ESG Reporting Standards Decoded: Choosing the Right Framework for Your Business

This informal CPD article, ‘ESG Reporting Standards Decoded: Choosing the Right Framework for Your Business’ was provided by IFRS Lab, a leading ESG advisory and training institution committed to advancing sustainability.

In today’s evolving corporate landscape, environmental, social, and governance (ESG) disclosures are a strategic, regulatory, and reputational imperative. As capital markets tighten scrutiny and regulators push for greater transparency, ESG reporting is transforming from a soft sustainability gesture into a compliance-driven discipline.

Yet for many organizations—particularly in emerging markets or complex value chains—the question remains: Which ESG framework is right for us?

The answer is not generic. It requires a deep understanding of multiple variables, including your jurisdictional obligations, stakeholder expectations, operational footprint, and financial objectives. Selecting the wrong framework, or adopting a misaligned strategy, can not only lead to reporting fatigue—but also reputational risk, poor investor signaling, and regulatory non-compliance.

This article aims to demystify ESG reporting frameworks—decoding their purpose, differences, and applications—to help organizations make informed, technically sound, and strategically aligned decisions.

What ESG Reporting Really Means

ESG reporting is the structured disclosure of data on a company’s environmental impact, social practices, and governance structures. While the concept seems straightforward, the execution is far from uniform.

At its core, ESG reporting aims to:

• Improve transparency for investors, regulators, and stakeholders
• Mitigate long-term non-financial risks
• Support capital allocation aligned with sustainability outcomes

But beneath these objectives lies a fundamental distinction: materiality.

• Financial materiality: Disclosing ESG factors that influence enterprise value (investor-centric).
• Impact materiality: Disclosing how the company impacts the environment and society (stakeholder-centric).
• Double materiality: A hybrid of both—required by several leading global regulations (e.g., CSRD).

Understanding where your organization lies across this spectrum is the first step in selecting the right ESG framework.

The Big Five: Dissecting the Core ESG Reporting Frameworks

As the sustainability landscape matures, organizations are confronted with a multitude of ESG reporting standards—each developed with distinct philosophies, stakeholder priorities, and technical requirements. Understanding these nuances is critical not only for selecting a framework but for ensuring that the resulting disclosures are aligned with both compliance obligations and strategic intent.

Here, we present an in-depth analysis of the five most influential global frameworks shaping ESG reporting across markets:

1. GRI – Global Reporting Initiative

Focus: Stakeholder impact | Double Materiality

Type: Voluntary, but widely used globally

Primary Users: NGOs, public companies, development banks, consumer brands

The GRI Standards are the most widely adopted ESG reporting framework globally, used by more than two-thirds of the N100 use the GRI (68 percent). GRI pioneered the concept of impact materiality, emphasizing a company’s effects on the environment, people, and society—regardless of whether these impacts are financially material (1).

Technical Features:

• Modular structure: Composed of Universal Standards (foundation), Topic Standards (e.g., energy, water, diversity), and Sector Standards (industry-specific, e.g., Oil & Gas).
• Double materiality: Integrates both financial and impact dimensions in line with EU’s CSRD model.
• Granularity: Emphasizes detailed, disaggregated data (e.g., emissions by geography, gender diversity by job grade).
• Stakeholder inclusiveness: Requires stakeholder mapping and engagement in materiality assessment.

Use Case: Ideal for companies seeking to transparently disclose environmental and social impact to a broad stakeholder base, particularly in sustainability-led sectors like consumer goods, extractives, and development finance.

2. SASB – Sustainability Accounting Standards Board

Focus: Financial materiality | Industry-specific risk disclosure

Type: Voluntary (now part of ISSB under IFRS Foundation)

Primary Users: Institutional investors, financial analysts, CFO offices

SASB Standards are designed to identify the ESG issues most likely to impact a company’s enterprise value. Unlike GRI, which focuses on broad stakeholder concerns, SASB is built to integrate ESG metrics into financial reporting—making it a favorite among investors and asset managers (2).

Technical Features:

• Industry-specificity: 77 tailored standards ensure materiality is contextually relevant (e.g., water use in mining vs. software).
• Quantitative metrics: Each disclosure includes accounting metrics, technical protocols, and activity metrics (e.g., tons of CO₂ per unit revenue).
• SEC-compatible: Many US companies integrate SASB metrics into 10-K filings or financial statements.

