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Disclosure Standards and Frameworks: What Does it All Mean to Stakeholders?

Given President Biden’s recent Executive Order on Climate-Related Financial Risk1, and in particular, the Securities and Exchange Commission’s (SEC) request for public input, the stated policy goal of regulating ESG (Environmental, Social, and Governance) disclosures, including climate-related data, is an attempt at providing investors and other stakeholders with consistent, comparable, and reliable data that may be used to make informed investment decisions. Whether disclosure of ESG data, or specifically climate-related data, continues to be under a voluntary principles-based approach, is yet to be determined. While financially material information is already required to be disclosed under existing SEC regulations, and 90% of S&P 500 companies produced suitability reports, consistency and comparability of that data is driving the disclosure issue.

Disclosure is at the core of ESG issues. While what encompasses ESG is for a different discussion, assuming the “what” is determined, the difficult question for companies then becomes “how” to disclose their ESG data. Specifically, what standards and frameworks to use and whether the metrics used adequately represent an individual company’s assessment of relevant disclosure material?

There are several different standard and framework setters including those created by government agencies, non-profits, and industry-developed. Who are the leading standard and framework setters and what is their role in providing relevant information to the public?

Historically, sustainability issues, sometimes including such terms as “corporate social responsibility,” were relegated to what has been referred to as “impact-investors.” These investors wanted their investments to have an impact on the issues they thought important. Then, as concerns about climate change increased, large institutional investors, such as BlackRock, State Street, and Vanguard started asking for more ESG-type information from companies. This resulted in companies compiling sustainability reports. These sustainability reports often included qualitative data unique to the individual company. Additionally, the broader investment community and stakeholders were interested in comparing data between companies as well as data on how companies were impacting the environment. This brings us to the standard and framework setters who had already begun to establish principles and templates for disclosure.

Over the years there have been many broad-based standards and frameworks contemplated, but the “Group of Five” (Group) have been the most widely used and are now collaborating on certain issues. The Group includes: The Global Reporting Initiative (GRI); CDP (formerly, the “Carbon Disclosure Project”); The Climate Disclosure Standards Board (CDSB); The International Integrated Reporting Council (IIRC); and The Sustainability Accounting Standards Board (SASB). While the Group has different approaches to their standards and reporting, there is overlap that they, as a group, consider complementary. This overlap can be seen in the brief description of each.

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"The Group of Five"

The Global Reporting Initiative (GRI) is an international organization created in 1997 to ensure companies follow certain environmental conduct principles. Originally, it provided guidelines for sustainability and then in 2016 transitioned to produce global standards on various topics. Today, its purpose is to assist organizations and government entities evaluate, and ultimately communicate, the impacts they have on the broader environment. GRI, differentiates itself from the others of the Group in that it covers the broadest range of impacts to include those on the economy, environment, and people. GRI also views materiality from the perspective of each stakeholder.

CDP (formerly, the “Carbon Disclosure Project”) is a non-profit created in 2000 to address corporate impact on the environment including reducing GHG (greenhouse gas) emissions, protecting water resources, and preserve forests. They advocated that transparency on global environmental issues would ultimately reduce environmental harm. Today, CDP manages a “global disclosure system for investors, companies, cities, states, and regions to manage their environmental impacts.”

The Climate Disclosure Standards Board (CDSB) was formed in 2007 by a group of global NGOs and businesses to integrate climate change related data into financial reporting. It created a framework for reporting environmental and climate-related information. The goal was to give investors “decision-useful information” given the importance of understanding both natural and financial capital. CDSB advocates that investors, analysts, companies, regulators, stock exchanges, and accounting firms can all benefit from a transparent framework for reporting environmental information.

The International Integrated Reporting Council (IIRC) was established in 2010, with some assistance from the GRI, to establish a globally accepted integrated reporting framework. IIRC developed the Integrated Reporting Framework which incorporates “a set of guiding principles and content elements” to help businesses integrate their reporting. IIRC differentiates itself from others in the Group by incorporating the generally accepted accounting principles in its framework, as opposed to only sustainability disclosure standards.

The Sustainability Accounting Standards Board (SASB) was created in 2011 to develop sustainability accounting standards initially with a focus on U.S. based companies. SASB has worked with businesses and other stakeholders to create 77 industry specific ESG disclosure standards. The standards are intended to help investors and other stakeholders asses the materiality of reported sustainability information and be able to compare companies on their disclosed information under a broad range of metrics. SASB differentiates itself from the others in the Group in that their standards focus on capturing data that is financially material for each industry standard.

In 2021, SASB and IIRC merged and renaming themselves the Value Reporting Foundation (VRF). The merger is touted as a response to both global investors and corporations calling for a simplified corporate reporting structure. The merger brings together IIRC’s integrated reporting and SASB’s sustainability disclosure standards.

SASB has also collaborated with GRI on a guide for companies to disclose under both standards. The guide focuses on the similarities and differences in their individual reporting standards including materiality, scope of disclosure, intended audiences, and their standard setting process.

