Working on ESG All Year But Still Not Getting the FTSE Russell Score You Deserve?
Let’s Fix That: Build a Simple Data System That Actually Gets You Points
Your ESG Score Didn’t Meet Your Goal—Even Though You Did the Work
You’ve been running ESG programs all year. You have sustainability policies in place. But your FTSE Russell ESG score still isn’t where you want it to be. Sound familiar? Here’s the good news: you’re probably doing more than you think. The issue isn’t the work itself—it’s how you’re organizing and showing that work. This year, let’s change that by setting up a straightforward data system that helps evaluators see what you’re actually doing.
Introduction
Many organizations have received their FTSE Russell ESG Rating scores, which were released in December 2025. Congratulations to those who achieved their target scores. For organizations that fell short, you might feel disappointed and wonder, “Why didn’t our score improve as expected when we’ve implemented so many ESG initiatives?” The answer isn’t about doing too much or too little work—it’s about having systematic data collection, documentation and evidence management, and disclosure practices that allow assessors to properly evaluate and score your efforts. This article provides an actionable roadmap to help you establish an ESG data management system throughout the year, enabling you to systematically elevate your scores with principles that support long-term sustainable operations.
Understanding FTSE Russell ESG Rating Assessment Principles
FTSE Russell assesses ESG based on verifiable data and disclosures with a clear audit trail for data sources. Publicly listed companies are evaluated annually, with the assessment cycle typically running from June through March of the following year. Scores become available approximately four weeks after the Index Review in June, with official results announced in December.
A critical part of the process is the Company Review Period, when companies can provide additional information. This is an essential opportunity for companies to clarify data and address questions from FTSE Russell, which can result in higher scores. Here’s a summary of what you need to ensure to earn.
5 Main Reasons Your Score Isn’t Improving Despite Additional Work
Based on experience working with multiple organizations, here are five commonly encountered issues:
1. Scattered Data with No Clear Data Owner or Job Owner
ESG data often resides across different teams and files, using inconsistent definitions. When compiling data for reporting, this frequently leads to inconsistencies or overlapping data that’s difficult to explain and utilize effectively.
2. Evidence Isn’t Public or Can’t Be Found
Even when organizations genuinely implement initiatives, if evidence isn’t publicly disclosed or easily searchable, assessors cannot award points. This causes organizations to miss out on well-deserved scores.
3. Irregular Data Collection Cycles
The “compile everything at year-end” approach often results in missing critical data or misalignment with assessment cycles. Year-end data collection not only risks incomplete data but also creates significant headaches for the team.
4. Policies Without Measurement, Plans Without Results
Since FTSE Russell assesses both “structure” and “outcomes,” having only policies without KPIs, or only numbers without governance frameworks, leads assessors to view the data as lacking foundation, resulting in incomplete scoring.
5. No Quality Assurance/Quality Control (QA/QC)
Organizations that change policies, plans, and definitions every quarter show no continuity in their initiatives. When current year data can’t be compared with previous years, the credibility of the program diminishes.
Change your perspective and make your ESG program “scorable,” not just “doable.” The key principle to understand is that scores don’t come from good intentions but from “provable systems.” Therefore, establishing an effective ESG data management system is more important than conducting numerous ESG activities without systematic documentation.
Organizing ESG Data Collection in 5 Steps
If you don’t know where to start, try following these steps to establish a data management system and elevate your ESG reporting scores:
1. Analyze Scores and Gaps
Clearly identify “where points were lost” and “what should be improved first.” Review the latest assessment results broken down by Pillar (Environmental, Social, Governance) and prioritize data based on score concentration. This will reveal your “priority fix list” to identify what’s urgent and should be addressed first. Don’t forget to include the names of responsible parties, reviewers, and approvers for each topic to plan subsequent work.
2. Create an ESG Data Management System
Establish consistent data collection that allows year-round comparison. Develop a data framework that typically includes definitions for each indicator, collection methods, units of measurement, data collection scope, base year, and data sources. Develop tools or methods to track ESG work and data covering all indicators, data collection status, responsible parties, and supporting evidence or reference documents. Remember to align data collection cycles with annual assessment schedules.
3. Prepare Evidence and Reference Documents for Public Disclosure
Make evidence and reference data easily searchable, verifiable, and public. Create standardized datasets for organization-wide communication and collaboration, including policies, operational procedures, and KPI definitions, so the entire organization shares the same vision and moves toward common goals.
4. Design Disclosure Strategy
Ensure disclosed information is clear, relevant to the criteria, and matches FTSE Russell keywords. Structure your reports and ESG website pages for easy searching with clear categories and convenient access. Content should cover governance, policies and practices, goals and indicators, program progress, and verifiable reference evidence.
5. Test Run and Prepare for Assessment
Reduce risks before entering the actual assessment process. In this step, verify consistency between outcome figures, actual programs, disclosed reports, and reference documentation to ensure all data sets align. Assessors may have questions and follow-ups. At this juncture, readiness to respond quickly with supporting evidence is crucial to ensure your report doesn’t miss deserved points.
Quick Start Checklist
If you want to start immediately, here are 8 steps to take first:
Assign data owners for each ESG topic – Designate clear responsibility for each area (E, S, G)
Create a one-page summary showing where score gaps exist, starting with key indicators that most impact scores
Build an ESG data tracking sheet – Use Google Sheets or Excel, but it must be accessible to everyone
Create a folder for reference documents, supporting evidence, and related data with systematic structure for easy searching
Set clear data collection cycles – Monthly or quarterly depending on work nature and data type, add to calendar and notify all stakeholders
Summarize high-impact topics – Review the big picture and prioritize
Create an ESG Hub Page on your website – Even a simple page is better than nothing
Establish mandatory data review before any external submission or publication
Improve Your ESG Reporting Score with “Systems”, Not “More Work”
If your FTSE Russell ESG Rating score didn’t meet targets last year, this year is a golden opportunity to reset your approach. The critical shift is moving from year-end fire-drill ESG projects to creating a repeatable, continuous ESG management system that operates reliably year-round. When you have a solid system for data collection, evidence management, and disclosure, you’ll achieve:
Easier workflow for your team
Greater data credibility
Assessors able to score according to actual performance
More effective ESG communication for your organization
Are You Ready to Get Started?
If your organization needs additional consultation on establishing an ESG Data Management system or wants a customized FTSE Russell ESG Readiness Checklist designed specifically for your organization, don’t hesitate to contact us for further guidance.
5 key differences of SET ESG Ratings and FTSE Russell ESG Scores
Why FTSE Russell Matters for Thai Companies
ESG is no longer just about “responsibility”—it has evolved into an “investment standard” that drives global investor decision-making. The Stock Exchange of Thailand’s transition from SET ESG Ratings to FTSE Russell ESG Scores represents far more than a procedural change. It’s a pivotal shift that every listed company must understand and prepare for strategically.
FTSE Russell stands as a globally recognized ESG index and risk assessment provider, operating across over 80 countries worldwide and evaluating more than 85,000 companies throughout Europe, the Americas, and Asia. Its core strength lies in relying exclusively on publicly disclosed information, ensuring transparency, comparability, and verifiable assessment standards that meet international benchmarks.
To help Thai listed companies navigate this transition effectively and leverage this opportunity to elevate their organizational sustainability, this article examines the 5 fundamental differences between SET ESG Ratings and FTSE Russell ESG Scores. We’ll explore the transition roadmap you need to understand and provide systematic preparation strategies for your organization.
Figure 1FTSE Russell ESG Scores Model
The 5 key differences Thai ESG Ratings/Scores
1. Scoring Systems and Performance Disclosure
One of the most significant distinctions between SET ESG Ratings and FTSE Russell ESG Scores lies in their “scoring methodology” and “public disclosure” of results—a paradigm shift that fundamentally impacts corporate reputation, transparency, and investor confidence.
Under SET ESG Ratings, companies receive tier-based ratings (BBB, A, AA, or AAA) only when they meet minimum qualifying thresholds. Beyond achieving scores above 50% across each dimension (Environmental, Social, Governance), companies must satisfy additional requirements such as maintaining a CGR rating of at least 3 stars and demonstrating no negative governance issues during the assessment period. Companies failing to meet these criteria receive no public rating disclosure whatsoever.
FTSE Russell ESG Scores takes the opposite approach, implementing unconditional disclosure of all company scores using a decimal-based system ranging from 0.0 to 5.0. Regardless of performance level, all scores will be publicly announced starting in 2026, providing open access to investors and the general public.
While detailed insights such as thematic scores, dimensional breakdowns, or individual indicator performance remain accessible only within FTSE Russell’s proprietary system using company-specific access codes, the overall score—representing your organization’s “ESG identity” on the global stage—becomes universally visible. Whether you achieve a 4.8 or 0.9, the result is transparent to all stakeholders.
This transparency extends beyond mere openness to directly impact corporate “credibility.” Low scores without adequate explanation or appropriate disclosure may lead investors to conclude that the organization lacks genuine ESG commitment or systematic sustainability management practices.
This difference transcends scoring methodology—it represents a fundamental shift from “seeking assessment” to “communicating transparency” continuously through verifiable, publicly disclosed information.
In an era of heightened investor focus on ESG factors, companies that strategically manage their disclosure practices will not only achieve scores reflecting their true potential but also earn sustainable “stakeholder confidence.”
Summary
SET ESG Ratings
Scores only companies that “meet qualifying thresholds”
Announces results in tier format: BBB, A, AA, AAA
FTSE Russell ESG Scores
Scores all companies regardless of performance level
Uses decimal scoring format: 0.0–5.0
Publicly announces overall scores starting in 2026
Detailed insights (thematic scores, dimensions, indicators) accessible only through company-specific system access
The Advantage
FTSE Russell operates on principles of “transparency and equality”—every company has the opportunity to communicate ESG progress, not just those meeting minimum thresholds.
2. ESG Data Collection Methodology
Another game-changing distinction lies in the approach to ESG data collection. SET ESG Ratings requires companies to voluntarily register and complete comprehensive questionnaires with extensive supporting documentation from both public sources and internal records for Stock Exchange evaluation.
FTSE Russell ESG Scores eliminates questionnaires entirely, instead evaluating companies based solely on “publicly disclosed information”—sustainability reports, annual reports, Form 56-1 One Reports, and corporate websites. No internal documentation receives consideration.
This philosophy reflects international capital market principles emphasizing the ability to “communicate sustainability” directly, clearly, and accessibly. Companies capable of systematically disclosing ESG information can confidently navigate assessments without dedicating time and resources to hundreds of questionnaire responses.
Simultaneously, this signals that ESG disclosure should not be limited to assessment seasons but should represent “continuous public transparency”—robust, evidence-backed, and consistently verifiable information.
Summary
SET ESG Ratings
Companies must register and complete assessment forms
Requires internal documentation such as undisclosed policies and reports
FTSE Russell ESG Scores
No registration or form completion required—all listed companies assessed automatically
Uses exclusively publicly disclosed information:
Sustainability Reports
Annual Reports
Form 56-1 One Reports
Official corporate websites
The Advantage
Companies avoid duplicative work while establishing “comprehensive disclosure systems” that are accurate, complete, and easily accessible—benefiting investors and all stakeholders alike.
