into corporate strategies.
  2. Stakeholder Engagement: Ensuring active participation from all stakeholders in setting goals and assessing materiality.
  3. Technology Utilization: Leveraging technology for accurate data gathering and real-time reporting.

Case Studies: 

Nestlé, a leading food and beverage company, aligns its reporting with GRI and SASB standards, boosting stakeholder trust and streamlining sustainability efforts, underscoring their commitment to addressing environmental and social responsibilities transparently. In Europe, 82% of top companies now produce sustainability reports, reflecting a sharp increase from previous years (KPMG, 2022).

Future Trends in ESG Reporting Standards

The future of ESG reporting is trending towards greater integration and standardization. Initiatives like the International Sustainability Standards Board (ISSB) aim to provide a global baseline of sustainability-related disclosures, simplifying the reporting process for companies operating in international markets.

Conclusion

ESG Reporting Standard Mapping is not just about compliance; it is a strategic tool that enhances transparency, informs better investment decisions, and fosters sustainable business practices. As regulations evolve and stakeholder demands intensify, adeptness in navigating these standards will be crucial for business success.

References

Over 239 Companies are Projected to Miss Net Zero Targets, Reports GreenBiz

Since its inception in 2019, over 1,000 companies have signed up for the Business Ambition for 1.5C Campaign. The Science Based Targets Initiative (SBTi) is a global organization that encourages companies to set climate action targets aligned with the latest climate science, aiming to reduce greenhouse gas emissions in line with the Paris Agreement.

971 corporates were analyzed in a recent study by the SBTi. This study aims to assess companies’ progress in setting and implementing science-based climate targets aligned with the Paris Agreement.

Although the UK, US, France, Sweden, and Germany demonstrated strong participation, the report emphasized a critical challenge: 239 companies had their net-zero commitments revoked due to non-compliance.

Source: Business Ambition 1.5°C Final Report (SBTi)

The SBTi mandates that companies and financial institutions set science-based targets within 24 months of their pledge. Those who fail to meet this requirement are listed as “Commitment Removed” on the SBTi Dashboard, following a policy change in January 2023. Well-known brands such as Diageo, Microsoft, Unilever, Marks & Spencer, and Procter & Gamble have seen their commitments delisted from the SBTi dashboard.

Scope 3: The Biggest Obstacle

The most significant obstacle cited by companies involves managing value-chain emissions.

According to the SBTi, “About half of the survey respondents identified the complexity of Scope 3 emissions as a major hurdle in setting net-zero targets.” SBTi also observed that “Only a small number of companies are prepared to set ambitious, long-term decarbonization targets for their value chain,” noting that for some, the uncertainties are too great.

Recently, the US Securities and Exchange Commission decided to exclude Scope 3 emissions from its new climate disclosure regulations following corporate concerns about the challenges and costs of acquiring precise data.


Barriers face by companies in setting net-zero targets

The Industry  Response

Walmart has reduced over 1 gigaton of emissions since 2017 and is now analyzing its Scope 3 emissions to refine its strategy in line with the Greenhouse Gas Protocol. Walmart continues to hold its status with the SBTi while working toward its net-zero targets. 

Despite SBTi removing its net-zero commitment, Microsoft continues to pursue its 2020 environmental goals and maintains a near-term, SBTi-validated target.

Procter & Gamble (P&G) is actively collaborating with SBTi, having validated its near-term Scope 1, 2, and 3 emissions reduction targets, and remains dedicated to transparent, science-based climate action.

Unilever’s initial net-zero target was found incompatible with SBTi’s methodology, leading to a revised plan that aims for a 42% reduction in Scope 3 emissions. The company anticipates SBTi approval soon and is committed to achieving its net-zero ambitions by 2039 through emissions reductions and carbon removals.

Next Steps


The SBTi recognizes the challenges identified in this study, especially the difficulty of managing Scope 3 emissions. To address these, the SBTi will expand its sector-specific standards and implement regional differentiation to engage more participants from the global south. 

Furthermore, a comprehensive review of the SBTi corporate net-zero standard will be conducted next year, with insights gained guiding future improvements and helping companies better align their climate targets with the 1.5°C pathway. These steps will support businesses in setting clear, ambitious, and compliant targets that can enhance the industry’s ability to meet global climate goals.

References

Business Ambition 1.5°C Final Report (SBTi, March 7, 2024)

CO2 Watchdog Delists Net Zero Pledges of More Than 200 Companies (Bloomberg, Mar 22, 2024)

Hundreds of businesses drop net-zero commitments due to Scope 3 challenges (Edie, Mar 12, 2024)

Microsoft, P&G, Unilever and Walmart among 239 companies to miss net-zero deadline (GreenBiz, Mar 13, 2024)