How to approach sustainability reporting frameworks

Using a recognised standard or framework provides a means to measure, assess and report on ESG initiatives, risks and opportunities and ultimately improves the comparability of ESG data, thereby making it easier for investors to assess potential investee companies when considering whether or not to add them to their portfolios.

For the company, disclosure of ESG data can therefore represent an important point of differentiation. It can also be valuable from a reputation perspective to highlight where its ESG efforts have been acknowledged by a third party.

However, with the multitude of different standards and frameworks relating to ESG, including GRI, SASB, TCFD and CDP (formerly the Carbon Disclosure Project), the independent standards and framework landscape looks like an ‘alphabet soup’ of regulation, causing many businesses to be confused about where to start.

Our latest issue of ‘Reporting Matters’ reveals the findings of our research in the FTSE 100 on how successful leading companies are adopting independent standards and frameworks.

 Our findings

In the context of our ‘Reporting Matters 7’ study, our key findings are as follows:

• Almost half of the companies sampled already reported all 11 TCFD recommendations, many having done so previously on a voluntary basis.
• 40% were beginning to align with the TCFD or had at least stated their intention to do so.
• 10% of our sample did not mention the TCFD at all, despite the incoming regulatory requirement.
• 20% of companies in our sample mapped their ESG strategy to SDGs.
• Statements of support for the UN Global Compact, made by 12% of our sample, tended to be even more generic.
• 16% of companies referred to their CDP score or response.
• Rare mention of SASB (8%) and GRI (8%) should give companies pause for thought, given the widespread support these frameworks enjoy among investors.

Our recommendations

• Identify the ‘E’, ‘S’ and ‘G’ data that is material to your company and disclose it in your Annual Report.
• Map your audience against the disclosures. For example, SASB is the preferred standard for the UK regulator, the FRC, and large investors such as BlackRock.
• Align your corporate or ESG strategy only with the SDGs that are most relevant to your specific business and ESG commitments, and map out how you will act.
• For premium-listed businesses, look to address TCFD reporting early, possibly with a gap analysis provided by Luminous as a starting point for mandatory reporting in 2022.
• Disclose your company’s third-party ESG scores and accreditations.

 At our launch event on 13 July, Luminous’ Stephen Butler, Investor Engagement & ESG Disclosure Director, Rachel Madan, Sustainability & Impact Director, and Nina Kefer, Consultant, along with Richard Davies, Managing Director of RD:IR, shared the outcomes of our proprietary research. They also offered practical advice on defining, reporting and engaging around ESG strategy, as well as how to optimise your ESG in your Annual Report and investor days.

If you would like to access the recording and slides from our event, please get in touch.