3. Review Process and Supplementary Information
FTSE Russell recognizes that assessments based solely on public disclosure may contain gaps, therefore designing a process enabling companies to review and provide additional information before final results are announced. Companies receive email notifications from FTSE4GOOD approximately September through October each year to access the FTSE Russell Platform and review their preliminary results.
Within this system, companies can provide commentary, submit additional reference documents, or clarify information not yet reflected in public sources. Organizations have approximately one full month to complete this process—a critically important window of opportunity. Once the deadline passes, FTSE Russell closes the system, accepts no additional information, and proceeds to finalize scores officially, announcing results in December of the same year.
This period represents a golden opportunity for companies to provide context, supplement missing information, or correct misunderstandings before final scores are transparently published to global investors and stakeholders. Importantly, these scores remain unchanged until the following year’s assessment cycle.
Companies missing this window—whether due to outdated contact information preventing notification receipt or lack of system response—must accept scores based solely on available information. In cases of low scores, this can immediately impact reputation and investor confidence on the international stage.
FTSE Russell provides companies the opportunity to
Review preliminary results and provide feedback within the system
Timeframe: September–October annually
Duration: Approximately one month
Method: Email notifications sent to designated company contacts
Companies can use this period to:
Verify information accuracy
Provide supplementary information or correct discrepancies
Update contact details to avoid missing notifications
Upon deadline expiration, FTSE Russell finalizes and announces scores in December.
4. Business Grouping and Industry Classification Systems
An accurate ESG assessment cannot apply uniform criteria across all businesses, as risks and material issues vary distinctly by industry. Business classification represents another critical difference between SET ESG Ratings and FTSE Russell ESG Scores.
Business Grouping and Industry Classification of SET ESG Ratings
It employs the Stock Exchange of Thailand’s classification structure, dividing companies into 8 major industry groups:
Agribusiness & Food
Consumer Products
Financials
Industrials
Property & Construction
Resources
Services
Technology
Each group subdivides into 28 business sectors for assessment and comparison of similar companies—such as banking, energy, food & beverage, communications, etc. While suitable for Thai capital market management, this system has limitations in granularity and alignment with global ESG standards. Despite effectively reflecting the Thai market overview, it cannot achieve the depth of segmentation or international benchmarking required for sophisticated analysis.
Business Grouping and Industry Classification of FTSE Russell ESG Scores
It utilizes the ICB (Industry Classification Benchmark)—a globally recognized industry classification system used by investors and stock exchanges across over 80 countries, enabling accurate and fair cross-sector, cross-border company comparisons.
ICB divides industries into 11 primary groups:
Oil, Gas and Coal – Traditional energy businesses including oil, natural gas, coal
Basic Materials – Raw materials and mining including metals, chemicals, plastics, paper
Industrials – Machinery, heavy industry, engineering, general manufacturing
Consumer Discretionary – Non-essential goods and services including automotive, apparel, furniture, entertainment
Financials – Banking, insurance, funds, and various financial services
Real Estate – Property development, asset management for residential, commercial, or industrial properties
Technology – Software, hardware, electronics, telecommunications, IT services
Telecommunications – Telephone networks, internet, satellite, and other communication services
Utilities – Public utilities including electricity, water, gas, and renewable energy
ICB extends beyond primary industry groups, subdividing into 20 Supersectors, 45 Sectors, and ultimately 173 Subsectors at the most granular level. This enables FTSE Russell assessments to identify ESG issues material to each specific business type with precision.
For example, a property development company operating in Thailand might be classified under “Real Estate Development,” which has entirely different indicators from “Real Estate Investment Trusts (REITs)” or “Construction & Engineering,” despite all falling under the broader real estate category.
Furthermore, FTSE Russell considers the operational country context. Companies based in developing countries may need greater emphasis on human rights or anti-corruption measures rather than carbon issues in certain cases. The system analyzes “materiality levels” for each ESG theme, then weights indicators appropriately for that specific business. This represents “Context-Based ESG Scoring”—emerging as the new global standard.
Summary
SET ESG Ratings
Uses Thai Stock Exchange criteria
Divides into 8 industry groups / 28 business sectors
FTSE Russell ESG Scores
Uses ICB – Industry Classification Benchmark
International standard used across 80+ countries
Divides into 11 primary industry groups with detailed segmentation to 173 subsectors
Considers “primary revenue sources” identified in financial statements and One Reports
Multi-business companies may span multiple subsectors
Considers “operational country context” concurrently
Strength
FTSE Russell assesses based on “actual business risks” and country context, delivering accurate and internationally relevant ESG profiles.
5. Indicator Quantity and Complexity Levels
While both SET ESG Ratings and FTSE Russell ESG Scores measure from similar core dimensions—Environmental (E), Social (S), and Governance (G)—the clear distinction lies in the depth, specificity, and structural design of FTSE Russell’s indicator framework.
SET ESG Ratings employs approximately 140-150 indicators, predominantly general metrics applied universally across all industries, with only minimal adjustments for specific business characteristics.
FTSE Russell ESG Scores utilizes a more comprehensive and flexible indicator set, comprising over 300 indicators divided into two categories:
Universal indicators representing approximately 56%
Sector- and Country-specific indicators comprise the remaining 44%, which vary according to industry characteristics and the operational context of each country.
Each company is not assessed against all 300+ indicators simultaneously, but rather evaluated on what is “genuinely material,” averaging approximately 125 indicators per company. This reduces reporting burden while enabling scores to more precisely reflect organizational capabilities.
All FTSE Russell ESG Scores indicators are categorized under 14 ESG Themes linked to systematic global ESG risks, organized across three core dimensions:
Environmental
Biodiversity
Climate Change
Pollution and Resources
Water Security
Supply Chain (Environment)
Social
6. Human Rights and Community
7. Labor Standards
8. Health and Safety
9. Customer Responsibility
Governance
10. Risk Management
11. Tax Transparency
12. Anti-Corruption
13. Corporate Governance
14. Supply Chain (Social)
The distinctive feature of FTSE Russell’s system lies in risk materiality assessment for each theme across industries, categorized into four levels:
High (Very high risk)
Medium (Moderate risk)
Low (Low risk)
Not Relevant (Not applicable)
When any theme receives a “Not Relevant” (N/A) assessment for a specific business, the company will not be evaluated on that theme, and it will have zero impact on overall ESG score calculations.
For example, if a company operates in digital services, “Water Security” might be classified as Not Relevant due to minimal water usage in operations. Conversely, for mining or agricultural businesses, this theme might receive a High classification, requiring serious management and disclosure commitments.
Additionally, certain indicators maintain heightened intensity requirements, such as three-year historical data disclosure, external verification, or demonstrable impact measurement rather than mere policy statements or commitments.
This comprehensive approach means FTSE Russell ESG Scores evaluate not just “what organizations have” but rather “how organizations manage risk and create transparency” in matters most material to their specific context.
Summary
SET ESG Ratings
Approximately 140-150 indicators
Predominantly general metrics
FTSE Russell ESG Scores
Over 300 indicators
Divided into:
56% universal indicators
44% specific indicators (industry + country-specific)
Certain indicators maintain high intensity requirements:
Three-year historical data disclosure
External verification requirements
Recommendation
Companies should systematically study FTSE indicators to strategically plan comprehensive disclosure aligned with their specific context.
Figure 2FTSE Russell ESG Scores Data structure
Timeline for FTSE Russell ESG Scores Transition
Year
Development
2024
Leading listed companies begin pilot FTSE Russell assessments
2025
Companies may “voluntarily” request assessments
2026
FTSE Russell ESG Scores fully operational, officially replacing SET ESG Ratings
Preparation Strategies for FTSE Russell ESG Scores
1. Develop Transparent ESG Data Architecture
As Thailand’s ESG assessment system transitions from questionnaire-based evaluation to comprehensive public disclosure assessment, companies preparing for FTSE Russell ESG Scores must establish not only clear ESG policies but also “disclosure systems” that are transparent, systematic, and accessible beyond previous requirements.
Preparation extends beyond content to encompass processes, mindset, and continuity of information that organizations choose to communicate publicly through published documents, website-hosted reports, and internal systems supporting consistent disclosure practices.
2. Enhance Website Disclosure Systems
Corporate websites, typically the first point of reference, require structured ESG or IR (Investor Relations) menu organization with current information and comprehensive linkage to critical documents such as Sustainability Reports, ESG Policies, GHG Emissions data, and organizational values. This prevents assessor confusion or misinterpretation from fragmented information.
3. Verify Three-Year Historical Data
FTSE Russell considers three-year historical data across multiple indicators, particularly for trend analysis such as carbon reduction or female executive representation. Companies should ensure quantitative evidence (KPIs and performance data) is maintained consistently and consider external verification (auditor or verifier certification) for certain data points to enhance disclosure credibility.
4. Update Company Contact Information
This seemingly minor detail often causes organizations to miss critical opportunities, especially approaching annual assessment periods. Organizations not receiving FTSE4GOOD email notifications during September-October will forfeit opportunities to review preliminary results or submit additional system information, potentially resulting in December score announcements that fail to reflect current company data.
The Transition as Strategic Opportunity (Not to Be Overlooked)
FTSE Russell ESG Scores represents more than a “new assessment system”—it’s a powerful opportunity to elevate Thai organizations’ internal management capabilities and genuinely open doors to the global ESG stage.
Many perceive ESG disclosure as burdensome—filled with reports, indicator tables, and management obligations. In reality, organizations beginning with proper system establishment from the outset discover it’s not only manageable but becomes a process enabling profound organizational self-examination in previously unconsidered dimensions.
Data previously scattered across departments, explanations once limited to “internal use,” and problems whose “root causes remained unknown” gradually emerge clearly as you systematize, create disclosure frameworks, and communicate authentically.
This represents an organizational “transformation” period—not for assessment compliance but for identifying inefficiencies, financial leakages, or hidden risks, and areas deserving reinforcement because they create long-term business and sustainability value.
Early-adopting companies gain advantages beyond scoring—they achieve “self-awareness and understanding.” When you know your global positioning, you advance with greater confidence than others.
In the ESG landscape, transparency isn’t a burden but a tool for building credibility and strategic advantage, plus organizational self-understanding—all beginning with strategic and intentional “disclosure.”
A guide to understanding the FTSE Russell ESG Scores for corporate leaders
What is FTSE Russell ESG Scores
FTSE Russell is a framework designed for worldwide companies to evaluate their performances in three pillars; Environmental, Social, and Governance. In collaboration with the Stock Exchange of Thailand (SET) and the London Stock Exchange Group (LSEG) launched a comprehensive assessment framework for benchmarking, analytics, and data solutions for investors. The purpose of this framework is increasingly significant for publicly listed companies as investors progressively incorporate sustainability factors into their investment decisions.
The Explanation of FTSE Russell ESG Scores
The FTSE Russell ESG Rating methodology assesses companies across 14 ESG themes containing over 300 individual indicators. They are divided into (1) general indicators and (2) industry group indicators, with each listed company being assessed on average around 125 indicators, with the FTSE Russell indicators giving approximately 56% weight to general questions and 44% to questions that delve deeper into sectors and countries.
These themes are categorized into three pillars: Environmental, Social, and Governance.
The Environmental pillar examines how companies manage their impact on the natural world, focusing on climate change strategies, water security measures, biodiversity protection efforts, and pollution control systems. Companies are evaluated on their policies, programs, targets, and actual performance in reducing their environmental footprint.
