The recent rise of climate-related disclosure frameworks has provided businesses with invaluable tools to measure, report, and improve their sustainability efforts. However, with multiple frameworks to report to, companies face a critical challenge when navigating the complexities of interoperability between these reporting standards and frameworks.
This article unpacks how four of the most widely adopted standards and frameworks, ISSB Standards (IFRS S1 & S2), European Sustainability Reporting Standards (ESRS), Global Reporting Initiative (GRI), and CDP (formerly Carbon Disclosure Project), align, differ, and complement each other.
Why Do These Frameworks and Standards Exist?
Every framework serves a distinct purpose, tailored to the needs of its stakeholders.
ISSB Standards: Aim to provide investors and financial statement users with material sustainability-related information to improve decision-making and valuations.
ESRS: Developed as part of the Corporate Sustainability Reporting Directive (CSRD), they aim to provide investors, affected stakeholders, and regulators with comprehensive sustainability-related information.
GRI: This standard aims to increase the consistency of sustainability-related disclosures, particularly of non-financial information, to increase accountability to stakeholders.
CDP: This framework aims to drive sustainable investment and decision-making by encouraging comprehensive disclosure of environmental impacts. This is for the benefit of the reporting companies as well as external stakeholders.
The Key to Effective Reporting: Understanding Materiality
Materiality defines what gets disclosed and varies across frameworks.
ISSB Standards: Focus on financial materiality, with the definition aligning to the ESRS definition.
ESRS: Applies double materiality, which considers both financial materiality, i.e., the effect of impacts, risks and opportunities (IROs) on the company’s financial performance, and impact materiality, i.e., the effect of the company’s operations on society and the environment.
GRI: Applies impact materiality and are “the only global standards with an exclusive focus on impact reporting for a multi-stakeholder audience.” (GRI – The materiality madness: why definitions matter, 2022)
CDP: Applies double materiality, as companies should provide data about their impact on stakeholders, as well as the risks and opportunities sustainability issues present to their valuation (CDP – The EU takes a big step to further global sustainability standards, 2021).
Where Climate-Related Disclosures Overlap
Despite their differences, these frameworks and standards converge on critical areas.
Integration with GHG Protocol and TCFD: All frameworks rely on the GHG Protocol and the Task Force on Climate-Related Financial Disclosures (TCFD), which are globally recognized standards for greenhouse gas (GHG) emissions reporting and climate risk disclosures.
Mutual Compatibility:
- The ISSB and ESRS offer detailed interoperability guidance.
- CDP aligns with ISSB, making it a reliable tool for those adopting IFRS S2.
- GRI complements ESRS and CDP, enhancing impact reporting through shared standards. It is also collaborating with the ISSB to become fully interoperable in the future.
Tips for Streamlining Compliance with Climate-Related Disclosures
Here are some practical takeaways to get started, streamline compliance, and maximize efficiency in reporting processes.
1. Start with a Climate Materiality Assessment to Identify the Risks and Opportunities to Disclose
Conducting either a traditional climate materiality assessment or a double materiality assessment will help to inform which climate-related risks and opportunities exist and could support the disclosure of ESRS E1 (Climate Change). Once this has been undertaken, mapping to ISSB, GRI, or CDP becomes significantly easier, as the core fundamentals will be known.
2. Leverage Existing Disclosures
For companies already reporting under CDP or GRI, these frameworks can serve as stepping stones to meet ESRS requirements. Their alignment with ISSB simplifies this transition.
3. Prioritize Climate Metrics
Given the high degree of alignment on climate-related disclosures, focus on areas like GHG emissions reporting and climate risks to achieve interoperability with minimal effort.
4. Use Technology to Simplify Mapping
Platforms such as Novata can help streamline data collection, simplify materiality and double materiality assessments, and map disclosures across frameworks, saving time and ensuring accuracy.
Looking Ahead
Efforts to harmonize climate disclosure frameworks are accelerating. With full interoperability announced in 2024 and new mapping tools on the horizon, the reporting landscape is becoming less fragmented. Of all the frameworks, the ESRS are arguably the most comprehensive, but as one of the most recently published, they are also least familiar to companies.
We anticipate reporting entities will leverage existing disclosures in line with the CDP (which are fully aligned to the IFRS S2) and the GRI to help them complete the ESRS. However, this route will still require additional effort. First time respondents may benefit from starting with the ESRS, as it is the most granular, and then mapping to the other frameworks. Novata can support companies with materiality assessments and data collection related to all of the frameworks referenced in this article. Learn more about how Novata can support your sustainability reporting journey.
