ESG reporting framework with IBM Envizi

ESG frameworks serve as essential tools for organizations aiming to publicly disclose comprehensive environmental, social, and governance (ESG) metrics related to their business operations. This article delves into the ESG reporting frameworks, how organizations can strategically select the most fitting frameworks for their reporting needs. Additionally, this article explores the disclosure process within IBM Envizi and how organizations can effectively leverage this platform by aligning with specific frameworks.

Companies use ESG reporting frameworks to disclose data encompassing their business operations, opportunities, and risks associated with environmental, social, and governance (ESG) aspects. These frameworks are crafted by diverse entities such as NGOs, stock exchanges, business groups, non-profits, think tanks, and governments. Despite the existence of numerous ESG frameworks, only around a dozen are considered significant. Each framework typically defines metrics, qualitative elements, format, and reporting frequency for companies. While some frameworks are voluntary, others are mandated by governments.

In response to growing investor and community interest, organizations are actively pursuing sustainability performance improvements, establishing ESG goals, and reporting on their achievements. Neglecting to address ESG risks seriously could lead to various negative impacts on firms. The significance of ESG is evident as organizations increasingly report their ESG impact using a diverse range of frameworks.

To get more information about IBM Envizi or to try it out yourself, start your 14-day IBM Envizi ESG Suite trial. You can also request a personalized IBM Envizi demo.

ESG frameworks landscape and coverage

The ESG frameworks landscape can be categorized into the following five key areas. Example frameworks for each catogrory are also shown.

• Global Agreements: Legally-binding commitments between entities aimed at achieving specific outcomes of global importance, typically facilitated through diplomacy.

  

• International Frameworks: Structures developed by independent organizations that enable corporations and financial institutions to categorize, share, and communicate information.

  

• Corporate Reporting Standards: Uniform criteria for entities to report against, harmonizing disclosures across a given industry or set of industries.

  

• Market Regulations: Regulations with significant implications for activities across a macroeconomic landscape, driving a paradigm shift.

  

• Domestic Legislation: National or state laws, funding package, or executive order directing local activities.

  

Every major ESG reporting framework has varying emphasis on key ESG performance metrics. The following matrix provides an overview of the focus areas within each reporting framework.

Selecting ESG reporting frameworks

Navigating the landscape of ESG reporting involves sifting through numerous frameworks. Employing different lenses to assess and categorize these frameworks can help in selecting the most fitting ESG reporting approach for your organization.

Lens 1: Potential for impact

Initiating the decision-making process involves considering where your organization can exert the most influence based on materiality assessments. Materiality guides organizations to concentrate on ESG issues that are relevant and to measure impact on the business. For example, a large-cap e-commerce company may focus on packaging materials and waste (environmental), supply chain labor standards (social), and business ethics (governance) in its materiality assessment.

Lens 2: Stakeholder expectations

Understanding stakeholder expectations is crucial. Different stakeholders may prefer specific ESG frameworks. For example:

• Investors, boards, insurers, and creditors may favor Task Force on Climate-related Financial Disclosures (TCFD) or Sustainability Accounting Standards Board (SASB).
• Employees and consumers may align with United Nations Sustainable Development Goals (UN SDGs).
• Governments or regulators may lean towards Streamlined Energy and Carbon Reporting (SECR) or National Greenhouse and Energy Reporting (NGER).

Lens 3: Geography

Geographical considerations play a role, with certain ESG reporting frameworks mandated by law or tailored to local conditions. Examples include ENERGY STAR (North America and select other countries), SECR (UK), and NGER (Australia).

Lens 4: Sector preference

Different sectors align with specific ESG reporting frameworks. For example, the Global Real Estate Sustainability Benchmark (GRESB) is tailored to assess the sustainability performance of real estate and infrastructure portfolios.

Lens 5: Framework coverage

Understanding the diverse focus areas of ESG reporting frameworks is important. Each framework has varying emphasis on key metrics such as environment, social, governance, carbon, energy, and waste. Knowing which indicators a framework emphasizes can guide the selection process effectively.

Optimizing ESG reporting with IBM Envizi

Traditional spreadsheet approaches prove inadequate in efficiently managing ESG data amid increasing stakeholder and regulatory demands, particularly for complex global organizations reporting across multiple frameworks.

Much like dedicated IT systems for process support, secure accounting systems for financial data, and HR systems for personnel information, ESG reporting demands dedicated attention. Leveraging a specialized software platform offers significant advantages for organizations, enabling seamless capture of activity data, precise emission calculations, effective oversight of sustainability initiatives, and streamlined management of supply chain information. This becomes crucial for addressing the "E" (environmental) component of ESG, known for its intricate reporting and tracking requirements.

IBM Envizi ESG Suite facilitates organizational efficiency by automating data capture directly from the source and maintaining a centralized system. IBM Envizi streamlines ESG reporting across various frameworks, ensuring all responses align with internationally recognized standards such as SASB and GRI. This consolidated approach results in a framework library housing a singular dataset and repository of information, enhancing the coherence and accessibility of ESG reporting for organizations.

Navigating ESG frameworks with Envizi's SRM

The Sustainability Reporting Manager (SRM) in IBM Envizi helps organizations to capture, manage and report ESG quantitative metrics and questionnaire responses across many different ESG Frameworks.