The Social pillar assesses how organizations interact with employees, customers, suppliers, and their communities. This includes labor standards and working conditions, human rights policies and community engagement, health and safety protocols, and customer responsibility practices such as product safety and data protection.
In the Governance pillar, FTSE Russell examines corporate structures and processes that ensure proper oversight, accountability, and ethical business conduct. Key areas include board composition and effectiveness, anti-corruption measures, tax transparency, and comprehensive risk management frameworks.
Companies are evaluated on both their exposure to ESG risks (determined by their industry and geographic operations) and the quality of their management response to these risks. This creates a balanced assessment that recognizes both inherent operational challenges and management effectiveness. For example, an oil company may have high environmental risk exposure but could still score well if it demonstrates exceptional management of those risks relative to industry peers.
SET ESG Rating vs. FTSE Russell ESG Scores: Key Differences
The Stock Exchange of Thailand (SET) ESG rating system and FTSE Russell’s framework share similar objectives but differ in several important aspects.
In terms of geographic focus, SET ESG is explicitly designed for the Thai market and business environment, whereas FTSE Russell applies global standards that enable international comparability. This distinction is crucial for companies with international investors or ambitions for global expansion.
The methodology also differs significantly. SET ESG is tailored to the Thai business context, taking into account local regulatory requirements and market conditions. FTSE Russell employs a standardized global methodology that allows for cross-border and cross-industry comparisons, making it particularly valuable for international investment decisions.
The assessment process varies as well. SET ESG typically conducts annual assessments based primarily on company disclosures. FTSE Russell employs continuous assessment with more frequent updates, incorporating a wider range of data sources beyond company reports. This provides a more dynamic and comprehensive view of a company’s ESG performance.
Data sourcing represents another key difference. While SET ESG relies predominantly on company-disclosed information, FTSE Russell supplements this with multiple sources including third-party data, news analysis, and stakeholder reports. This multi-source approach helps validate company claims and provides a more objective assessment.
Thematic coverage also distinguishes the two frameworks. SET ESG focuses on issues particularly relevant to the Thai market and regulatory environment. FTSE Russell covers a comprehensive range of global ESG issues, which may include emerging risks that are not yet prevalent in Thailand but are important to international investors.
Finally, the scoring systems differ in presentation. SET ESG uses a stars-based rating system (1-5 stars), while FTSE Russell employs a numerical scale ranging from 0.0 to 5.0, wherein a score of 0.0 indicates an absence of evaluative information, and a score of 5.0 represents the pinnacle of best practices. The FTSE Russell approach allows for more granular differentiation between companies and clearer tracking of incremental improvements.
The key distinction is that while SET ESG provides valuable insights into the Thai market, FTSE Russell offers a globally recognized benchmark that enables international comparisons and attracts a broader range of global investors.
Opportunities for High-Scoring Companies
Companies that achieve high scores in the FTSE Russell ESG Scores can leverage several significant advantages in today’s sustainability-focused business environment.
Enhanced access to capital represents perhaps the most tangible benefit.
Global investment firms managing trillions in assets use FTSE Russell ESG ratings to screen potential investments. High-scoring companies gain privileged access to ESG-focused investment funds, which have seen record inflows in recent years. They may also secure green bonds and sustainability-linked loans at favorable rates, reducing capital costs. Furthermore, they attract long-term institutional investors who value sustainability as a proxy for management quality and future resilience.
Strong ESG performance also offers substantial competitive differentiation. Companies with high FTSE Russell ratings enjoy improved reputations among stakeholders, which translates into enhanced brand value and customer loyalty, particularly among younger consumers who increasingly make purchasing decisions based on sustainability criteria. This reputation advantage extends to stronger positioning in competitive tenders, particularly for government and corporate contracts that increasingly incorporate ESG requirements.
Risk mitigation and operational efficiency present another valuable opportunity.
The framework encourages risk management practices that lead to reduced exposure to environmental and social risks, which can manifest as costly disruptions, litigation, or regulatory penalties. Companies often experience lower compliance costs through proactive management rather than reactive responses to new requirements. Many sustainability initiatives simultaneously enhance operational efficiency through resource optimization, whether in energy, water, or materials. Additionally, strong ESG performers face a reduced likelihood of regulatory penalties as they typically exceed compliance requirements.
Global recognition and stakeholder trust
High FTSE Russell ratings provide international recognition of sustainability leadership that extends beyond national borders which investors can compare scores with listed companies around the world. This improved credibility with multinational partners and customers who increasingly screen their supply chains for sustainability risks. Strong performers also develop stronger relationships with regulators and policymakers, potentially influencing future policy development. The reputation benefits extend internally as well, enhancing employee and talent attraction and retention in competitive talent markets where purpose-driven organizations have advantages.
Practical Implementation for Thai Companies
For Thai corporate leaders looking to improve their FTSE Russell ESG performance, several strategic approaches can yield significant results.
You better start with gap analysis and strategy development, which represent essential first steps. Companies should comprehensively compare their current sustainability practices against FTSE Russell metrics to identify strengths and weaknesses. This assessment helps identify high-impact improvement areas based on materiality assessment—focusing resources where they will have the greatest effect on both sustainability outcomes and ratings improvement. With this understanding, organizations can develop a comprehensive ESG strategy with clear goals, timelines, and accountability measures that align with both business objectives and FTSE Russell criteria.
Governance structure enhancement often yields substantial rating improvements. This involves ensuring board-level oversight of ESG matters, with clear reporting lines and regular sustainability discussions at the highest organizational level. Companies should establish clear accountability for sustainability performance through designated roles and compensation links. Integrating ESG considerations into risk management frameworks helps identify emerging issues before they become problems and demonstrates a sophisticated management approach to potential investors.
Robust data management and disclosure systems are increasingly critical. Leading companies implement specialized systems to collect, verify, and report ESG data with the same rigor as financial information. Aligning disclosures with international standards such as GRI, SASB, and TCFD ensures compatibility with investor expectations and rating methodologies. Transparency in both successes and challenges builds credibility with raters and investors, who recognize that sustainability transformation is a journey rather than an immediate destination.
Stakeholder engagement complements these technical approaches. Companies should regularly engage with investors to understand their evolving ESG expectations and priorities. Collaboration with industry peers on common sustainability challenges can accelerate progress and demonstrate sector leadership. Participation in relevant sustainability initiatives and platforms increases visibility and provides valuable learning opportunities that can inform internal practices.
In the era of responsibility
The FTSE Russell ESG framework represents more than just a rating system—it offers a roadmap for sustainable business transformation. For Thai corporate leaders, understanding and implementing this framework can drive long-term value creation while meeting the growing expectations of global investors and stakeholders.
By strategically approaching the FTSE Russell assessment, companies can transform sustainability compliance into a competitive advantage, accessing new capital opportunities while building resilience for the future. In an era where sustainable business practices increasingly define market leaders, high FTSE Russell ratings serve as both validation of current excellence and a foundation for continued success in an evolving business landscape.
the Most Renowned ESG Voluntary Frameworks: Dow Jones Sustainability Indices (DJSI)
The Dow Jones Sustainability Indices (DJSI) are a family of best-in-class benchmarks for investors who have recognized that sustainable business practices are critical to generating long-term shareholder value and who wish to reflect their sustainability convictions in their investment portfolios. The family was launched in 1999 as the first global sustainability benchmark and tracks the stock performance of the world’s leading companies in terms of economic, environmental and social criteria. Created jointly by S&P Dow Jones Indices and Robeco Sustainable Asset Management (SAM), the DJSI combine the experience of an established index provider with the expertise of a specialist in Sustainable Investing to select the most sustainable companies from across 61 industries. The DJSI World applies a transparent, rules-based component selection process based on the companies’ Total Sustainability Scores resulting from the annual S&P Global Corporate Sustainability Assessment (CSA). Only the top ranked companies within each industry are selected for inclusion in the Dow Jones Sustainability Index family. No industries are excluded from this process as shown in Figure 1.
* Global Indices: Top 10%, Regional Indices: Top 20%, Country Indices: Top 30%
Figure 1
The composition of the DJSI is reviewed each year in September based on the S&P Global ESG Scores resulting from the annual SAM and CSA and is rebalanced quarterly (S&P Global, 1, 2023). The CSA has become the basis for numerous ESG indices over the last two decades. S&P Global acquired the CSA in 2019, which included the transition of the related ESG ratings and ESG benchmarking teams and that now operate out of S&P Global Switzerland. The Corporate Sustainability Assessment (CSA) empowers you to leverage the unique expertise and the proprietary methodology and database underlying the world’s most renowned sustainability indices (S&P Global, 2, 2023). While increasing numbers of companies have chosen to participate in the CSA, annual reviews have enabled the questions to be refined and streamlined over the years. The result is that currently relevant sustainability themes are combined with the systematic introduction of emerging sustainability issues and it can be said that it is the continuing evolution process of the CSA (S&P Global, 3, 2023).Starting April 2019, S&P DJI has begun further leveraging SAM sustainability data to deliver an extensive range of ESG indices. The S&P ESG Index Family, which are sets of indices, offers investors exposure to companies according to their ESG profile in the context of country-specific and regional indices. The index families are based on S&P DJI ESG Scores, based on the results of the annual S&P Global Corporate Sustainability Assessment (CSA). The index family includes broad market indices like the S&P 500 ESG, S&P Europe 350 ESG, S&P Global 1200 ESG, and S&P Japan 500 ESG, designed to closely track their parent indices with similar risk and return profile and low tracking error. The key criteria for constituent eligibility and selection in the S&P ESG Index Family are the S&P DJI ESG Scores. The scores contain a total company-level ESG score for a financial year, comprising individual environmental (E), social (S), and economic & governance (G) dimension scores. The criteria scores are weighted to eliminate biases among different industries and companies that complete the CSA versus companies that are assessed on the basis of publicly available information. The methodology of the S&P ESG Index Family is constructed to be simple, with a selection process meant to keep index’s industry weights in line with S&P broad market indices. The index methodology results in improved composite ESG scores, and offers improved ESG performance across each industry group (S&P Global, 4, 2023). Figure 2 Shows the score of CSA and ESG Indices, and figure 3 shows an example feature of S&P ESG Indices (S&P Global, 5, 2023).
Figure 2
Figure 3
CSA Methodology
The Corporate Sustainability Assessment (CSA) will ask invited companies about methodologies and rationales of reporting in order to gather information from invited companies for calculating the S&P Global ESG Score, which is a crucial part of the Dow Jones Sustainability Indices (DJSI). CSA provides a guideline, called CSA Handbook, to be a check list for invited companies’ activities. For each covered question, this document provides the Assessment Focus, the Question Rationale, details of the Question Layout and specific guidance on how to answer. Moreover, the Question-Specific Guidance & Definitions sections define the terms that use and provide details on how to interpret and answer each question. They also specify the question’s alignment with the GRI or other standards and framework (Based on GRI mainly), and whether internal or public documents will be necessary to answer the question. The CSA is a holistic assessment, but the structure and weighting of each criterion depends on its financial materiality in a given industry. To aid companies’ preparation for the CSA, it shares the weights for the different aspects of the assessment under CSA Methodology. It also provides general guidance on how to complete the CSA, its expectations and some general tips for a successful submission. Each question in the questionnaire consists of one or more sub-questions. Invited companies are given the possibility of selecting one or more answers to each question. Each question also contains a standard set of answer options that enable you to indicate if a company do not have the information asked for or if the question is not applicable to that company. For the Assessment focus, there are icons to give an indication of what CSA looking for as showed in Figure 4 (S&P Global, 6, 2023).
