Five organizations devoted to sustainability reporting have announced a joint initiative to cut through the confusion that surrounds the disparate environmental, social and governance (ESG) standards and frameworks by developing a comprehensive corporate reporting system. Participants in this initiative include the Carbon Disclosure Project (CDP), the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB).

The initiative is meant to provide joint market guidance on how the organizations' various frameworks and standards can be applied in a complementary and additive way, a joint vision for how these elements can complement financial reporting and serve as a natural starting point for a coherent and comprehensive corporate reporting system, and a joint commitment to drive toward this goal through an ongoing program of deeper collaboration among them and a stated willingness to engage closely with other interested stakeholders.

The organizations noted that the financial information ecosystem, in contrast with the sustainability reporting one, is relatively mature, with the market aware of the differences between all the different standards, ratings and rankers.

"For example, the market would never confuse a credit rating agency, such as Moody’s, Standard & Poor’s, or Fitch, with a standard-setting organisation, such as IASB or FASB," said the statement. "Yet, similar confusion is common in the sustainability information eco-system." 

The coalition aims to arrive at the same level of maturity that the financial reporting ecosystem has already achieved via IFRS and US GAAP by gaining global legitimacy for sustainability disclosure frameworks and standards as part of a comprehensive corporate reporting system. These standards would provide a common set of sustainability topics and related disclosure requirements that would result in high-quality information being shared in the public domain, which can then be consumed by a wide variety of data aggregators, analytics providers, ratings and indices.

The heart of this concept is the development of a globally agreed-upon set of sustainability topics and related disclosure requirements. From this agreed-upon set, the organizations intend to identify and explore topics that are reasonably likely to affect a typical company’s financial condition, operating performance or risk profile in different industries, with an eye toward users whose primary concerns are economic in nature.

The organizations are taking what they called a "stepping stone" approach to this goal, which involves numerous bilateral efforts among coalition members. They would be akin to efforts already underway. The statement noted, for instance, that the SASB and CDSB have already jointly articulated to the market their complementary and interlocking nature, most notably through the co-branded publication of a TCFD Implementation Guide and Good Practice Handbook, which combine CDSB’s guiding principles and reporting requirements with SASB’s industry-specific metrics. It also noted that the GRI and the IIRC ran the “GRI Corporate Leadership Group on integrated reporting” that helped companies adopt both GRI and the <IR> Framework, and that the GRI and SASB have announced a collaborative work plan, which includes demonstrating how their respective standards can be used concurrently.

"We believe that the conditions are ripe for the development of a market-based and globally coherent solution for sustainability disclosure standards," said the statement's concluding remarks. "Climate change, the global pandemic and the increasingly clear connection between sustainability performance and financial risk and return are driving the urgency. Stakeholders across the eco-system have recognised this and, through the various initiatives and calls for action from many players, including policy makers, there is a groundswell of support for a system change."