Use Case: Best for companies targeting investor audiences, especially those in capital-intensive or high-risk sectors.

Note: SASB is now consolidated under ISSB, but the industry standards remain active and relevant.

3. TCFD – Task Force on Climate-related Financial Disclosures

Focus: Climate-related financial risks and opportunities

Type: Voluntary but increasingly mandated (UK, Japan, New Zealand, UAE)

Primary Users: Listed companies, banks, insurers, investors

Developed by the Financial Stability Board in 2017, TCFD provides a structured approach to assessing and disclosing climate-related financial risks. It emphasizes scenario analysis and governance integration—linking climate concerns with strategic and financial planning (3).

Technical Features:

• Four disclosure pillars: Governance, Strategy, Risk Management, Metrics & Targets.
• Forward-looking focus: Requires scenario planning (e.g., 1.5°C vs. 4°C pathways) and stress-testing against physical and transitional risks.
• Quantification: Encourages disclosure of Scope 1, 2, and where relevant, Scope 3 emissions, along with carbon pricing assumptions.

Use Case: Essential for climate-intensive sectors (energy, finance, logistics) and firms with global investor bases.

Integration: TCFD is now formally embedded in ISSB’s IFRS S2 climate disclosure standard, making it foundational for global alignment.

4. ISSB – International Sustainability Standards Board (IFRS S1 & S2)

Focus: Financially material sustainability disclosures | Global baseline

Type: Emerging global standard under IFRS Foundation

Primary Users: Public companies, multinational corporations, regulators

Standards Released: IFRS S1 (General Requirements), IFRS S2 (Climate)

Launched in 2021, ISSB represents a transformative effort to unify fragmented ESG standards under a single investor-grade reporting baseline. It consolidates elements of TCFD, SASB, and CDSB, aiming to standardize ESG disclosures in financial reporting (4).

Technical Features:

• IFRS S1: Covers general sustainability-related risks and opportunities material to enterprise value.
• IFRS S2: Climate-specific disclosures aligned with TCFD, including physical and transition risks.
• Interoperability: Designed to work alongside jurisdictional mandates like CSRD and regulatory taxonomies.
• Data structure: Emphasis on disclosing assumptions, metrics, and governance arrangements that affect enterprise valuation.

Use Case: For firms seeking global alignment, investor transparency, and assurance readiness. Ideal for companies preparing for integrated ESG-financial disclosure.

5. CSRD / ESRS – EU Corporate Sustainability Reporting Directive / European Sustainability Reporting Standards

Focus: Double materiality | Compliance-first ESG disclosure

Type: Mandatory (for large EU and EU-linked entities)

Primary Users: EU-listed companies, large subsidiaries, non-EU firms with EU footprint

CSRD is the EU’s flagship regulation for mandatory ESG reporting, replacing and expanding the previous NFRD (Non-Financial Reporting Directive). It introduces detailed, audit-ready disclosure obligations based on the ESRS developed by EFRAG (5).

Technical Features:

• Scope: Over 1,000 data points across ESRS 1 and ESRS 2 (cross-cutting), and topical ESRS E1–S4–G1.
• Double materiality: Companies must report on how sustainability issues affect their business and how their activities impact people and the environment.
• Third-party assurance: Mandatory limited assurance for ESG data, moving toward reasonable assurance.
• Value chain focus: Requires Scope 3 emissions, supply chain due diligence, and forward-looking disclosures.

Use Case: Mandatory for any large company operating in the EU (including subsidiaries and non-EU parents). Also, a reference model for regulators in UAE and other MENA regions exploring ESG mandates.

How to Choose the Right ESG Reporting Framework

The process of selecting an ESG reporting framework is not a matter of preference—it is a strategic exercise grounded in regulatory compliance, investor expectations, operational readiness, and long-term business positioning. This section provides a structured, technical approach for organizations to identify and adopt the most suitable ESG disclosure standard, ensuring both relevance and resilience in their sustainability journey.

1. Evaluate Regulatory Mandates and Jurisdictional Trends

The first and most immediate filter in the framework selection process is regulatory exposure. Organizations must begin by mapping their geographic footprint, entity classification, and capital market interactions against prevailing and emerging disclosure mandates.