Figure 4
Invited Companies
Every year more companies see the value of disclosing their sustainability performance to capital markets via active participation in the Corporate Sustainability Assessment (CSA). In 2023, 13,800 companies were invited to complete the CSA. Of those, 3,519 companies were eligible for selection into a Dow Jones Sustainability Index (DJSI). A record number of 1,728 DJSI eligible companies actively participated, an increase of 9% over last year in this group. Of all invited companies, 2,480 have already submitted, representing over 48% of global market capitalization, relative to the S&P Global Broad Market Index (BMI), up from 45% in 2021. The assessment is still ongoing until end of January. Participating companies can choose the degree to which they permit S&P Global to share underlying datapoints submitted in the CSA that are supplemental to the company’s public reporting. The majority of participating companies took advantage of this option to leverage S&P Global’s platforms to communicate this information to a wider capital market audience. To inform the growing number of ESG-focused investors about corporate sustainability performance. Companies will be invited in 3 groups, starting with those eligible for any Dow Jones Sustainability Index (DJSI), then companies will be chosen from 3 factors including:
All companies that participated in the CSA in previous year.
Companies invited as part of the eligible universe of the Dow Jones Sustainability Indices (DJSI), as well as numerous other S&P ESG indices.
Companies whose sustainability performance is considered to be of interest to the broader investment community.
Companies that are invited but decide not to participate may be assessed by S&P Global based on publicly available information, and the resulting ESG Scores and data may be shared via S&P Global platforms. Participation in the CSA is not a prerequisite for eligibility in the DJSI or other S&P ESG Indices. Official invitations will be sent out between February and June. Companies may also check their invitation status via CSA online platform.
Participation without invitation
Any company interested in the CSA that agrees to make their resulting ESG Score public on S&P Global platforms will be assessed free of charge by contact [email protected] for more information. The 2023 CSA questionnaire opens for all companies on April 4th. New for this year, companies are able to select an assessment window that best meets individual reporting schedules. Log in to the CSA Portal to reserve a slot (S&P Global, 7, 2023).
In Thailand, there are currently 26 Thai companies in DJSI, which is the highest number in ASEAN, including ADVANC, AOT, BANPU, BDMS, BJC, BTS, CPALL, CPF, CPN, CRC, DELTA, EGCO, GPSC, HMPRO, IRPC, IVL, KBANK, MINT, PTT, PTTGC, SCB, SCC, SCGP, TOP, TRUE and TU. There are 11 Companies among These 26 companies, which has world class potential to be in DJSI World Family and achieve ESG Index Family (SET, 2022).
S&P Global, 3 (2023) The S&P Global Corporate Sustainability Assessment. [online] New York: S&P Global. Available from: https://www.spglobal.com/esg/csa/about/ [Access 27 July 2023].
the Most Renowned ESG Voluntary Frameworks: Global Real Estate Sustainability Benchmark (GRESB)
GRESB is the global ESG benchmark for financial markets, which is established in 2009 and composed of an independent foundation and a benefit corporation. The GRESB Foundation focuses on the development, approval and management of the GRESB Standards while GRESB BV performs ESG assessments and provides related services to GRESB Members. GRESB is a mission-driven and industry-led organization that provides actionable and transparent environmental, social and governance (ESG) data to financial markets. The 2022 real estate benchmark covers more than 1,800 property companies, real estate investment trusts (REITs), funds, and developers. In addition, GRESB coverage for infrastructure includes over 800 infrastructure funds and assets. Combined, GRESB represents USD 8.6 trillion in real asset value. More than 170 institutional investors use GRESB data to monitor their investments, engage with their managers, and make decisions that lead to a more sustainable real asset industry. Led by a Foundation Board composed of representatives from GRESB Members and Partners, the GRESB Foundation is the primary platform for GRESB to engage with the industry, owning and governing the standards upon which GRESB BV – a separate profit-for-purpose benefit corporation – performs its assessments. The GRESB Foundation, GRESB BV and GRESB Members work as one to deliver a shared vision of an investment community that plays a central role in creating a more sustainable world, one where society can meet the needs of the present without compromising the ability of future generations to meet theirs. As an independent standards-setting body, the GRESB Foundation works to develop, maintain, improve and publish GRESB Standards annually, in time for GRESB BV to perform its assessments.
Specifically, the GRESB Foundation:
Facilitates active industry engagement and consensus on the GRESB Standards
Ensures that the standards are feasible and can be practically implemented
Provides inclusive representation across GRESB Members and Partners
Ensures that the standards continually evolve to advance the foundation’s mission
The GRESB Standards are a set of guidelines to assess and benchmark ESG and related performance of real and other assets. The Standards include the questions, evidence and indicators to assess ESG performance, including the weighting of the indicators. On 14 September 2022, the GRESB Foundation Board approved all the recommended changes for the 2023 GRESB Standards. This is an important outcome of the new GRESB Standards Development Process, which puts the voice and priorities of GRESB members and partners at the forefront of the global ESG realm (GRESB 1, 2023).
Stakeholder Engagement
GRESB’s stakeholder engagement strategy is built on the AA1000 AccountAbility Stakeholder Engagement Standard (2015) and references the ISEAL Alliance Standard-setting Code of Good Practice, which defines how a sustainability standard should be developed, structured and improved over time. To ensure stakeholder engagement is embedded across the organization, GRESB have committed to the AccountAbility principles of inclusivity, materiality, responsiveness and impact. For GRESB, the stakeholder landscape is complex, with some stakeholder groups overlapping others in terms of roles and responsibilities:
Investors, both institutional investors (pension funds, insurance companies, sovereign wealth funds) and other investors (banks, family offices, endowments, etc.)
Real estate & infrastructure entities, including listed property companies, developers, REITs and private funds
Industry associations, such as APREA (Asia Pacific Real Estate Association), ANREV (Asian Association for Investors in Non-Listed Real Estate Vehicles) or ARES Management Corp
Institutions like development banks, central banks, governments, and inter-governmental organizations
ESG framework providers, from both NGOs and the private sector
Inter-governmental initiatives, such as those related to the United Nations
Investor initiatives
Green Building Councils
Certification or rating scheme providers
Consultants either organization or individual
Media and research organizations
According to GRESB plays an important role within the world of sustainable real assets, and critically engage with the many stakeholders that operate in the ESG space. That said, they cannot and should not engage every stakeholder in the same way or at the same level. Therefore, an “interest-influence” grid helps illustrate our approach, which shows active engagement with GRESB Investor Members, Participant Members and Partners, which is done primarily through the GRESB Foundation as shown in Figure 1.
Figure 1
It can be seen that “influential ESG reporting frameworks” are among our most important stakeholders, just below our own members and partners. For these frameworks, we create bilateral partnerships and engage through representation on various committees and working groups such as Principles for Responsible Investment (PRI) The Global Reporting Initiative (GRI), The Sustainability Accounting Standards Board (SASB), The International <IR> Framework, EU Sustainable Finance Disclosure Regulation (SFDR), Task Force on Climate-related Financial Disclosures (TCFD), Carbon Disclosure Project (CDP) (GRESB 2, 2023). Especially, The EU’s Sustainable Finance Disclosure Regulation (SFDR) is a new transparency requirement for financial market participants related to key environmental, social and governance (ESG) criteria. The purpose is to increase market transparency and direct capital towards more sustainable businesses. SFDR imposes different disclosure obligations on Financial Market Participants, depending on their size and the nature of their products and/ or services. All participants in the EU will need to make general disclosures about sustainability practices for both the entity and their products and/ or services. They will also need to report on their Principle Adverse Impacts (PAIs), which are a series of indicators covering a range of ESG issues, such as greenhouse gas emissions and waste management. At the moment, most companies and funds do not provide disclosures or collect data that is granular enough to satisfy the requirement, once it goes fully in effect, or to provide investors with the level of transparency that is expected by this regulation. GRESB, hence, offers an assessment that provides Financial Market Participants with the framework they need for their Principal Adverse Impact Statement. The Assessment is comprised of around 60 ESG metrics that need to be reported on (GRESB 3, 2023). The SFDR Assessment consists of a number of aspects that a participant is required to report on, including:
Entity and Reporting Characteristics
Climate and other environment-related indicators
Social and employee, respect for human rights, anti-corruption and anti-bribery matters
The SFDR Assessment is broken into 3 parts to reflect the different tables of PAIs as outlined by the EU documentation. The Assessment evaluates performance against three ESG Components – Management, Performance, and Development. The methodology is consistent across different regions, investment vehicles and property types and aligns with international reporting frameworks, such as TCFD, GRI or PRI. The GRESB Real Estate Assessment provides investors with actionable information and tools to monitor and manage the ESG risks and opportunities of their investments, and to prepare for increasingly rigorous ESG obligations. These 3 tables are detailed as follows:
Table 1: Mandatory climate and other environment-related indicators, Social and employee, respect for human rights, anti-corruption and anti-bribery matters.
Table 1 focuses on 14 environmental and social indicators applicable to investments in investee companies and 2 indicators applicable to investments in real estate assets that have to be disclosed by financial market participants, these are considered as part of the “mandatory indicators that have to be reported on”.
Table 1 consists of 16 indicators across 7 aspects:
Greenhouse gas emissions
Biodiversity
Water
Waste
Social and employee matters
Fossil fuels (Real Estate specific indicators)
Energy efficiency (Real Estate specific indicators)
Table 2: Additional climate and other environment-related indicators. These are considered to be optional although participants are encouraged to report on at least one of those indicators in order to abide by regulatory requirements. Table 2 consists of 16 applicable to investment in investee companies and 5 indicators specific to real estate across 9 aspects:
Emissions
Energy performance
Water, waste and material emissions
Green securities
Greenhouse gas emissions (Real Estate specific indicators)
Energy consumption (Real Estate specific indicators)
Waste (Real Estate specific indicators)
Resource consumption (Real Estate specific indicators)
Biodiversity (Real Estate specific indicators)
Table 3: Additional indicators for social and employee, respect for human rights, anti-corruption and anti-bribery matters. These are considered to be optional although participants are encouraged to report on at least one of those indicators in order to abide by regulatory requirements. Table 3 consists of 17 indicators across 3 aspects:
Social and employee matters
Human rights
Anti-corruption and anti-bribery
Those issues in 3 Tables are reported through following tools (online) that help participants with the submission process:
Assessment Access Tool: A participating property company or fund manager can invite colleagues, advisors and consultants to register in the Portal to assist with the submission of data to GRESB.
Asset-level data tools: GRESB has developed a number of tools to assist participants with the collection and aggregation of asset-level data that is required to complete the SFDR Assessment.
The Portal has real-time error detection systems and warnings (GRESB 4, 2023).
The tools are designed to streamline data flows and increase data quality. For example,
Application Programming Interface (API): This tool is available through an increasing number of data providers. It allows participants to seamlessly feed information from a data provider’s data collection system to the GRESB Portal, automatically completing some of the indicators in tables 1 and 2 of the SFDR Real Estate Assessment. The full list of data partners can be found in GRESB Partner Directory (GRESB 5, 2023).
