Choosing the Right ESG Framework for Your Company: Key Considerations and Factors

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Selecting the appropriate ESG framework for your business or organization is a critical step in making sure your ESG reporting accurately represents your performance and priorities.

There are various ESG frameworks available, each with a different emphasis and approach, so it's important to be aware of the ESG challenges and opportunities specific to your sector and to take into account the expectations of your stakeholders. To determine the best fit for your organization, it's important to evaluate the different ESG frameworks and seek professional guidance, if necessary.

By choosing the right ESG framework, you can guarantee that your reporting is thorough, meaningful, and relevant and that it aligns with your organization's sustainability objectives and principles.

Where do We Start? 

Choosing the right ESG framework for your industry can be a challenging task, as there are a variety of frameworks available, each with its own unique focus and methodology.

• Evaluate your industry's specific ESG risks and opportunities: Each industry faces different ESG risks and opportunities, so it's important to understand the issues that are most relevant to your organization and industry.
• Consider your stakeholders' expectations: ESG reporting is becoming increasingly important to investors, customers, and other stakeholders, so it's important to understand their expectations and choose a framework that aligns with these expectations.
• Review the different ESG frameworks: There are a variety of ESG frameworks available
• Seek expert advice: Consult with ESG experts or sustainability consultants who can help you evaluate the different frameworks and determine which one is best for your industry.
• Monitor developments in ESG reporting: ESG reporting is constantly evolving, so it's important to stay up-to-date on developments in the field and assess whether your chosen framework continues to be the best fit for your organization and industry.

The Most Widely Used Standards

Some of the most widely recognized ESG frameworks include the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and the United Nations' Sustainable Development Goals (SDGs).

• Global Reporting Initiative (GRI): GRI is a non-profit organization that provides a comprehensive framework for sustainability reporting. The GRI framework covers a wide range of sustainability topics, including environmental impact, social responsibility, and governance practices.
• Sustainability Accounting Standards Board (SASB): SASB is a non-profit organization that provides a set of standards for companies to disclose material sustainability information. The SASB framework is focused on providing relevant and concise information to investors, and it covers sustainability topics that are most material to a company's financial performance. An example of a company using the SASB framework is Procter & Gamble, which has been using it to report its sustainability performance since 2016.
• Task Force on Climate-related Financial Disclosures (TCFD): The TCFD is a group of experts established by the Financial Stability Board (FSB) to develop recommendations for companies to disclose climate-related financial information. The TCFD framework provides a comprehensive set of recommendations for companies to disclose information related to the physical and transition risks posed by climate change, as well as their opportunities and strategies for addressing these risks. An example of a company using the TCFD framework is BlackRock, which has been using it to report its climate-related financial information since 2018.
• United Nations Sustainable Development Goals (SDGs): The SDGs are a set of 17 global goals adopted by the United Nations in 2015 to achieve a sustainable future for all. The SDGs provide a framework for companies to align their sustainability efforts with the global community's priorities. Companies can use the SDGs as a benchmark to measure their impact on a wide range of sustainability issues, such as poverty, inequality, and climate change.

What to Consider Before Choosing a Framework OR Frameworks

Companies may choose to use two or more different frameworks by adopting a multi-framework approach, which involves using multiple frameworks to gain a comprehensive understanding of your ESG performance and sustainability priorities. This approach can be particularly useful for companies that operate in multiple countries or regions, as each framework may have different requirements and standards. By using a multi-framework approach, your company can gain a more comprehensive understanding of your ESG performance and sustainability priorities and can communicate this information to stakeholders in a meaningful and relevant way. This can help to build trust and support for your sustainability efforts and to enhance your reputation and competitiveness.

• Meeting stakeholder demands: Different stakeholders, such as investors, customers, and regulators, may have different expectations for ESG information, and companies may choose to use multiple frameworks to ensure they are meeting the needs of all relevant stakeholders.
• Completing multiple reporting requirements: Companies may be required to report ESG information to multiple organizations, each with its own reporting standards. In this case, companies may choose to use multiple frameworks to meet these different requirements.
• Ensuring completeness and accuracy of information: Different ESG frameworks may cover different aspects of sustainability, and companies may use multiple frameworks to ensure they are providing a comprehensive and accurate picture of their ESG performance.
• Keeping up with evolving ESG standards: ESG reporting standards are constantly evolving, and companies may choose to use multiple frameworks to keep up with these changes and ensure their reporting remains relevant and up-to-date.
• Improving the quality and reliability of ESG information: By using multiple frameworks, companies can benefit from best practices and common standards from different sources, which can help to improve the quality and reliability of their ESG information.

The Role of Technology

Technology plays a critical role in ESG reporting, as it enables organizations to collect, analyze, and communicate ESG data in a timely, accurate, and meaningful manner. There are various technology solutions that can help organizations with their ESG reporting, specifically in regard to Scope 1, 2, and 3 emissions.