For example:

• Companies operating within the European Union are legally obligated to adopt the CSRD/ESRS framework.
• Entities listed in the UK must comply with TCFD-aligned disclosures, with growing alignment toward ISSB standards.
• In the GCC region, especially the UAE and KSA, stock exchanges and regulators are increasingly encouraging alignment with TCFD and ISSB as part of national ESG strategies.

Strategic Considerations:

• Assess current and near-future ESG disclosure requirements in all jurisdictions of operation or investment.
• Monitor regulatory guidance issued by stock exchanges, financial regulators, and sovereign ESG frameworks.
• Consider voluntary alignment with international standards where domestic regulation is nascent but evolving.

2. Define Materiality: Financial, Impact, or Double Materiality?

The concept of materiality lies at the core of every ESG framework. Organizations must determine the lens through which ESG issues will be evaluated and reported.

• Financial materiality focuses on ESG factors that can affect the company’s financial condition or operating performance. This is the basis of frameworks such as SASB, TCFD, and ISSB.
• Impact materiality assesses how the company’s activities affect the environment, society, and broader systems, regardless of financial implications. Frameworks like GRI and CSRD emphasize this perspective.
• Double materiality requires reporting on both financial and impact aspects. This dual approach is mandated by CSRD and supported by GRI 2021.

Implementation Actions:

• Conduct a formal materiality assessment engaging internal and external stakeholders.
• Determine whether your disclosure objectives are investor-driven, compliance-driven, or focused on public accountability.
• Select a framework that aligns with the materiality orientation best suited to your business model and stakeholder expectations.

3. Align with Industry-Specific Disclosure Needs

Sectoral characteristics heavily influence ESG risk exposure and reporting obligations. The material ESG topics relevant to a utility provider differ substantially from those pertinent to a financial services firm.

Frameworks such as SASB provide highly detailed industry-specific guidance, while GRI Sector Standards focus on high-impact industries. ISSB is in the process of building sector-based interoperability based on its SASB foundation.

Key Steps:

• Map your primary business activities to the industry classification used by each framework.
• Review sectoral standards and disclosure topics to ensure relevance and precision.
• Ensure that the chosen framework captures the technical nuances of your operations (e.g., carbon intensity in heavy industry, product lifecycle in consumer goods, etc.).

4. Assess Organizational Readiness and Data Infrastructure

Framework selection must be calibrated to the organization’s current capacity for data collection, validation, and reporting. Many ESG frameworks, particularly CSRD and GRI Comprehensive, require detailed, auditable disclosures across operational boundaries and value chains.

Organizations at early stages of ESG maturity may begin with lighter frameworks such as SASB or GRI Core, gradually evolving toward more advanced disclosures.

Core Capability Assessments:

• Evaluate the availability and quality of internal ESG data (e.g., GHG inventories, employee diversity, supply chain metrics).
• Assess the presence of formal ESG governance structures, internal controls, and cross-functional reporting mechanisms.
• Determine the feasibility of third-party assurance or internal audit validation.

Actionable Recommendations:

• Conduct a data gap analysis aligned to your intended framework’s KPIs.
• Invest in ESG data platforms, reporting software, and internal training for ESG focal points.
• Establish internal ESG committees or integrate reporting responsibility within existing compliance functions.

5. Map Stakeholder Expectations and Disclosure Objectives

An effective ESG disclosure strategy must be stakeholder-informed. Different stakeholder groups—investors, regulators, customers, rating agencies, and the public—prioritize different frameworks and metrics.

For example:

• Institutional investors may prefer disclosures aligned with ISSB, TCFD, or SASB for their comparability and financial relevance.
• Development finance institutions, civil society, and B2B customers may expect alignment with GRI, CDP, or UNGC.
• Government buyers or PPP projects may evaluate ESG credentials based on CSRD, ISO standards, or specific taxonomies.

Stakeholder Engagement Actions:

• Conduct a stakeholder mapping exercise to identify ESG data users and their expectations.
• Align ESG report content with contractual, investor, or reputational expectations.
• Use engagement outcomes to prioritize framework selection and disclosure depth.

