Decoding the Labyrinth: Your Guide to Sustainability Reporting Frameworks

Setting credible climate targets is a complex undertaking, demanding specialised knowledge and adherence to established frameworks. This guide empowers organisations to navigate this intricate process by exploring sustainability reporting frameworks, the essential tools for establishing a robust and transparent sustainability strategy.?

These frameworks provide organisations with clear and, in many cases, scientifically validated methods for setting ambitious targets and developing effective strategies. This comprehensive approach empowers companies to build a strong foundation for addressing greenwashing concerns and demonstrating genuine sustainability commitments throughout their journey.

With this guide, learn about the following:

1. Frameworks used to measure and report companies’ environmental impact and establish a baseline for setting reduction targets
2. Frameworks to set climate goals?
3. Frameworks that consider the interconnectedness of climate action with broader environmental and social issues.

Level 1: Laying the Foundation - Emissions Mapping Frameworks

The Emissions Mapping Frameworks lay the groundwork for a company's sustainability journey. These frameworks provide standardised methodologies for meticulously measuring and transparently reporting greenhouse gas (GHG) emissions. Established frameworks like the Greenhouse Gas Protocol (GHG Protocol), ISO 14064, and PAS 2050 fall under this category. Here’s a brief breakdown:

• Greenhouse Gas Protocol (GHG Protocol): This is a globally recognized accounting standard for measuring and reporting greenhouse gas (GHG) emissions. It provides a framework for companies and organisations to track their carbon footprint across different categories (e.g., energy use, transportation).
• ISO 14064: This is an international standard specifically focused on organisational greenhouse gas quantification and reporting. It builds upon the GHG Protocol and provides detailed requirements for verifying and validating emissions data. Think of it as the verification layer on top of the GHG Protocol's accounting framework.
• PAS 2050: This is a publicly available specification, primarily used for calculating the life cycle greenhouse gas emissions of products and services. It helps assess the environmental impact of a product throughout its entire lifecycle, from raw material extraction to disposal.
• International Sustainability Standards Board (ISSB): An emerging global standard-setter developing a comprehensive baseline for sustainability disclosure, aiming for consistency across companies worldwide.
• Intergovernmental Panel on Climate Change (IPCC) guidelines offer comprehensive scientific information and recommendations on how to assess and report greenhouse gas emissions and climate change impacts. These guidelines provide the theoretical and methodological foundation for emissions accounting and reporting, but don't offer a specific set of rules or procedures like reporting frameworks.

As is true for everything, a strong foundation is essential before going ahead. By adhering to these frameworks, companies establish a credible and quantifiable baseline for their emissions. Baseline is an initial measurement that provides a crucial reference point against which targets and future progress can be set and evaluated. This data serves as the bedrock for setting realistic and measurable reduction targets in the subsequent stages, paving the way for a more sustainable future.

Level 2: Building on the Base - Reporting Frameworks

Following the establishment of a credible emissions baseline through Level 1 frameworks, the focus shifts to Reporting Frameworks. These frameworks guide companies in setting ambitious and science-aligned emissions reduction targets, bridging the gap between meticulous measurement and impactful goal setting.

Here are a few for your reference:

Industry Standards Bodies:

• SASB (Sustainability Accounting Standards Board): Provides industry-specific standards for companies to report on financially material ESG (environmental, social, and governance) factors.
• CDSB (Climate Disclosure Standards Board): Offers a framework specifically focused on environmental and climate change reporting, including greenhouse gas emissions and climate-related risks.

Reporting Frameworks:

• GRI (Global Reporting Initiative): A comprehensive framework for sustainability reporting across various ESG topics, widely used by companies globally.
• IIRC (International Integrated Reporting Council): Promotes integrated reporting that connects financial and sustainability performance.
• CDP (Carbon Disclosure Project): A global platform where companies disclose environmental data on climate change, water security, and deforestation.
• ISO 26000 Social Responsibility: International standard guiding social responsibility best practices.
• Science Based Targets initiative (SBTi): Supports companies in setting ambitious emissions reduction targets aligned with climate science.
• Value Reporting Foundation: Merged GRI and IIRC, aiming to unify corporate reporting on financial and sustainability performance.

The most popular framework, the SBTi Net Zero Standard guides companies in setting ambitious emissions reduction goals aligned with climate science. This ultimately contributes to achieving net zero, beyond which emissions are balanced by removals, leading to climate neutrality. While some Net Zero Standards might include offsetting strategies, SBTi prioritises actual reductions and allows offsetting only for residual emissions, underlining the importance of concrete action for a sustainable future. It is important to remember that offsetting is generally considered a supplemental strategy to actual emissions reduction, not a replacement.

The potential benefits of setting ambitious emissions reduction targets are beyond just environmental advantages. Companies with ambitious science-based emissions reduction targets have a 20-30% lower probability of defaulting on their loans compared to companies without such targets.

Level 3: The Broader Context - Global Frameworks

The final tier, Global Goods Frameworks, encompasses frameworks like the Sustainable Development Goals (SDGs) and the Principles for Responsible Investment (PRI). These frameworks remind companies that climate action is inextricably linked to broader environmental, social, and economic concerns. Unlike the first two tiers that focus on measuring and setting goals for a company's own emissions, these frameworks look at the bigger picture.?

Here’s a little more about global frameworks:

• Sustainable Development Goals (SDGs): A set of 17 goals adopted by the United Nations as a blueprint to achieve a sustainable future for all.
• Paris Climate Agreement: An international agreement to combat climate change and limit global warming.
• Principles for Responsible Investment (PRI): A set of investment principles encouraging investors to integrate ESG factors into their decision-making, aligning investments with sustainability goals.

Companies with strong sustainability performance, as measured by ESG factors, outperform their peers on financial metrics such as return on equity, return on assets, and risk-adjusted returns.

The Power of Frameworks: Why They Matter

This intricate network of sustainability reporting frameworks isn't just bureaucratic red tape; it serves a critical purpose, benefiting both companies and stakeholders.

• Enhanced Transparency: Standardised frameworks ensure clear and consistent emissions reporting, allowing investors and consumers to objectively assess a company's progress towards its sustainability goals. Investors now consider ESG factors in their investment decisions, highlighting the growing demand for transparency and accountability.
• Reduced Greenwashing: By adhering to established guidelines, companies demonstrate a genuine commitment to emissions reductions and responsible practices, minimising the risk of misleading stakeholders through greenwashing tactics.?
• Collective Action & Level Playing Field for Companies: Widespread adoption fosters collective action on climate change. These frameworks create a standardised approach, enabling companies to benchmark their progress against peers and encouraging healthy competition towards ambitious sustainability goals..

The year-on-year increase in companies adhering to these frameworks underscores their growing importance. This trend signifies a growing global commitment towards sustainability and the crucial role these frameworks play in achieving a more sustainable future. This makes absolute sense, especially because it is also widely observed that consumers reward sustainability and 84% of consumers are more likely to trust and buy from companies with strong sustainability. Navigating sustainability reporting frameworks can seem daunting, but this guide empowers companies to embark on this crucial journey.