• Carbon Accounting Software: This type of software helps organizations track and report their greenhouse gas emissions, including those from Scope 1 (direct emissions from owned or controlled sources), Scope 2 (indirect emissions from the generation of purchased electricity, heat, or steam), and Scope 3 (other indirect emissions, such as the production of purchased goods and services).

  • Example Companies: Carbon Trust, South Pole, Ecova, The Carbon Neutral Company, Verco, CDP, ERM, WSP, Enablon, and SAP

• Energy Management Systems: These systems monitor and analyze energy usage data, providing organizations with insights into their energy consumption and carbon footprint, including both Scope 1 and 2 emissions.

  • Siemens' EnergyIP: A comprehensive energy management platform that provides end-to-end visibility into energy consumption and carbon emissions, and helps organizations to optimize energy usage and reduce costs.
  • Johnson Controls' Metasys: An enterprise-level energy management system that integrates building automation, energy management, and sustainability tracking into a single platform, and helps organizations to optimize energy consumption and reduce costs.
  • Honeywell's Energy Manager: A cloud-based energy management system that provides real-time monitoring and control of energy consumption, and helps organizations to reduce energy usage and carbon emissions.
  • IBM's Maximo Energy Management: An integrated energy management solution that helps organizations to manage energy consumption and costs, and to track carbon emissions and sustainability performance.
  • ABB's Ability Energy Management: A comprehensive energy management platform that provides real-time monitoring and control of energy consumption, and helps organizations to optimize energy usage and reduce costs.
  • Rockwell Automation's FactoryTalk EnergyMetrix: A real-time energy management solution that provides organizations with visibility into energy consumption, costs, and carbon emissions, and helps organizations to optimize energy usage and reduce costs.

• Supply Chain Management Systems: These systems can help organizations track and report on the environmental and social impact of their supply chain, including the emissions generated by their suppliers (Scope 3 emissions).

  • SAP Ariba: An end-to-end procurement solution that helps companies manage their entire procurement process, from sourcing to invoicing.
  • Oracle SCM Cloud: A cloud-based SCM solution that offers a range of tools for managing procurement, manufacturing, inventory, and logistics.
  • Infor SCM: A comprehensive SCM solution that includes features for procurement, manufacturing, logistics, and warehouse management.
  • Manhattan Associates: A leading SCM solution that provides integrated solutions for omnichannel retail, supply chain management, and omnichannel commerce.
  • JDA Software: A cloud-based SCM solution that provides a range of tools for planning, sourcing, manufacturing, delivery, and returns.

• Sustainability Reporting Platforms: These platforms provide organizations with a centralized, streamlined way to report on their ESG performance, including their emissions and energy usage, as well as other sustainability metrics, such as waste reduction, water usage, and social impact.

  • Carbon Trust Standard for Carbon Footprinting
  • CDP Sustainability Data Management
  • Enablon Sustainability Management Software
  • EY Sustainability Services
  • Trucost Environmental Data and Analytics
  • BREEAM Sustainability Assessment
  • Sustainalytics Environmental and Social Risk Analysis

• Artificial Intelligence and Machine Learning: These technologies can help organizations analyze large amounts of data related to their ESG performance and emissions, providing insights into trends and opportunities for improvement.

  • Vigeo Eiris: Vigeo Eiris provides ESG data, research, and analysis for over 6,000 companies worldwide. Its AI-powered tools help investors, asset managers, and sustainability professionals to assess and monitor ESG risks and opportunities.
  • Sustainalytics: Sustainalytics is a leading ESG research and analysis firm that provides ESG ratings and analysis for over 20,000 companies globally. The platform uses AI and machine learning algorithms to help clients make informed investment decisions.
  • MSCI ESG: MSCI ESG is a leading provider of ESG data, research, and analytics. Its platform uses AI and machine learning to deliver ESG insights and analysis for over 15,000 companies worldwide.
  • Refinitiv: Refinitiv provides ESG data and analysis for over 20,000 companies worldwide. The platform uses AI and machine learning algorithms to help clients make informed investment decisions and monitor ESG risks and opportunities.
  • Arabesque S-Ray: Arabesque S-Ray is an ESG analysis platform that provides ESG ratings, data, and research for over 7,000 companies globally. The platform uses AI and machine learning algorithms to help investors, asset managers, and sustainability professionals make informed decisions.

It's also important to keep in mind that no ESG framework is perfect, and each has its own strengths and limitations. It's important to carefully evaluate the frameworks that are most relevant to your needs and choose the one that best aligns with your objectives and capabilities. It is of utmost importance to stay abreast of current regulations that can impact your company or organization.