Native weather trade, sustainability, and ESG concerns are more and more taking middle stage in corporate boardrooms internationally. When measuring and communicating corporate sustainability performance by plan of sustainability experiences or rankings, executives face a all of sudden evolving and intricate instruct of choices. In consequence, corporations are inclined to falling within the abet of or deciding on opposed experiences and rankings that don’t drive sustainability performance and open the door to accusations of greenwashing. This article introduces the sustainability reporting matrix, a instrument that helps executives and sustainability managers to accommodate the sustainability reporting standards and rankings which may perhaps well well well be most carefully aligned with their strategic necessities and the details needs of their stakeholders.
Deciding which metrics to use when reporting on corporate sustainability performance may perhaps well well well additionally additionally be overwhelming for executives. Some corporations convey only their greenhouse gasoline emissions, whereas others put up modern experiences about their CSR (corporate social accountability) initiatives or use their ESG (environment, social, and governance) rankings as a badge of honor. But most executives don’t know why — or when — to rep one among these experiences over one other.
The previous decade has seen a exclaim in sustainability reporting solutions. The abundance of preference may perhaps well well well additionally additionally be terrible for executives. With so many solutions, corporations can cease up investing in sustainability disclosures, whereas aloof no longer assembly the expectations of legislators, shoppers, investors, and staff. In addition, the train of disclosing data usually does no longer translate into necessary action or affect.
Dubai’s Sustainable City no longer too lengthy within the past developed a bigger methodology to navigate this advanced instruct of choices. The 46-hectare mixed-use neighborhood is designed to assemble salvage-zero vitality, nonetheless the developer’s data arm (the SEE Institute) didn’t know obtain out how to simplest convey on achievements in opposition to that purpose. It became refined to rep from a huge different of reporting standards, every with a irregular stare of what sustainability reporting need to aloof quilt. The worldwide sustainability rankings it reviewed didn’t fit the native context, whereas domestically developed rankings lacked global comparability.
In accordance with these challenges, we developed a matrix to categorize reporting standards and rankings. By categorizing all readily available reporting and rating solutions by methodology of the scope of issues they quilt and their target viewers, executives on the Sustainable City have faith been in a station elaborate a sustainability reporting methodology that suits the needs of the corporate and its stakeholders. The train resulted in an annual sustainability convey that centered on the most severe environmental discipline that the Sustainable City can affect: the reduction of greenhouse gasoline emissions, measured in response to the Greenhouse Gas Protocol and verified by an exterior celebration.
Because no longer one among the gift rankings have faith been discovered as a plan to adequately summarize an entity’s greenhouse gasoline emissions reduction performance, it became firm no longer to search a sustainability rating. This decision enabled the corporate to focal level its communication on its severe message of combating climate trade and earned it a pair of regional awards for its sustainability reporting. Communicating data on greenhouse gasoline emissions to the Sustainable City’s residents additionally helped them to replicate on how they may perhaps well well perhaps additionally abet within the reduction of emissions by plan of behavioral trade.
Dubai’s Sustainable City is never any longer irregular within the decisions it needed to contrivance. The matrix we developed can abet others obtain the optimal methodology for deciding on every sustainability reporting and sustainability rankings. Here’s how it works.
Sustainability reporting standards
Sustainability reporting refers to the details that corporations provide about their performance to the open air world on a peculiar foundation in a structured methodology. Sustainability rankings (discussed below) provide a summary indicator of an entity’s performance.
There are no longer decrease than seven well-identified sustainability reporting frameworks and standards readily available, every one backed by credible organizations and with reputable folks on their Board. In alphabetical advise they’re:
- CDP – Carbon Disclosure Project
- CDSB – Native weather Disclosure Standards Board
- GRI – World Reporting Initiative
- IIRC – International Integrated Reporting Council
- SASB – Sustainability Accounting Standards Board
- TCFD – Taskforce on Native weather Connected Disclosures
- WEF IBC – World Financial Forum International Industry Council
Each and every long-established deals with a irregular scope of subject from slim (an real sort out greenhouse gasoline emissions, for instance) to huge ones (encompassing all of ESG or your complete differ of UN Sustainable Pattern Targets), and caters to various differ of audiences from a slim instruct of stakeholders (primarily investors) to broader groups, alongside side possibilities, staff and society at trim.
The first matrix developed by Dubai’s Sustainable City sorted by plan of these variations by placing subject on one axis and viewers on the opposite. The corporate then analyzed all of the predominant global sustainability reporting standards and positioned every one within the relevant quadrant on the matrix.
