TradeBeyond’s Q4 2023 Retail Sourcing Report is out now, and it’s packed with timely research, facts, and analysis to help brands and retailers make the most informed sourcing decisions. In addition to critical updates on economic indicators and commodity prices, the report features extensive breakout sections on ESG and traceability, including a breakdown of the many third-party frameworks that have arisen to evaluate and report on corporate responsibility.
The goal of these frameworks is to provide transparency and accountability to stakeholders. In the past, reporting on ESG was voluntary, but going forward, all companies, especially those publicly traded, will be required to report on ESG. Currently, there is no single framework for ESG reporting, but several standard bodies have developed their own ESG frameworks.
We understand that navigating through these many emerging models can be daunting. We hope the following information makes it easier for you to decide which are most relevant for you. Of the “big three” reporting frameworks, the European Financial Reporting Advisory Group (EFRAG), the IFRS Sustainability Disclosure (ISSB) will both finalize their frameworks in 2023, while The Enhancement and Standardization of Climate-Related Disclosures for Investors (U.S. SEC) is likely to become mandatory for U.S. public companies and foreign private issuers within a few years.
Here is your guide to the major frameworks.
Carbon Disclosure Project (CDP)
The CDP was founded in 2000 and operates a well-known environmental disclosure system that companies use to report on business risks and opportunities related to climate change, water security, and deforestation. The CDP scores companies in each area for transparency with various stakeholders. Over 18,700 companies (including city governments) use their framework, with more than 3,700 in North America.
Climate Disclosure Standards Board (CDSB)
The CDSBP was set up to support the inclusion of ESG reporting in annual reports and 10-K filings. The first version of the CDSB framework was released in 2010, focusing on climate change issues, with expanded versions available in 2015 and a 2022 version covers social factors. The CDSB framework was adopted by 374 companies in 32 countries before being consolidated into the IFRS Foundation in 2022.
IFRS Sustainability Disclosure Standards (IFRS)
The IFRS standard is a new framework developed by the International Sustainability Standards Board (ISSB), set up in 2021 by the International Financial Reporting Standards (IFRS) Foundation. The goal is to create a unified set of disclosure standards that will be used globally to report ESG data to investors. It included general and specific information disclosures, which were released in June 2023.
Global Reporting Initiative (GRI)
The GRI standards are a modular framework which includes sets of universal, sector-specific and topic-based sustainability reporting standards. First published in 2000, the GRI released updates in 2016, 2019, and 2021. The standards are relevant beyond companies to investors, governments, policymakers, and other stakeholders.
Organization Environmental Footprint (OEF)
The OEF is a Lifecycle Assessment (LCA) methodology developed by the European Commission as part of Product Environmental Footprint (PEF) to quantify the environmental impacts of organizations such as businesses, governments, and other bodies. It is similar to the PEF, except it applies to organizations.
Principles of Responsible Investment (PRI)
The PRI was developed by an international group of institutional investors to cover the increasing relevance of environmental, social, and corporate governance issues to investment practices. Launched in 2017, this framework is based on a set of six guiding principles which are voluntary and aspirational. The PRI claims signatory base of almost 5,000 companies
Product Environmental Footprint (PEF)
The PEF is an initiative by the European Commission to devise a common methodology and set of standards to measure and communicate on environmental performance through the product lifecycle of a product, from raw material sourcing through production and communication to consumers.
Sustainability Accounting Standards Board (SASB)
The SASB standards were released in 2018 to specify the disclosure of financially related sustainability information across 77 industries. It was the most popular choice for evaluating the ESG programs of IT suppliers among 400 IT professionals surveyed in 2022. The SASB was absorbed by the IFRS Foundation in 2022 and will likely be replaced when new IFRS standards are released.
Task Force on Climate-Related Financial Disclosures (TCFD)
The TCFD was created by the Financial Stability Board which monitors the global financial system. The TCFD released a set of 11 recommendations in 2017 focusing on governance, strategy, risk management and climate related metrics and targets. Over 4,000 companies have declared support for these recommendations and some countries have aligned their mandatory report in line with these standards.
Formed in 2000, the U.N. Global Compact is considered the largest corporate sustainability initiative. It emphasizes 10 principles covering human rights, labor practices, the environment and anti-corruption measures. Companies file an annual Communication on Progress (CoP) report, which is now digitized. Over 96,000 CoP reports have been submitted to date from 22,665 participants in 165 countries.
Workforce Disclosure Initiative (WDI)
The WDI was created in 2016 by ShareAction, a non-profit that supports sustainable investment practices with an ESG focus. This framework is modeled on the CDPs disclosure system, where companies that participate fill out an online survey and receive a disclosure scorecard that they can use for benchmarking against their peers. In 2022, 167 companies worldwide completed the survey.
While the ESG landscape is evolving rapidly, we will continue to provide you with insights to help you navigate this challenging environment. For more extensive coverage of these frameworks and other topics related to ESG, sustainability, and traceability, download the complete Q4 2023 Retail Sourcing Report and contact us any time to learn how TradeBeyond can help your company achieve its ESG goals.
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