What tools are available to companies for reporting and communicating their environmental impact?
- Raphael Der Agopian
- Aug 7, 2024
- 5 min read
Companies of all sizes and industries are increasingly expected to communicate their sustainability performance. This helps demonstrate their commitment, transparency, and credibility to their stakeholders. To meet this requirement, several frameworks provide organizations with tools to measure, manage, and disclose their environmental, social, and governance (ESG) impacts. In this article, we will discuss the voluntary frameworks that offer flexibility to companies (Part I). In a subsequent article, we will cover the regulated framework introduced by the European CSRD (Corporate Sustainability Reporting Directive), which imposes legal sustainability reporting obligations on large companies and listed SMEs (Part II).
PART I - VOLUNTARY FRAMEWORKS
1. The Global Reporting Initiative (GRI)
Established in 1997, the GRI is an independent international organization that provides a global framework to help businesses and organizations communicate their impacts on economic, environmental, and social issues consistently and comparably.
The latest generation of GRI's sustainability reporting standards, the GRI Standards, are divided into three main categories:
Universal Standards: these form the basis of reporting and include fundamental principles such as organizational profile, governance structure, code of conduct, value chain, and stakeholder engagement.
Sector Standards: designed for specific industries, these standards identify the most significant environmental, social, and economic impacts associated with sectors like agriculture, aquaculture, oil and gas, mining and metals, and financial services.
Topic-Specific Standards: these cover specific aspects of an organization and are divided into three categories:
Economic (GRI 200): topics include economic performance, market presence, procurement practices, anti-corruption, and anti-competitive behavior.
Environmental (GRI 300): these standards aim to measure the impact of businesses on natural systems. They include standards such as energy, water and effluents, biodiversity, greenhouse gas emissions, effluents and waste, and supplier environmental assessment.
Social (GRI 400): covers issues like employment, non-discrimination, child labor, indigenous peoples' rights, and local communities.
Organizations can select relevant standards for their sustainability reports based on their sector, specific impacts, and stakeholder expectations. To date, over 10,000 organizations use the GRI Standards.
2. The Carbon Disclosure Project (CDP)
The Carbon Disclosure Project (CDP) is a nonprofit international organization that holds the largest database on environmental performance of companies, cities, states, and regions. CDP offers a series of standard questionnaires that organizations can use to disclose their environmental information. The collected data is analyzed, rated, and published, providing transparency on organizational actions regarding environmental sustainability. This evaluation helps companies improve their practices and enables investors and other stakeholders to make informed decisions.
Main areas covered:
Climate change: CDP evaluates governance, including management's involvement in handling climate risks and integrating these risks into company strategy. Companies must specify their GHG emission reduction goals and progress, identify climate-related risks (physical, transition, regulatory), and emerging opportunities. They also report direct, indirect, and value chain emissions, and the methodologies used for calculation. Engagement with stakeholders and transparency in climate performance communication are also assessed.
Water security: CDP questions companies about water management governance, including board-level responsibility and strategies for managing water-related risks. The questionnaire gathers data on water use, supply sources, and effluent management. Companies also describe their relations with local communities and water conservation initiatives.
Forests: CDP examines forest management policies and traceability goals for risk commodities like timber and palm oil. Companies identify risks associated with sourcing these products and detail traceability systems and the use of certifications like FSC or RSPO. Engagement with stakeholders, including suppliers and local communities, is also evaluated to promote responsible forest management.
Scoring scale:
A - (Leadership): given to companies demonstrating a high level of transparency and effective environmental risk management, along with proactive leadership in sustainability.
B - (Management): indicates active management of environmental impacts with appropriate measures to mitigate risks and seize opportunities.
C - (Awareness): shows awareness of environmental issues and implications, but without comprehensive management.
D - (Disclosure): basic information provided without demonstrating thorough understanding or management of environmental risks and opportunities.
F: assigned to companies that have not provided sufficient information for evaluation.
In 2022, CDP's tracker covered 18% of global GHG emissions based on disclosures from over 12,000 companies.
3. IFRS Foundation (ISSB / TCFD)
In 2023, the IFRS Foundation integrated the Task Force on Climate-related Financial Disclosures (TCFD) into its activities. The International Sustainability Standards Board (ISSB), established by the IFRS in 2021, now encompasses global sustainability reporting standards, including climate-related risks. The TCFD recommendations are now aligned and harmonized with ISSB requirements, consolidating sustainability reporting practices under centralized governance for increased transparency and information useful to financial markets and other stakeholders.
Recommended disclosures:
Governance: structures for overseeing sustainability issues, including board and management involvement.
Strategy: identification and description of the current and potential impact of climate risks and opportunities on business activities, value chain, strategy, and financial planning.
Risk management: description of processes for identifying, assessing, and managing sustainability-related risks, including the integration of climate risks into the company’s overall risk management framework.
Metrics and targets: disclosure of metrics used to assess and manage climate risks and opportunities, along with targets set for monitoring performance, such as GHG emissions (Scope 1, 2, and 3), water use, waste management, and biodiversity.
Forward-looking information and scenarios: use of scenarios to anticipate potential future impacts of climate and other ESG risks, including resilience analysis under various climate change scenarios.
Stakeholder engagement: interactions with stakeholders on sustainability issues (including employees, customers, local communities, regulators, and investors).
Transparency and verification: indication of whether disclosed information has been verified or assured by an independent third party, and communication of the verification results if applicable.
4. EcoVadis
EcoVadis is a platform for evaluating corporate social responsibility (CSR) performance. EcoVadis’ methodology includes:
Multicriteria assessment: companies are evaluated on environmental, social, ethical, and supply chain criteria. Environmental criteria include GHG emissions management, natural resource management, and chemical practices.
Evaluation process: ecoVadis analyzes documents provided by the company, such as policies, reports, and certifications, to assess performance. An algorithm scores the performances and provides a detailed report.
Scoring process: companies receive a score out of 100, along with a detailed report on strengths and areas for improvement. A higher score indicates strong CSR practices and performance. This score can be used for communication with business partners and investors.
These frameworks and tools provide structured methods for companies to measure, manage, and communicate their environmental impacts and emissions reduction initiatives. By adopting these standards, companies can improve transparency, strengthen credibility, and meet the expectations of investors and other stakeholders regarding sustainability and climate responsibility.
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We support businesses and funds willing to engage in long-term and impactful decarbonization strategies - within and beyond their own value chain - by designing, implementing and monitoring science-based carbon reduction projects that restore natural ecosystems.
Through technology and innovative solutions, we aim at shaping a resilient and environmentally friendly world, by encouraging the decarbonization of the economy and supporting social and environmental initiatives.
You can drive positive change for the climate, biodiversity and local communities.
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