The foundation for integrating ESG starts with data. And the challenges originate with the fact that companies have historically not been formally required to report initiatives on environmental, social, and governance factors:
US:
companies are not given formal standards from regulatory agencies as to what ESG data is material. Look to SASB - Sustainability Accounting Standards Board for more information
Europe / EU:
Non-financial reporting: EU law requires large companies to disclose certain information on the way they operate and manage social and environmental challenges.
Accounting Directive from 2014 (Directive 2014/95/EU) – also called the non-financial reporting directive (NFRD) – lays down the rules on disclosure of non-financial and diversity information by large companies. This directive amends the accounting directive 2013/34/EU. Companies are required to include non-financial statements in their annual reports from 2018 onwards.
ESG Standard setting organizations:
- GRI - Global Reporting Initiative: is an international independent organization that provides widely used standards on sustainability reporting. GRI standards are used by businesses, governments and other organizations to communicate the impact of their day-to-day activities on critical sustainability issues
GRI Standards: The GRI Standards create a common language for organizations – large or small, private or public – to report on their sustainability impacts in a consistent and credible way.
GRI also offers guidance on specific sectors including: airport operators, construction and real estate, electric utilities, event organizers, financial services, food processing, media, mining and metals, NGOs, and Oil and gas.
- Covalence: a case on how the ESG criteria are inspired by the Global Reporting Initiative's sustainability reporting guidelines
- UNGC - United Nations Global Compact: it is a voluntary initiative based on CEO commitments to implement universal sustainability principles and to take steps to support UN goals. And the multi-year strategy of the UN Global Compact is to drive business awareness and action in support of achieving the Sustainable Development Goals
List of the participants
- IIRC - International Integrated Reporting Council: IIRC is a global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. IIRC framework enables a holistic view of an organization by putting its performance and strategy in the context of its relevant social and environmental issues.
- ISO - International Standards Organization: ISO is an independent, non-governmental international organization with a membership of 165 national standards bodies.
- SASB - Sustainability Accounting Standards Board: SASB is a U.S. based organization that focuses on industry-based sustainability standards for the recognition and disclosure of material environmental, social and governance impacts by companies traded on U.S. exchanges. It has developed a complete set of 77 industry standards. In November 2018, SASB published these standards, providing a complete set of globally applicable industry-specific standards which identify the minimal set of financially material sustainability topics and their associated metrics for the typical company in an industry.
- OECD Guidelines for Multinational Enterprises: Provide recommendations for responsible business conduct in areas such as employment and industrial relations, human rights, environment, information disclosure, combating bribery, consumer interests, science and technology, competition, and taxation.
- ISO - International Organization for Standardization:
ISO 2600: Social Responsibility: is a guidance standard on how business and organizations can operate in a socially responsible way. It helps clarify what social responsibility is, helps businesses and organizations translate principles into effective actions, and shares best practice on social responsibility
- CDP - Carbon Disclosure Project: CDP provides a global reporting system that collects information from the world’s largest organizations on their climate change risks, opportunities, strategies and performance, and the way in which they consume and affect natural resources including water and forests. The CDP Open Portal provides access to datasets on disclosure rates, emissions, climate risks and related topics.
- Greenhouse Gas Protocol: GHG Protocol establishes comprehensive global standardized frameworks to measure and manage greenhouse gas (GHG) emissions from private and public sector operations, value chains and mitigation actions.
- Tripartite declaration of principles concerning multinational enterprises and social policy (MNE Declaration) - 5th edition, 2017: The MNE Declaration is the only ILO instrument that provides direct guidance to enterprises on social policy and inclusive, responsible and sustainable workplace practices
- UN Guiding Principles on Business and Human Rights: The principles aim to prevent and address infringement of human rights linked to business activity.
- IFC, International Finance Corporation > Sustainability > Policies & Standards: IFC helps clients understand and manage the environmental, social, and corporate governance (ESG) risks they face
Providers of ESG Data and ratings:
Despite the absence of clear standards, there are a number of ESG data providers with porprietary ESG metrics and rating systems. Typically each ESG data provider has developed its own sourcing process and research methodology.
Among the providers with global coverage are MSCI, Sustainalytics, Refinitiv (previous name Thomson Reuters), Bloomberg, FTSE,Oekom Research, RepRisk, Inrate, and more.