GRESB Asset Spreadsheet: Participants who do not have access to the Automated Data Feed can upload asset data to the GRESB Asset Portal using the Asset Spreadsheet. Please check the SFDR Assessment Instructions tab of the Asset Spreadsheet for more information (GRESB 6, 2023).
*Note that the term table is used as a reference point to the mandatory and optional indicators as per the template provided by the EU but that the SFDR Assessment Portal itself is not composed of ‘’tables’’. The SFDR report will however be in table format.
The goal of the GRESB Assessments is to capture the most material ESG data related to the sustainability performance of real estate and infrastructure companies and assets. This data and the insights derived from it are used by investors to assess organizational exposure to various risks and to identify new opportunities to invest in strong-performing companies. For a detailed description of the new governance structure, the GRESB Standards Development Process, and the changes for the 2023 GRESB Standards, by relating more to external frameworks as showed in Table 1.
Real Estate
Infrastructure
IR Framework
CDP
CDP
PRI
SASB
GRI
GRI
SASB
PRI
Table 1
For each external framework, GRESB created an analysis table with the framework’s relevant indicators, which were mapped to specific indicators from the relevant GRESB’s standards. From this, GRESB analyzed the level of alignment between the GRESB indicators and those from the external framework (GRESB 7, 2023). GRESB collects, validates, scores, and independently benchmarks ESG data to provide business intelligence, engagement tools, and regulatory reporting solutions for investors, and asset managers in the wider industry. GRESB provides a rigorous methodology and consistent framework to measure the ESG performance of individual assets and portfolios based on self-reported data. Performance assessments are guided by what investors and the wider industries consider to be material issues, and they are aligned with the Sustainable Development Goals, the Paris Climate Agreement and major international reporting frameworks. Through a GRESB Membership, data is reported to the relevant GRESB Assessment each year on a regular cycle and are validated by a third party and scored before being used to generate the following ESG benchmarks for the industry:
Real Estate Benchmark
Real Estate Development Benchmark
Infrastructure Fund Benchmark
Infrastructure Asset Benchmark
Each year, GRESB publishes the global aggregated benchmark data showing the state of ESG in the industry. The benchmark itself evolves over time, ensuring that scores reflect relative performance and evolving sustainability expectations (GRESB 8, 2023).
GRESB 1 (2023) GRESB Foundation. [online] Amsterdam: Global Real Estate Sustainability Benchmark. Available from: https://www.gresb.com/nl-en/gresb-foundation/ [Accessed on 17 July 2023].
GRESB 4 (2023) GRESB Documents. [online] Amsterdam: Global Real Estate Sustainability Benchmark. Available from: https://documents.gresb.com/ [Accessed on 17 July 2023].
GRESB 5 (2023) Partner Directory. [online] Amsterdam: Global Real Estate Sustainability Benchmark. Available from: https://www.gresb.com/nl-en/gresb-partners/ [Accessed on 22 July 2023].
GRESB 6 (2023) GRESB Real Asset Spreadsheet. [online] Amsterdam: Global Real Estate Sustainability Benchmark. Available from: https://www.gresb.com/nl-en/?s=asset+spreadsheet [Accessed on 22 July 2023].
GRESB 8 (2023) How We Work. [online] Amsterdam: Global Real Estate Sustainability Benchmark. Available from: https://www.gresb.com/nl-en/about-us/ [Accessed on 17 July 2023].
the Most Renowned ESG Guidance Frameworks: Value Reporting Foundation (VRF)
The VRF’s SASB Standards serve as a key starting point for the development of the IFRS Sustainability Disclosure Standards, while the Integrated Reporting Framework provides connectivity between financial statements and sustainability-related financial disclosures. The consolidation delivers on market demand—including from companies, investors and regulators—for simplification of the sustainability disclosure landscape, and follows the consolidation of the Climate Disclosure Standards Board (CDSB) into the IFRS Foundation (IFRS, 1., 2022). The VRF unites the IIRC’s historic focus on enabling management and business decision-making with SASB’s historic focus on enabling investor decision-making. The two organizations share a core belief that external reporting can create a common language among businesses and investors and help both businesses and investors understand how value is created, preserved or eroded over time. The Value Reporting Foundation’s three resources comprise a robust toolset:
Integrated Thinking Principles drive an improved understanding of how value is created, to enhance decision-making and actions by boards and management. Through integrated thinking, organizations are better placed to tailor their business model and strategy to respond to the external environment and understand risks and opportunities.
<IR> Framework is a principles-based framework that guides effective communication on strategy, governance, performance and prospects through a multi-capital lens, enabling a single integrated report that communicates a business’s holistic value.
SASB Standards provide detailed industry-specific sets of disclosure topics and metrics to inform what content to include in an integrated report, lending insight into performance on the subset of sustainability issues that are most closely tied to an organization’s ability to create long-term value, and thus most of interest to investors.
When used together, tools from the Value Reporting Foundation create a perpetual feedback loop, enabling businesses and investors to more effectively communicate on enterprise value and how it is created, preserved or eroded over time. Across the globe, organizations are increasingly leveraging the complementary benefits of the <IR> Framework and SASB Standards as shown in Figure 1.
Figure 1
Clarifying compatibility across the Value Reporting Foundation Tools
The <IR> Framework and the SASB Standards are complementary, and many businesses use both to fulfill their reporting needs. The tools provide a powerful structure for reporting qualitative context and activity alongside quantitative industry-specific metrics. Within the growing field of sustainability-related disclosure, frameworks and standards have been developed to help establish a foundational layer of relevant, comparable and reliable information from companies. Each serves a unique purpose to help companies understand and report on critical drivers of long-term value.
Disclosure frameworks, including the <IR> Framework, provide broad content and presentation requirements through a principles-based approach.
Disclosure standards, including SASB Standards, provide replicable and detailed requirements for what should be reported for specific topics. Standards support frameworks by ensuring comparable, consistent and reliable information.
The <IR> Framework helps companies explain how they create, preserve or erode value. Applying well-defined Guiding Principles and Content Elements, integrated reports look beyond financial performance alone to demonstrate how businesses manage up to 6 forms of capital: financial, manufactured, intellectual, human, social and relationship, and natural. Integrated reporting offers internal and external benefits. Internally, it builds communication and coordination across departments. It improves internal decision-making through building a deeper understanding of the resources and relationships that are critical to the long-term success of the business. Integrated reporting also enables an organization to evaluate its governance, performance and prospects in the context of the external environment, and provide investors and other users of integrated reports with a more holistic view of the business. SASB Standards complement the <IR> Framework’s principles-based approach. An integrated report provides essential context to investors, helping them more fully understand the business’ current position, future prospects and the relevant circumstances under which performance has been achieved. This provides investors with insight into the quality of thinking and strategic planning of the board and management. However, an integrated report, a concise and connected narrative, offers valuable explanations and context for the data provided through SASB Standards. On the other hand, SASB Standards identify the subset of environmental, social, and governance (ESG) issues likely to materially impact the financial performance of a typical business in an industry. By starting with this subset of issues, businesses can establish best practices, produce decision- useful reports, and then seek to improve disclosure and performance year on year. Available for 77 industries, SASB Standards provide investors with consistent, comparable and reliable information on the ESG factors most relevant to financial performance and enterprise value. With an average of six disclosure topics and 13 disclosure metrics per industry, the SASB Standards are an accessible starting point for companies beginning their ESG reporting journey. Many businesses using both the <IR> Framework and SASB Standards find that the two tools strengthen one another. Furthermore, SASB Standards provide comparable information on the business-critical risks and opportunities that fall beyond the scope of traditional financial disclosure.
Internal business benefits
The corporate disclosure has been described as complex and confusing for businesses. The breadth of reporting frameworks and standards can strain a company’s resources. Amidst this broad reporting landscape, the <IR> Framework and SASB Standards provide an efficient solution. These tools provide companies with a robust system that integrates sustainability disclosure with financial disclosure practices. The <IR> Framework and SASB Standards provide an accessible starting point to high-quality, investor- focused disclosure. With the <IR> Framework, organizations can understand and communicate how their resources (capitals) are changed through business activities to create value over time. With SASB Standards, companies can report on the ESG information most critical to their industry and enable comparability. While certain information is useful across industries, many sustainability-related value drivers are industry-specific. By adding SASB Standards, reporters provide: 1) industry-specific rigor; 2) quantitative evidence/ support for the integrated report’s narrative claims; and 3) deeper comparability against peers. For example, with SASB Standards, Badische Anilin and Sodafabrik (BASF) can succinctly highlight the sustainability topics most material to the Chemicals industry (such as Hazardous Waste Management), and Unilever, a UK-based consumer goods provider, can do the same for the topics in the Household & Personal Products industry (such as Environmental & Social Impacts of Palm Oil Supply Chain). (SASB Standards, 2021).
External business and investor benefits
With the <IR> Framework and SASB Standards, businesses can provide a more complete picture of long-term value creation while meeting investor needs for comparable, consistent and reliable information. Reporting with both tools can bolster a company’s credibility and trust among its external stakeholders, especially investors and other providers of financial capital. Investors are not monolithic — they have varying strategies and priorities. To best meet investor needs, businesses should engage with their investors directly, understand their priorities, and then tell the company story with that lens in mind. The <IR> Framework and SASB Standards are useful tools to strengthen, enhance and clarify a business’ value creation story. BASF conducted an “ESG to value creation” mapping exercise to help prioritize and disseminate sustainability practices and initiatives. In particular, with the issuance of its first green bond in 2020, BASF found that reporting and performance improvements subsequently increased its access to financial capital. While green bonds are an uncommon offering for a chemical business, BASF turned it into a successful financing tool. In many ways BASF attributes this success to its reporting with the <IR> Framework. Investors credited their support for the BASF green bond to a strong trust in BASF’s business and ESG practices. Investors feedback further underlined that this trust arose from the company’s reporting and how investors are able to see financially-relevant sustainability issues integrated into management of the business. Due to high investor demand for consistent, comparable and reliable ESG data, businesses find that disclosing with SASB Standards has a positive effect on investor relations. Because they are industry-specific, metric-driven and focused on financial materiality, SASB Standards enable integration of ESG considerations into investment and stewardship decisions across global portfolios and asset classes. They also provide comparable data to the data and analytics ecosystem that supports investment decision making.
Communicating Inside and out
Disclosure with the <IR> Framework and SASB Standards creates a positive feedback loop between businesses and investors. Used in conjunction, this positive feedback loop helps communicate progress and facilitate further improvement over time. When a business is clear about its sustainability objectives, the reporting process, using the <IR> Framework and SASB Standards, creates a positive feedback loop as shown in Figure 2.
Figure 2
Incorporating feedback will look different at every organization. It may result in the review of corporate strategy, adaptation of management systems or evolution of governance processes. In all scenarios, the feedback loop will ensure that resources are allocated efficiently to maximize value over the short, medium and long term. Many businesses describe this holistic approach as integrating ESG or sustainability into their DNA. In the same way that sustainability issues manifest differently for every industry, integrating ESG across internal business units looks different for every business. Disclosure with the <IR> Framework and the SASB Standards is far more than a communications exercise. Within a business, these tools can help break down internal barriers, build connectivity and enhance decision-making. This promotes integrated thinking, a process by which boards and management teams gain new insights into their organization’s value creation process. They improve their understanding of the resources and relationships (or capitals) on which the organization depends, the risks it faces and the financial and non-financial outcomes it generates.