6. Consider Strategic Integration and Long-Term Use Case

Beyond compliance, ESG reporting is a tool for strategy execution, investment readiness, and risk management. Organizations must consider how ESG disclosures align with broader business goals.

For example:

• Companies planning to issue green or sustainability-linked bonds must align with frameworks such as TCFD, ISSB, and assurance-ready standards.
• Organizations aiming for integrated reporting may prioritize frameworks that can dovetail with financial statements or investor reports.
• Firms investing in sustainability-driven transformation should adopt frameworks that allow for tracking performance, scenario analysis, and transition planning.

Long-Term Planning Recommendations:

• Choose a framework that supports integrated thinking and enterprise risk alignment.
• Ensure forward compatibility with assurance requirements, ESG ratings, and sustainability taxonomies.
• Build ESG reporting into the strategic and financial planning cycles of the organization.

7. Implement a Phased Reporting Strategy Where Needed

For many organizations—especially those in developing markets or in early ESG maturity stages—it is both practical and strategic to implement ESG reporting in phases.

Phased Approach:

• Phase 1: Begin with foundational disclosures using SASB or GRI Core, focused on high-priority metrics.
• Phase 2: Build capabilities to integrate TCFD-aligned climate risk disclosures.
• Phase 3: Transition toward ISSB or CSRD readiness, including value chain assessments and assurance frameworks.

This approach minimizes disruption, improves quality over time, and enables stakeholder trust through incremental transparency.

Implementation Challenges and How to Overcome Them

1. Data Availability, Consistency, and Verification

The Challenge:

ESG data is often fragmented across departments, systems, and geographies. Unlike financial data, non-financial metrics—such as Scope 3 emissions, board diversity, or water usage—are not always collected with uniform definitions or controls. This leads to data gaps, inconsistent baselines, and credibility issues during assurance.

Root Causes:

• Lack of centralized ESG data ownership
• Absence of standardized data collection protocols
• Inadequate digital infrastructure for real-time monitoring
• Low confidence in third-party data from suppliers or subsidiaries

Solutions:

• Establish ESG data governance protocols: Assign responsibility for ESG data to specific functions (e.g., Sustainability, Risk, Compliance) and ensure they coordinate across business units.
• Develop ESG-specific data dictionaries: Standardize definitions, units of measurement, and sources to ensure consistency and comparability.
• Invest in ESG digital tools: Implement platforms that integrate with existing ERP, HR, and procurement systems to automate data capture and tracking.
• Introduce internal control systems for ESG data: Design validation workflows, periodic reconciliation processes, and audit trails to enable assurance and stakeholder trust.

2. Scope 3 Emissions and Value Chain Reporting

The Challenge:

Scope 3 emissions—those occurring in a company’s upstream and downstream value chain—can account for over 70% of total emissions for many sectors. Yet data on these emissions is often opaque, unreliable, or completely unavailable, especially in fragmented or globalized supply chains.

Root Causes:

• Supplier resistance or lack of capacity to provide emissions data
• Inconsistent emissions calculation methodologies
• Inadequate tools to model Scope 3 emissions across categories (e.g., purchased goods, employee commuting, end-of-life treatment)

Solutions:

• Segment Scope 3 into material categories and prioritize based on relevance and data availability (e.g., Category 1: purchased goods; Category 6: business travel).
• Use hybrid approaches: Combine supplier-specific data (where available) with spend-based or input/output models for less mature tiers.
• Engage Tier 1 suppliers: Introduce ESG clauses in procurement contracts, and offer supplier training programs on emissions disclosure.
• Leverage global guidance: Align methodologies with the GHG Protocol’s Scope 3 Calculation Guidance and ensure consistency over time.

3. Materiality Assessment Quality and Credibility

The Challenge:

A flawed or superficial materiality assessment undermines the integrity of the ESG report. Many organizations conduct desktop-level exercises without stakeholder engagement or scenario testing, leading to irrelevant or incomplete disclosures.