The usage of this matrix, executives can see that if they have faith to convey on the lisp dangers that climate trade advise to its financial results, they’ll rep to use CDSB (a explicit long-established) or TCFD (a huge framework). Companies having a perceive to convey on a huge different of disorders (such because the corporate’s contribution to the UN Sustainable Pattern Targets) can use SASB and IIRC, which have faith now merged into the Charge Reporting Initiative.
On the pause half of of the chart, the CDP specializes within the affect of a company on the greenhouse gasoline emissions. CDP enables corporations to convey their affect on climate, water and forests, with reporting on climate in total in conserving with the Greenhouse Gas Protocol. At final, corporations having a perceive to convey on a huge instruct of environmental and social issues can use GRI or the WEF IBC. GRI is the arena’s most broadly dilapidated sustainability reporting long-established. The WEF IBC has mapped its possess metrics to GRI standards, enabling some stage of comparability between the 2.
Managers who use this matrix must rep whether or no longer to focal level reporting only on environmental ingredients or to embody a broader instruct of non-financial issues within the convey. A 2nd consideration is whether or no longer corporations are reporting their affect on the environment or the affect of the environment (in explicit, climate trade) on the corporate. The feeble query is of hobby to a huge instruct of stakeholders, whereas the latter is of relevance primarily to the corporate’s administration and investors. Though every are in conserving with a rep figuring out of climate trade and its causes, they’re in fact separate questions and use various reporting standards. The sustainability reporting standards matrix presents guidance on which standards are appropriate in every of the four scenarios that come up.
The 2nd matrix the Sustainable City developed charts sustainability rankings.
A sustainability rating presents an independently particular, standardized summary indicator of sustainability performance in conserving with a explicit instruct of criteria. These rankings are usually solicited and paid for by the entity being rated. Rankings assist as easy-to-realize communication instruments that can facilitate comparisons of performance between organizations and over time.
Executives face an very objective appropriate better diversity of sustainability associated rankings than reporting standards. In advise to facilitate decision making on which, if any, rankings to undertake, corporations first must rep whether or no longer they require a rating that is centered on environmental ingredients only or a on broader instruct of issues, resembling ESG concerns. In parallel, corporations must rep if they wish a rating that is aimed at investors only or at a wider instruct of stakeholders.
On the backside left, corporations having a perceive to discipline bonds for projects which may perhaps well well well be in conserving with the greenhouse gasoline emissions trajectory of the Paris Settlement can discipline green bonds. The Native weather Bonds Initiative is the predominant group that certifies green bonds, usually on the foundation of a verification implemented by accredited third parties. Issuance of green bonds is rising all of sudden and has surpassed a cumulative complete of $1 trillion in 2021.
On the backside ethical, ESG rankings revealed by the predominant global financial rating businesses and data providers in total measure both the usual of a company’s disclosure of information alongside ESG dimensions or the risk that corporations face on ESG associated issues. Regularly these two walk hand in hand, as corporations which may perhaps well well well be disclosing ESG data in a clear manner are usually perceived as much less dangerous. ESG rankings are aloof increasing, with a latest see finding little correlation between the ESG rankings of 5 main businesses. In accordance with Bloomberg, by 2025 one third of Assets Under Administration (much like US $ 53 trillion) can have faith an ESG focal level, so it is no surprise that corporations are paying rising consideration to ESG rankings.
On the pause half of of the matrix there are a few rankings that search advice from a huge different of stakeholders. Science Essentially based fully Targets verifies that corporate greenhouse gasoline emission reduction targets are in conserving with the targets of the Paris Settlement. Equally, rankings for the constructed environment (resembling LEED and BREEAM) talk sustainability characteristics of constructions and communities to a huge viewers. Other rankings, such because the dealer rankings from EcoVadis, assess corporate performance alongside a wider instruct of issues, alongside side environmental and social.
Superior Sustainability and Corporate Performance
Measuring, reporting and managing a company’s sustainability performance is barely going to have faith the next affect on corporate performance, recognition and risk. As corporations navigate in opposition to salvage zero, deciding on the ethical methodology is severe and senior executives must be sufficiently urged as a plan to actively take half within the dialogue and decision making. The sustainability reporting and rating matrices may perhaps well well well additionally additionally be precious instruments to deem by plan of a company’s decisions and abet contrivance obvious regulatory compliance, responsiveness to stakeholder needs and finally consequence in superior sustainability and company performance.