Contributing to a more sustainable future
Disclosure and transparency are a means to an end: more informed business and investment decision making that can lead to improved economic, environmental and societal outcomes. Businesses engaging in sustainability disclosure and integrated reporting are embarking on a continuous journey, an interactive cycle, which benefits their business, their investors, society and the planet as shown in Figure 3.
the Most Renowned ESG Guidance Framework: International Integrated Reporting Council (IIRC)
The International Integrated Reporting Council (IIRC) was found in August 2010 and aims to create a globally accepted framework for process that results in communications by an organization about value creation over time. The IIRC Board of Directors oversaw the strategy, finances, and operations of the organization and appointing members of the International Integrated Reporting Framework Board. The International Integrated Reporting Framework Board recommended any revision, modification or other updates to the International Integrated Reporting Framework Council. The Council was the primary institutional forum for expression of the broad market view on matters relating to integrated reporting and integrating thinking, as well as a medium for its interaction and provision of advice, guidance and input on issues of relevance for the organization, including its nature, objectives, purpose, vision and mission, as well as its strategy and the means by which to deliver integrated reporting framework to the market (Integrated Reporting, 1., 2023). In November 2011, the IIRC announced a number of changes to its organizational structure according to its complexity. Under the new arrangements, an initial transitional phase until the end of 2013 will see the IIRC supported by a strengthened secretariat operating through a not-for-profit company established for the purpose under the same name. A Governance Committee has also been established for replacing the original, with responsibilities relating to audit, nominations, and executive remuneration for the company. At this point, the IIRC Created the foundations for a new reporting model to enable organizations to provide concise communications of how they create value overtime in 2014. The IIRC refers to this process as Integrated Reporting, which it stylizes as <IR>. <IR> structured around the organization’s strategic objectives, its governance, and business model and integrating both financial and non-financial information. The objectives for an integrated reporting framework are to:
Support the information needs of long-term investors, by showing the border and long-term consequences of decision making
Reflect the interconnections between environmental, social, governance and financial factors in decisions that affect long-term performance and condition, making clear the link between sustainability and economic value
Provide the necessary framework for environmental and social factors to be taken into account systematically in reporting and decision making
Rebalance performance metrics away from an undue emphasis on short term financial performance
Bring reporting closer to the information used by management to run the business on day-to-day basis
(UK Accounting Plus, 2023) and <IR> aims to:
Improve the quality of information available to providers of financial capital to enable a more efficient and productive allocation of capital
Promote a more cohesive and efficient approach to corporate reporting that draws on different reporting strands and communicates the full range of factors that materially affect the ability of an organization to create value over time
Enhance accountability and stewardship for the broad base of capitals (financial, manufactured, intellectual, human, social and relationship, and natural) and promote understanding of their interdependencies
Support integrated thinking, decision-making and actions that focus on the creation of value over the short, medium and long term.
The <IR> framework is divided into 3 parts including Fundamental Concepts, Guidance Principles, and Content Elements. Firstly, the Fundamental Concepts underpin and reinforce the requirements and guidance in the <IR> Framework. It explains how an organization crates, preserves, or erodes value over time. Value is not created, preserved, or eroded by or within an organization alone, it is influenced by the external environment though. It, in addition, is created through relationships with stakeholders on various resources as following:
Value creation, preservation or erosion for organization and for others Value created, preserved or eroded by an organization over time manifests itself in increases, decreases or transformations of the capitals caused by the organization’s business activities and outputs. The ability of an organization to create value for itself is linked to the value it creates for others. As illustrated in Figure 1
Figure 1
The capitals All organizations depend on various forms of capital for their success. In the <IR> Framework, the capitals comprise financial, manufactured, intellectual, human, social and relationship, and natural
Process through which value is created, preserved, or eroded although organizations aim to create value, the overall stock of capitals can also either undergo a net decrease or experience no net change. In such cases, value is eroded or preserved. The process through which value is created, preserved or eroded is depicted in Figure 2 (Integrated Reporting, 2., 2021)
Figure 2
7 combination guidance principles underpin the operation and presentation of an integrated report, informing the content of the report and how information is presented:
Strategic focus and future orientation. An integrated report should provide insight into the organization’s strategy, and how it relates to the organization’s ability to create value in the short, medium and long term, and to its use of and effects on the capitals
Connectivity of information. An integrated report should show a holistic picture of the combination, interrelatedness and dependencies between the factors that affect the organization’s ability to create value over time
Stakeholder relationships. An integrated report should provide insight into the nature and quality of the organization’s relationships with its key stakeholders, including how and to what extent the organization understands, takes into account and responds to their legitimate needs and interests
Materiality. An integrated report should disclose information about matters that substantively affect the organization’s ability to create value over the short, medium and long term
Conciseness. An integrated report should be concise
Reliability and completeness. An integrated report should include all material matters, both positive and negative, in a balanced way and without material error
Consistency and comparability. The information in an integrated report should be presented: (a) on a basis that is consistent over time; and (b) in a way that enables comparison with other organizations to the extent it is material to the organization’s own ability to create value over time.
The <IR> also comprises of 8 content elements that are fundamentally linked to each other and are not mutually exclusive:
Organizational overview and external environment. What does the organization do and what are the circumstances under which it operates?
Governance. How does the organization’s governance structure support its ability to create value in the short, medium and long term?
Business model. What is the organization’s business model?
Risks and opportunities. What are the specific risks and opportunities that affect the organization’s ability to create value over the short, medium and long term, and how is the organization dealing with them?
Strategy and resource allocation. Where does the organization want to go and how does it intend to get there?
Performance. To what extent has the organization achieved its strategic objectives for the period and what are its outcomes in terms of effects on the capitals?
Outlook. What challenges and uncertainties are the organization likely to encounter in pursuing its strategy, and what are the potential implications for its business model and future performance?
Basis of presentation. How does the organization determine what matters to include in the integrated report and how are such matters quantified or evaluated?
In 2021, the IIRC merged with the Sustainability Accounting Standard Board (SASB) Foundation into the Value Reporting Foundation (VRF). The IIRC Board of Directors and the SASB Foundation Board of Directors combined to form the Value Reporting Foundation Board of Directors (“the VRF Board”). A governing board, the VRF Board was responsible for overseeing the strategy, finances, and operations of the organization and appointing members of the International Integrated Reporting Framework Board (IIRF) (Integrated Reporting, 2021). Then in 2022, The IFRS Foundation announced the completion of the consolidation of the Value Reporting Foundation (VRF) into the IFRS Foundation. The IFRS Foundation’s International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB) will work together to agree on how to build on and integrate the Integrated Reporting Framework into their standard setting projects and requirements. It follows the commitment made at COP26 to consolidate staff and resources of leading global sustainability disclosure initiatives to support the IFRS Foundation’s new International Sustainability Standards Board’s (ISSB) work to develop a comprehensive global baseline of sustainability disclosures for the capital markets. The <IR> helps businesses think holistically about their strategy to build investor and key stakeholder confidence and improve future performance. With integrated reporting now being adopted in 75 countries worldwide, by over 2,500 organizations and with support from 40 stock exchanges and counting, more and more organizations are experiencing its benefits for business decision-making and long-term value creation. (Integrated Reporting, 3., 2021).
the Most Renowned ESG Guidance Frameworks: Carbon Disclosure Standard Board (CDSB)
The Climate Disclosure Standards Board (CDSB) was an international consortium of business, environmental and social NGOs, committed to advancing and aligning the global mainstream corporate reporting model to equate natural social capital with financial capital. CDSB, created in 2007, did this by offering companies a framework for reporting environment and social information with the same rigor as financial information. CDSB has now consolidated into the IFRS Foundation. On November 3rd 2021 the IFRS Foundation announced that it would form a new International Sustainability Standards Board (ISSB), as well as the consolidation of the Climate Disclosure Standards Board and the Value Reporting Foundation (VRF—which houses the Integrated Reporting Framework and the SASB Standards) by June 2022. The first CDSB Framework, the Climate Change Reporting Framework, released in 2010, focused on the risks and opportunities that climate change presents to an organization’s strategy, financial performance and condition. In 2015, following two public consultations, the CDSB Framework for reporting environmental and climate change information was released. The CDSB Framework was updated in April 2018 to align with the recommendations of the Task Force on Climate-related Financial Disclosures and other key mainstream reporting requirements, helping to streamline the reporting cycle for many organizations. In light of changing market and user demands, the scope of the CDSB Framework was expanded to include social as well environmental, including climate change, information. Following public consultation, the CDSB Framework for reporting environmental and social information was released in 2022. CDSB technical guidance will form part of the evidence base as the ISSB develops its IFRS Sustainability Disclosure Standards. CDSB’s Framework and technical guidance on Water, Biodiversity and Social disclosures will remain useful for companies until such time as the ISSB declare any change on such topics. CDSB technical work has not been subject to the IFRS Foundation’s due process, which the International Sustainability Standards Board will follow in its work and does not form part of IFRS Standards. Through the provision of robust environmental and social information, CDSB hopes to encourage analysis and decision-making by investors that recognize the dependence and impacts of economic and financial stability on natural, human and social capital (CDSB, 1., 2022).
The objective of CDSB Framework
The CDSB Framework formed a foundation for the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations and sets out an approach for reporting environmental and social information in mainstream reports, such as annual reports, 10-K filing, or integrated reports. The objectives of the CDSB Framework are to:
Help companies translate their sustainability information into long-term value;
Provide clear, concise and consistent information to investors, connecting the organization’s sustainability performance to its overall strategy, performance and prospects;
Enable and encourage informed investor-decision making on the allocation of financial capital;
Add value to an organization’s existing mainstream report, while minimizing the reporting burden and simplifying the reporting process.
The Framework also indirectly supports organizations by:
Supports compliance with regulatory reporting requirements with current & emerging requirements for sustainability reporting, (e.g. the EU Non-Financial Reporting Directive or Thailand 56-1 Form);
Forms part of the evidence base as the ISSB develops its IFRS Sustainability Disclosure Standards.;
Aligns and complements the objectives of financial reporting by providing environmental and social information that is connected with financial information;
Aligns with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD);
Creates resilient reporting due to CDSB was built on the most widely used reporting approaches, such as CDP, GRI, SASB, IFRS;
Encourages standardization of environmental and social information reporting;
Supports the rigor that is appropriate for information provided to investors;
Helps prepare confident reports.
The development of the CDSB Framework has been overseen by the CDSB Technical Working Group, consisting of representatives from the largest accounting firms, reporting organizations, companies and academia. Currently, voluntary and mandatory reporting schemes on sustainability have multiplied, but there is no single standard about how companies should identify relevant information on natural, social and human capital and how users of such information can interpret it. As such, the information available is inconsistent and financial institutions are not taking account of environmental and social factors in their decision-making (CDSB, 2., 2022). Therefore, an organization should select reporting schemes that suit for its activities.