This is the main page of the SRM tool, displaying the various disclosures prepared and ready for submission.

IBM Envizi's SRM serves as a comprehensive tool for organizations to capture, manage, and report ESG quantitative metrics and questionnaire responses across diverse ESG frameworks. Let's explore the key features of SRM.

The main page of the SRM tool displays various disclosures that are prepared and ready for submission.

Access the Framework Library to explore major ESG frameworks integrated into SRM. For more information, see [SRM Supported Frameworks] (https://knowledgebase.envizi.com/home/srm-supported-frameworks).

You can create custom frameworks tailored to the specific needs of your organization. The Custom Frameworks section showcases a list of frameworks that are customized for the organization's unique requirements.

SRM provides a list of questions that are available within each framework. This helps organizations in understanding the scope and depth of inquiries.

Explore a detailed view of the disclosure process, illustrated through the CSR 2022 example. The disclosure contains questionnaires from prominent ESG frameworks such as TCFD, SASB, GRI, UN SDGs, EU Taxonomy, and BRSR. Questions are categorized across the framework when the Use Cross-Framework Categorization option is checked.

Here, questions are categorized based on the framework when the Use Cross-Framework Categorization option is unchecked.

The question itself along with additional details are shown. IBM Envizi provides guidance to assist in filling out the answers to the question. The Sustainability Executive Report link is available to view and prepare the response. The related questions section is available to display similar questions from other frameworks. When providing a response, you have the option to include supporting Links and Attachments.

ESG frameworks in detail

This section provides an overview of sustainability performance indicators used in each ESG framework, categorizing them into four groups:

• Benchmark frameworks: These frameworks necessitate responses to all questions and often include a scoring element.

  • Carbon Disclosure Project (CDP) focuses on providing stakeholders, including investors, employees, and customers, with environmental information such as governance policies, risk and opportunity management, environmental targets and strategy, and scenario analysis. CDP offers questionnaires on climate change, water, and forests.
  • Global Real Estate Sustainability Benchmark (GRESB) assesses the sustainability performance of real estate and infrastructure portfolios and assets. Stakeholders, including investors and asset managers, benefit from material insights aligned with international reporting frameworks. Participants receive comparative business intelligence, a roadmap for improvement, and a communication platform.

• Voluntary Frameworks: These frameworks allow flexibility in choosing questions based on industry and materiality, with no standardized scoring.

  • Global Reporting Initiative (GRI), a globally applicable reporting standard, is organized into Universal Standards, Sector Standards, and Topic Standards, covering environmental, social, governance, and other topics.
  • Task Force on Climate-related Financial Disclosures (TCFD) addresses climate-related financial risks across 11 disclosures, categorized into governance, strategy, risk management, and metrics/targets.
  • Value Reporting Foundation (VRF) (SASB and IIRC) formed by merging SASB and IIRC, provides resources such as Integrated Thinking Principles, Integrated Reporting Framework, and SASB Standards, facilitating the disclosure of financially material sustainability information.

• Regulatory Frameworks: These frameworks, requiring responses to all questions, are mandated by government bodies.

  • Corporate Sustainability Reporting Directive (CSRD), a regulation by the EU, focuses on double materiality assessment, requiring disclosure of how business activities impact the planet and its people, and how sustainability goals affect financial health.
  • Business Responsibility and Sustainability Report (BRSR), designed by the Securities Exchange Board of India, aligns with globally accepted frameworks, requiring disclosures related to general information, management processes, and principle-wise performance.
  • Securities and Exchange Commission (SEC) Climate Rule mandates US publicly traded companies to disclose annual climate-related information, including GHG emissions, climate-related risk, impacts, targets, and goals.
  • Sustainable Finance Disclosure Regulation (SFDR) mandates ESG reporting for EU financial entities through a Principal Adverse Impact (PAI) statement, including quantitative indicators and emissions reporting.
  • National Greenhouse and Energy Reporting (NGER) in Australia collects emissions-related data about GHGs, requiring records for external audit on relevance, completeness, consistency, transparency, and accuracy.
  • Streamlined Energy and Carbon Reporting (SECR) in the UK guides organizations in disclosing energy use, GHG emissions, and related information, mandatory for quoted companies and voluntary for unquoted large companies.

• Rating Agencies: These frameworks involve scoring and respond to a non-public questionnaire.

  • ENERGY STAR® in North America rates commercial buildings on energy performance, allowing owners to benchmark against peers.
  • Dow Jones Sustainability Indices (DJSI) and Corporate Sustainability Assessment (CSA) tracks companies' economic, environmental, and social performance, using CSA questionnaires to assess sustainability.
  • National Built Environment Ratings Scheme (NABERS) AU rates Australian buildings on a six-star scale, comparing performance to benchmarks in energy, water, and waste consumption.

Information sources for ESG frameworks

For regular updates and guidance on emerging trends and changes in the ESG reporting landscape, refer to the following directory of information sources.

Conclusion and next steps

This article provided an overview of ESG reporting frameworks and explored how IBM Envizi utilizes these frameworks to create disclosures.

To get more information about IBM Envizi or to try it out yourself, start your 14-day IBM Envizi ESG Suite trial. You can also request a personalized IBM Envizi demo.