In addition to the merger of SASB and IIRC, and collaboration with GRI, all three organizations recently collaborated with CDP and CDSB on a paper titled “Reporting on Enterprise Value” which was released in December of 2020. The collaboration embraced a vision for a global corporate reporting system using a common language. The conceived reporting system would not replace sustainability reporting, but rather specifically called for global standards for “sustainability-related financial disclosure.” In addition, they recommend using International Accounting Standards Board (IASB)’s Conceptual Framework for Financial Reporting as a starting point to bring together both financial accounting standards and sustainability-related financial disclosure standards. Lastly, the paper advocates for incorporating TCFD’s recommendations (see below) on climate-related financial disclosure because it helps stakeholders “understand how reporting organizations assess climate-related risks and opportunities.”

According to the Group, one of the most challenging aspects of the collaboration was on the definition of materiality. The materiality issue is a common theme of discussion when it comes to disclosure. Essentially, materiality is who (corporations or governments) decides what information is material (U.S. Supreme Court or E.U./non-profit definition) to whom (investors or society) and when (past, present, or future)? In addition to the U.S. Supreme Court’s definition, the notions of double, dynamic, and most recently in the Group’s collaboration the concept of nested materiality will factor in many discussions moving forward.

Other Standards, Recommendations, Templates, Metrics

In addition to the Group, there are widely used recommendations such as those from the Task Force on Climate-related Disclosures (TCFD), but also industry-lead standards, templates, and metrics. Given the Biden Administration’s focus on climate-related disclosures, and the SEC in particular, it’s pertinent to address those industry-lead disclosure efforts in the energy sector, but first a note on TCFD.

The Task Force on Climate-related Disclosures (TCFD) was created in 2015 by the Financial Stability Board which in turn monitors and recommends action on the global financial system. In 2017, the TCFD released a set of 11 climate-related financial disclosure recommendations. These recommendations include four core elements including: Metrics and Targets, Risk Management, Strategy, and Governance. While technically not a standard setter, its recommendations have been incorporated by the Group and widely praised by others. In fact, the largest institutional investor, BlackRock, strongly suggested that U.S. companies disclose using both SASB and TCFD.

The Edison Electric Institute (EEI), which represents all U.S. investor-owned electric companies, created a pilot program in 2017 as the first “industry-focused and investor-driven” effort to create a reporting template on ESG and sustainability-related information. In 2018, EEI partnered with the American Gas Association (AGA), which represents over 200 local energy companies, to create an “ESG/Sustainability” reporting template for their member companies to use so that investors and the broader financial sector would have a way to effectively compare companies within their industry sector. The template was a “stakeholder driven process” to provide both quantitative data and qualitative information. EEI meets semi-annually with investors, proxy services, trade associations, credit ratings agencies, ESG data providers, and various interested groups to help revise their template.

Other energy trade associations have followed suit. The American Exploration and Production Council (AXPC), which represents independent oil and gas exploration and production companies, responded to stakeholders who wanted more consistent information on the affect their membership’s operations had on the environment. As a result, in February of 2021, they released an ESG Metrics Framework and Template that included five key metrics: Greenhouse Gas (GHG) Emissions, Flaring, Spills, Water Use, and Safety. The American Petroleum Institute (API), which represents all segments of the oil and natural gas industry has, over the past 90 years, developed over 700 various standards on sustainability including safety, environmental issues, and efficiency. They recently released their Climate Action Framework which references a new template for reporting comparable climate-related data. In addition, API has partnered with the International Petroleum Industry Environmental Conservation Association (IPIECA), which was founded in 1974 to address environmental and social issues in the oil and gas sector, to create the “Sustainability Reporting Guidance for the Oil and Gas Industry” currently in its fourth edition to help companies with their sustainability reporting. IPIECA, which supports the Paris Agreement, has worked with the UN on implementing their Sustainability Development Goals (SDGs) by 2030.

It is also worth noting, that in January of 2020, the World Economic Forum (WEF) worked with the “Big Four” accounting firms to propose a set of 21 core ESG metrics, with 35 expanded metrics and disclosures. The “Group” of standard and framework setters supported the move by the WEF. The WEF has indicated that the metrics and disclosures are not meant to supplant other frameworks or industry-specifics ESG metrics.


Disclosure of ESG data has clearly moved from the periphery to the mainstream. The questions that policymakers need to ask themselves is what type of framework and standards should be used? There are multitude of options, but what is clear is that corporations have responded to the desire for ESG data as seen by the dramatic increase of corporate sustainability reports and the increased use of one or more of the multiple standards referenced here.

While all stakeholders have an interest in knowing how corporations impact our society and environment, investors have a right to certain financially material data to make sound financial decisions about their investments. However, regarding climate risks in particular, many have called for reviewing what is considered financially material. Non-profits, governments, and industry have all been working on how best to disclosure ESG data. While approaches vary, and many complement one another, to assist those determining what to disclose and those that rely on the disclosed information for investment decisions, as well as broader stakeholder interest, a common set of definitions and principles would go a long way in making ESG data more consistent, comparable, and reliable.

End Notes:

1 Executive Order on Climate-Related Financial Risk (May20, 2021); available at:

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