CDSB Framework Application Guidance
The first one is Climate Guidance which is produced for assisting companies in the disclosure of material climate-related information in the mainstream report. The Climate Guidance is designed to complement the CDSB Framework and other frameworks, codes and recommendations that are aligned with some or all of the requirements of the CDSB Framework. This guidance offers companies a means of developing their reporting practices and ensuring that investors are receiving the material climate-related information needed for efficient and effective capital allocation to drive the transition to a just, low-carbon economy. The current standard of mainstream reporting on climate risks and opportunities means that there is an information deficit for investors and other decision-makers. This shortfall in high quality, decision-useful material climate information means that investors are unable to make the capital allocations that can drive change across economies and societies. The focus of the guidance is on the first six reporting requirements of the CDSB Framework. These reporting requirements set out the key content elements for reporting material environmental information in the mainstream report as following:
REQ-01 Governance
REQ-02 Management’s environmental policies, strategies and targets
REQ-03 Risks and opportunities
REQ-04 Sources of environmental impact
REQ-05 Performance and comparative analysis
REQ-06 Outlook
For each of these reporting requirements, the Climate Guidance provides:
A checklist for making effective climate disclosures;
Detailed reporting suggestions and guidance to complement the CDSB reporting requirement in relation to climate issues;
A selection of further useful resources to assist companies in developing their mainstream climate reporting;
Explained examples of good practice in mainstream climate reporting.
The Climate Guidance also offers some further important considerations for companies in making mainstream climate disclosures, covering aspects of the reporting principles and remaining requirements of the CDSB Framework. In addition, the Climate Guidance provides an overview of the significance of climate change to business, explaining the importance of physical and transition risks, and highlighting the key and unique characteristics of the climate system and their importance to corporate reporting. Finally, the Appendices to the Climate Guidance provides a mapping of the CDSB Framework to the TCFD Recommendations and a list of additional CDSB resources for preparing effective climate disclosures (CDSB, 3., 2022).
Water Guidance is the second guidance for water-related disclosure, which has been developed for assisting companies in the disclosure of water-related financial information in mainstream report. It is designed to supplement the CDSB Framework for reporting environmental and climate change information to investors. The Water Guidance offers companies a means of developing their reporting practices and ensuring that investors are receiving the material water-related information needed for effective capital allocation to drive the transition to a sustainable, resilient, and water secure economy. The intended users of this Guidance are organizations, both single companies and corporate groups, and in particular those responsible for financial, governance and sustainability reporting (CDSB, 4., 2022).
The third part of a series of CDSB Framework Application Guidance is Biodiversity Guidance, which aims to extend the TCFD recommendation and its core elements to nature. It is designed to support the intended users in applying the CDSB Framework to the natural capital elements of climate change, water, and biodiversity. Following the guidance on climate-related and water-related disclosures, the Biodiversity Application Guidance is designed to enhance the quality of disclosures for such significant matters. Working in conjunction with the reporting principles and requirements of the CDSB Framework, each application guidance assists companies to develop clear, concise, consistent, and comparable (inter-period comparability of the same entity and inter-entity comparability) disclosures, enhancing the decision-usefulness of their mainstream reporting on sustainability-related financial matters to investors. Given the interconnected nature of environmental topics, the application guidance documents are complementary with some overlapping subtopics. The objective of the Biodiversity Application Guidance is to support organizations in preparing high-quality disclosures that enable users of mainstream reports to assess material biodiversity-related financial information. In addition, the Biodiversity Application Guidance also provides an overview of the significance of biodiversity to business, explaining the importance of biodiversity-related business risks and opportunities, and highlighting the key characteristics of biodiversity and their importance to corporate reporting (CDSB, 5.,2022).
In July 2021, CDSB published a position paper on social reporting and determined the benefit of expanding the scope of the CDSB Framework to include social as well as environmental information. This decision was made for three key reasons. First, the importance of social information to companies, investors and regulators in their decision-making continues to grow and increasingly poses material risks and opportunities to organizations. Second, the significance of the connections between environmental and social issues and the resultant businesses effects are being better understood, demonstrating the need to comprehend and report on these matters in an interlinked manner. Finally, there is presently no reporting framework for social information that is definitively committed to the principles, approaches, and structure of the mainstream report. The updated version of the CDSB Framework is hoped to assist in the development of higher-quality and more decision-useful environmental and social disclosures, benefitting both report preparers and users. The “Corporate reporting on social matters” integrates social information into the market-tested and well-aligned reporting principles and requirements of the CDSB Framework, offers specific guidance for reporting on social issues in the mainstream report, and more generally seeks to add detail and clarity to several areas of the framework. Challenges exist with the present practices of reporting consistent, comparable, decision-useful information on social issues, particularly for material social issues in the mainstream report. The challenge hence is not necessarily one of volume of data, but more one of quality, rigor, and context of that information (CDSB, 6., 2022).
CDSB is setting out to expand the scope of its reporting framework and technical work to suitably accommodate financially material social issues. This will see CDSB provide the market with the framework for TCFD-style reporting across all financially material social and environmental issues and offer companies the means of reporting decision-useful information that meets ever-developing needs and expectations of users.
References:
CDSB, 1. (2022) Consolidation of CDSB. [online] London: Climate Disclosure Standard Board. Available from: https://www.cdsb.net/ [Access 14 June 2023].
the Most Renowned ESG Standard: Global Reporting Initiative (GRI)
Global Reporting Initiative (GRI) standards are strongly aligned with the UN Sustainable Development Goals and provide resources and tools that enables companies understand and communicate their contribution to the SDGs. Information from GRI reveals that 82% of 250 big companies in the world adopted GRI standards for reporting sustainability issues and 10,557 companies around the world are following the GRI standards with more than 27,000 published papers. There are 177 listed and non-listed companies in Thailand that used that GRI standards with 342 published papers. GRI is an independent entity that was established by United Nation Environment Programme (UNEP) with Ceres Company Network by launched the first standards in 2000, called G1. Then, the standards have been developed until G4 which totally different from G1 by emphasized on qualitative reporting rather than quantitative reporting, especially in terms of disclosure of analysis issues, material aspects and stakeholder analysis. Moreover, there also was change in the level of reporting from A, B, C, which cause confusion between grading quality and scale of disclosure following GRI guideline, to be “In accordance” in form of “Core” or “comprehensive” instead of the level. This change entailed organizations highlight more about contents that relevant to their business contexts and stakeholders. After the popular version (G4), GRI recently launched “GRI Standards” for replacing G4 in 2016 by maintaining principal and format of reporting, but the change was structure of reporting which is more systematic and less of redundancy of reporting data by changing some significant indicators. Furthermore, structure of the GRI standards was designed for internal changing of organization’s indicators and regulations in the future without reviewing entire report. GRI standards was not created for only communication, but also being checklist in order to help organizations plan their long-term strategy. Michael Meehan stated in “Sustainability Reporting as a Tool for Better Risk Management” from MIT Management Review 2016 that following GRI guideline will help organizations to see a gaps between business operation and stakeholder needs in value chain. Organizations will have “the development” for creating “value add” when they can close those gaps and reduce potential risk in the future. Therefore, GRI is business management rather than a reporting, which comprises of 3 foundations of reporting including in gathering data processes, codification processes and connecting data with organizational strategies, and operational metrics particularly. These processes spotlight on operational progress and priority, and also provide efficient data for decision makers in organizations in terms of adding value by sustainability such as adopting an innovation for improving competitive capability. The sustainability report can be in deferent formats according to organizational readiness. It can be either a part of annual report or separated report, or published in form of paper, digital file, or website, organizations should concern about users and appropriate channel though. In addition, there currently are many forms of presentation like infographic, motion clip or social media that organizations can adopt for making productive ESG report and good brand image simultaneously (Tantimangkorn, A. and Ekachaiphaiboon, S., 2017). The GRI Standards are the only global standards with an exclusive focus on impact reporting for a multi-stakeholder audience – making it an essential factor in the shaping of a reporting structure. For example, GRI has a key role in working with European Financial Reporting Advisory Group (EFRAG) and the International Sustainability Standard Board (ISSB) to build this comprehensive global set of sustainability reporting standards. Only then the two-pillar structure can be created – for financial and sustainability standards – with a core set of common disclosures and each pillar of equal footing. Covering the information needs of investors as well as other stakeholders, this will increase confidence and credibility in the sustainability behavior of companies. GRI has a robust policy in cooperate with EFRAG, the ISSB, and (inter) governmental organizations to drive sustainability disclosure in a two-pillar reporting structure. Credibility is created through accountability. And accountability can only be provided through transparency. Frameworks without a definite reporting obligation cannot fulfil this purpose – but publishing relevant information based on widely used truly global corporate reporting standards – underpinning both the financial and impact materiality perspective of sustainability (GRI, 4., 2022).
GRI in The Sustainability Reporting Landscape
The sustainability reporting landscape is changing fast. With the rise of dedicated Environmental Social and Governance (ESG) investments, rankings and exchange-traded funds, the need for standardized, comparable information to enhance decision making by shareholders and stakeholders. On the other hand, cherry picking, and greenwashing are bigger than ever for avoiding standard and framework shopping. The current landscape is often referred to as an ‘alphabet soup’. While there is a confusing myriad of guidelines, frameworks, surveys, and certifications that deal with the topic of sustainability, there is no a confusing assortment when it comes to actual standard setters. On a global scale there are only two reporting standards: GRI and SASB. There are currently two complementary developments happening in the sustainability reporting landscape: 1) European Sustainability Reporting Standards (ESRS) are being created by the European Union– with EFRAG and GRI leading co-construction efforts. 2) Standards for the disclosure of sustainability-related financial information are being drafted by the International Financial Reporting Standards (IFRS) Foundation – with which the newly established International Sustainability Standards Board (ISSB) is charged. The main differences between them are: 1) First, the European Union is focused on developing reporting standards that reflect multi-stakeholder information needs on the full sustainability spectrum across socio-economic and environmental aspects. The exclusive remit of the standards developed by the IFRS Foundation is on the needs of investors and the financial impact of sustainability issues on the reporting entity itself, focusing on enterprise value creation. 2) The second major difference is enforcement. The EU standards are backed by a political process and enforcement capabilities, making reporting mandatory for some 50,000 companies from financial year 2023. IFRS can only encourage uptake of ISSB standards. Towards a two-pillar corporate reporting landscape GRI firmly supports the creation of a comprehensive corporate reporting system based on a two-pillar structure – for financial and sustainability reporting – with a core set of common disclosures and each pillar on an equal footing based on the idea that sustainability reporting initiatives should not be regarded as competing but complementary forces as shown in Figure 1.
• Pillar 1 – addressing financial considerations through a strengthened financial report which includes sustainability disclosures, in the context of enterprise value.
• Pillar 2 – concentrating on sustainability reporting exposing on all external impacts a company is having on society and the environment and hence their contributions towards the goal of sustainable development.
Figure 1 (GRI, 3., 2022, 2)
GRI is fully committed to supporting this sustainability objective and will cooperate with the ISSB, EFRAG and (inter) governmental organizations to drive sustainability disclosure in a two-pillar reporting landscape forward and call for:
Joint standard setting, and offered a pilot project around a biodiversity standard
Global agenda alignment (GRI, 3., 2022).