Root Causes:

• Overreliance on internal views without stakeholder triangulation
• Failure to update assessments in light of regulatory or market developments
• No documentation of process, assumptions, or prioritization logic

Solutions:

• Formalize materiality methodology: Define impact and likelihood scoring criteria, stakeholder engagement formats (interviews, surveys, workshops), and scoring thresholds.
• Adopt dynamic materiality reviews: Reassess material topics annually, particularly when new regulations or investor requirements emerge.
• Integrate dual lenses: Apply both impact and financial materiality assessments in line with double materiality principles (GRI, CSRD).
• Ensure documentation: Maintain a full audit trail of methodology, results, engagement insights, and board approvals.

4. Cross-Framework Mapping and Alignment Complexity

The Challenge:

Organizations operating in multiple jurisdictions often face the need to align with multiple frameworks (e.g., GRI for stakeholder reporting, ISSB for investors, CSRD for EU operations). Misalignment, duplication, or inconsistent mapping leads to reporting fatigue and stakeholder confusion.

Root Causes:

• Lack of technical expertise in inter-framework compatibility
• Absence of crosswalk tools or internal framework reference models
• Reporting teams working in silos across functions or markets

Solutions:

• Use interoperability tools: Employ official mapping resources (e.g., GRI–ISSB interoperability guidance, SASB–GRI linkage documents).
• Develop a master ESG reporting framework: Create an internal disclosure architecture that aligns KPIs across selected frameworks.
• Centralize ESG reporting oversight: Establish an ESG Disclosure Committee or steering group responsible for harmonization.
• Engage technical advisors: Involve ESG assurance specialists or consultants to validate alignment across overlapping standards.

5. Assurance Readiness and Audit Preparedness

The Challenge:

As ESG data begins to carry financial implications, many frameworks (e.g., CSRD) are introducing limited or reasonable assurance requirements. However, most companies are not yet structured for ESG audits—creating a gap between disclosure and verifiability.

Root Causes:

• Lack of internal ESG controls aligned with assurance standards
• Poor audit trail design and documentation
• Unfamiliarity with ESG audit criteria (e.g., ISAE 3000, AA1000AS)

Solutions:

• Build internal ESG control frameworks modeled on COSO ERM or ICFR practices, adapted for non-financial data.
• Design ESG audit-ready records: Implement documentation standards, change logs, metadata tagging, and archival protocols.
• Conduct pre-assurance diagnostics: Engage third-party reviewers for limited scope assurance before regulatory mandates apply.
• Train reporting teams on assurance expectations: Align internal capability with audit frameworks to reduce year-end disruption.

6. Change Management and Internal Engagement

The Challenge:

ESG reporting is often perceived as a compliance burden or external communications function. Without internal buy-in, especially from operations, finance, and HR, reporting efforts become disjointed and fail to drive real impact.

Root Causes:

• ESG responsibility siloed in one function (e.g., Marketing or CSR)
• Low understanding of ESG linkages to risk, strategy, and finance
• Absence of KPIs or incentives aligned with ESG outcomes

Solutions:

• Integrate ESG into business functions: Build ESG accountability into finance, procurement, risk, HR, and operations teams.
• Train internal stakeholders: Deliver function-specific ESG training (e.g., carbon accounting for operations, DEI metrics for HR).
• Align ESG with business strategy: Embed ESG KPIs into strategic dashboards, risk registers, and executive reporting.
• Tie incentives to ESG performance: Use ESG-linked KPIs in performance evaluation and compensation models.

Conclusion: Reporting Is a Means, Not the End

ESG reporting is more than a compliance task—it is a strategic function that informs capital, guides stakeholder trust, and steers long-term business viability.

Selecting the right ESG framework can unlock:

• Better access to capital
• Improved risk mitigation
• Enhanced brand reputation
• Regulatory preparedness
• Credible sustainability leadership

But to reap these benefits, your reporting must be authentic, technically sound, and aligned with evolving global standards.

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References:

1. https://assets.kpmg.com/content/dam/kpmg/se/pdf/komm/2022/Global-Survey-of-Sustainability-Reporting-2022.pdf
2. https://www.investopedia.com/sustainability-accounting-standards-board-7484327
3. https://www.deloitte.com/ch/en/services/consulting-risk/perspectives/tcfd-and-why-does-it-matter.html
4. https://www.grantthornton.global/en/insights/articles/overview-of-ifrs-s1-and-ifrs-s2/
5. https://www.ibm.com/think/topics/csrd