In 2021, GRI responded on the updated strategic direction of the IFRS Foundation and the establishment of a working group between GRI and IFRS. In November 2021, GRI welcomed the announcement of the launch of the ISSB, which included the consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) (which includes the IIRC and SASB) into the ISSB. GRI has previously had long-running collaborations with both the IIRC and SASB, including a 2021 joint report on how to use GRI and SASB standards together. In March 2022, GRI and the IFRS Foundation signed a Memorandum of Understanding (MoU) to coordinate their work programs and standard-setting activities as well as join each other’s consultative bodies related to sustainability reporting. By working together, the IFRS Foundation and GRI provide two pillars of international sustainability reporting – a first pillar representing investor-focused capital market standards of IFRS Sustainability Disclosure Standards developed by the International Sustainability Standards Board (ISSB), and a second pillar of GRI sustainability reporting requirements set by the Global Standards Setting Board (GSSB), compatible with the first and designed to meet multi-stakeholder needs. On the other hand, Since July 2021, GRI and the European Reporting Advisory Group (EFRAG) have been working together to co-construct the European Sustainability Reporting Standards (ESRS), which will set mandatory disclosure requirements under the EU Corporate Sustainability Reporting Directive (CSRD). Under the EFRAG-GRI cooperation agreement, the two organizations agreed to join each other’s technical expert groups and align standard-setting activities and timelines as much as possible (GRI, 2., 2023).
Basics and Confusions of Materiality
Back to basics, Materiality is a key concept in the world of reporting and plays a part both in the preparation of the disclosures and their verification by an auditor. Materiality is used to ‘filter in’ the information that is or should be relevant to users. Particular information is considered ‘material’ – or relevant – if it could influence the decision-making of stakeholders in respect of the reporting company. This brief description outlines that materiality is not a clear-cut concept and is subject to interpretation. What matters is not just what is meant by information but, crucially, who the stakeholders are. Are these only financial decision-makers such as investors and financiers? Or do they also include other parties such as employees, suppliers, customers and communities; that is, the socioeconomic environment? The next question is how influence must be interpreted for an organization’s stakeholders. Is this purely financial, in terms of costs or compliance – in other words, value creation for the reporting company itself? Or must it be viewed in terms of impact on the economy, the environment and people? There are the confusions around the concept of materiality for defining significant. To make it clear from the start, GRI determine two main directions of thinking about materiality, which together make up the concept of ‘double materiality’ as shown in Figure 2:
Figure 2 (GRI, 1., 2022, 2)
Recently There are wildly used terms in addition to the more familiar concepts of financial materiality and impact materiality such as: ‘dynamic materiality’, ‘nested materiality’, ‘extended materiality’ and ‘core materiality’. They are meant to strike a bridge between financial and impact materiality, but all it does is adding to the materiality madness, making the idea behind the concept of materiality unnecessarily complicated. Of those concepts, dynamic materiality is heard most often. It is based on the primacy of ‘financial materiality’ but has been extended by the notion of ‘pre-financial information’. The point of departure is that some sustainability issues have no direct monetary impact on the company’s financial value creation in the here and now, but may do so in the medium or long term. Blurring the boundaries between financial and impact materiality, by stating that some information is dynamic rather than static, complicates the way substance should be given to sustainability disclosures. The concept of dynamic materiality is basically a postponement of double materiality due to, at the end of the day, companies should report on matters that influence enterprise value (financial materiality) and matters that affect the economy, environment, and people (impact materiality). The reality is that the impacts of an organization are or will become financially material over time. Without understanding these impacts, it won’t be possible to get a complete overview of financially material issues affecting the company, an exercise that GRI supports. Besides, impact reporting is also highly relevant in its own right as a public interest activity for multiple stakeholders. The impacts of a company matter and must be reported even if the company or its investors do not consider them to be financially material, either now or in the future. That is to say two sustainability reporting developments are happening that take a different approach on materiality. 1. The European Sustainability Reporting Standards (ESRS) being created by the EU will be based on double materiality, for a multi stakeholder audience (which includes investors). GRI and the European Financial Reporting Advisory Group (EFRAG) are leading its co-construction efforts. 2. The standards for the disclosure of sustainability-related financial information are being drafted by the IFRS Foundation will be based on financial materiality for an investor audience only. In GRI’s perspective, the approaches of the IFRS and the EU are not competing but complementary forces. Different standards have different purposes for different audiences. In conclusion, the GRI Standard is currently the only global standard with an exclusive focus on impact reporting for a multi-stakeholder audience – making it an essential factor in the shaping of a reporting structure based on double materiality (GRI, 1., 2022).
Stakeholder Capitalism (Sustainable Capitalism) in Practice
The widely supported neoliberal economic view, especially popular since the 1980s, entails that a company is accountable only to the shareholders and investors. In this context, ‘profit maximalization’ is the company’s principal duty. Social matters are the responsibility of the government. At present, there are many who believe this view (in its extreme form) is no longer tenable. The objective of value creation by the company (purely) for the benefit of shareholders is moving towards a broader view, which takes account of social engagement and the impact on climate and society for a larger group of stakeholders. According to these topics are shifted market overview that will affect your reputation and brand, your ability to hire staff, mitigate and manage environmental risks (within the value and supply chain) and your access to capital markets. Recent milestones in this movement include The New Paradigm of Corporate Governance from the International Business Council of the World Economic Forum (WEF), the subsequent 2020 Davos Manifesto, as well as the adoption of stakeholder governance by the American Business Roundtable. Therefore, the real meaning of stakeholders should be reidentified. An interest (stake) is something of value to an individual or group, that can be affected by the activities of an organization. So, there are many individuals and groups either human or non-human that have the potential to be affected, for example: business partners, civil society organizations, consumers, customers, employees, governments, local communities, NGOs, shareholders and investors, suppliers, trade unions, and vulnerable groups etc. Together we call them stakeholders. The balancing act businesses face in a stakeholder centric economic model is to remain attractive to investors while taking into account the interests of your stakeholders. Alas, that is not an easy thing to do. First of all, you cannot please everyone. Secondly, you need to make money to stay competitive. Some business decisions may conflict with certain stakeholder’s interests. Hence, explaining to stakeholders your actions to become (more) profitable while (trying to) safeguard their interests is a powerful tool to show the world your contribution to the economy, environment and society. That is where financial reporting standards and GRI’s sustainability reporting standards come into play. The needs of the world’s economy, its people and environment go beyond climate metrics or investor interest alone. The topics of the top-10 most downloaded GRI Standards in 2021 clearly reflect this as shown in Figure 3. These numbers prove that there is broader interest in sustainability issues. Moreover, companies around the world are not all impacted by environmental issues to the same extent, with many organizations facing relatively higher-pressure levels on social and governance matters.
Figure 3 (GRI, 2., 2022, 2)
GRI bringing stakeholder capitalism into practice by suggested that the objective to generate profit should not be dismissed given that companies play an essential role in the creation of jobs and developing and scaling innovative technologies, which are crucial as the world seeks to shift from fossil to renewable energy. However, companies also need to set targets that are aligned to their sustainability impacts, including the Sustainable Development Goals (SDGs). Applying comprehensive sustainability reporting and financial reporting means the company, asset manager, asset owner or rating agency can legitimately respond to calls for an approach that reflects both their profit-making mandate as well as responsibilities to the environment and society. That is why GRI is a firm supporter in the creation of a comprehensive corporate reporting system based on a two-pillar structure – for financial and sustainability reporting – with each pillar on an equal footing and mandated. (GRI, 2., 2022).
The Global Standards for Reporting Sustainability Impacts
The GRI Standards enable any organization – large or small, private or public – to understand and report on their impacts on the economy, environment and people in a comparable and credible way, thereby increasing transparency on their contribution to sustainable development. In addition to companies, the Standards are highly relevant to many stakeholders – including investors, policymakers, capital markets, and civil society.
Figure 4 (GRI, 1., 2023)
· The Universal Standards – now revised to incorporate reporting on human rights and environmental due diligence, in line with intergovernmental expectations – apply to all organizations;
· The new Sector Standards – enable more consistent reporting on sector-specific impacts;
· The Topic Standards – adapted to be used with the revised Universal Standards – list disclosures relevant to a particular topic.
Access an overview of how the Standards are set up and what to look for in the reporting process with this short introduction: Get to know the GRI Standards system (GRI, 1., 2023)
GRI, 1. (2023) The Global Standards for Sustainability Impacts. [online] Amsterdam: Global Reporting Initiative. Available from: https://www.globalreporting.org/standards/ [Access 7 June 2023].
The FSB established the Task Force on Climate-related Financial Disclosures (TCFD or Task Force) to develop recommendations for more effective climate-related disclosures that: 1) could “promote more informed investment, credit, and insurance underwriting decisions” and 2) on the other hand, enable stakeholders to understand better the concentrations of carbon-related assets in the financial sector and the financial system’s exposures to climate-related risks. The Task Force identified several categories of climate-related risks and opportunities. These include potential financial impact to assist investors, and companies consider longer-term strategies and most efficient allocation of capital in light of “the potential economic impacts of climate change”. TCFD recommended disclosures into 4 thematic areas 1) Governance: Disclosure the organization’s governance around climate-related risks and opportunities. 2) Strategy: Disclosure the actual and potential impacts of climate-related risks and opportunities on the organizational’ s business, strategy, and financial planning where such information is material. 3) Risk Management: Disclosure how to organization identifies, assesses, and manages climate-related risks. 4) Metrics and Targets: Disclosure the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material (TCFD, 2022).
The Principles for Effective Disclosures
The first key consideration for prepare disclosures is the Principles for Effective Disclosures in which influences high-quality and decision useful disclosure that enable stakeholders to understand the impact of climate change on organizations. The TCFD recommended The Principles for Effective Disclosures including 7 concerns: 1) Disclosures should represent relevant information 2) Disclosures should be specific and complete 3) Disclosures should be clear, balanced, and understandable 4) Disclosure should be consistent over time 5) Disclosures should be comparable among companies within a sector, industry, or portfolio 6) Disclosures should be reliable, verifiable, and objective 7) Disclosure should be provide on a timely basis. Secondly, the Cross-Industry Metric Categories is a set of climate-related metric categories that all organizations should disclose, where data and methodologies allow. For example, A printing company, which familiar with printing process, may adopt a building rating system for identifying GHG from company’s building despite of GHG from printing process. However, the extract metrics and units of measure to be used are not prescribed in the Cross-Industry Metric Categories in order to allow organizations, industries, standard setters, and jurisdictions to develop specific climate-related metrics within those defined categories along with specific climate-related risk issues in each micro climate area. The third key consideration is the Financial Sector Metrics, which provides specific considerations for financial sector organizations due to the nature of their business activity. Another key consideration is the Transition Plans that ask for disclosure of the actual and potential impacts of climate-related risk and opportunities on the organization’s businesses, strategies, and financial planning, reporting on transition plans. The final one is the Implementation Over Time according to different organizations require vary resources, budgets and timing for producing disclosures, hence each organization should update the guidance continually.
Climate-related metrics
In terms of climate-related metrics, there are 3 “connective tissue” for connect those 4 thematic areas, which are mentioned above, comprise of 1) characteristics of effective climate-related metrics 2) Disclosing climate-related metric 3) driving toward comparability: cross industry metric categories. For the first one, TCFD described the character of reporting that ought to be. Firstly, organizations should elaborate about climate-related metrics that how it relates to organization, what are risks and opportunity of those metrics, and show how the organizations manage such risks and opportunities as part of governance, strategies, and risk management processes. This stage helps stakeholders to understand potential impacts of climate-related risks and opportunities over a specific time period, including financial impacts and operational consequences. Disclosure of climate-related metrics will be most effective when metrics are presented in manner that aids understanding including clear articulation of any limitations and caution. Climate-related metrics should also provide important context around such points as management’s thinking in terms of goal setting, internal process management, and communication objectives and should be supported by contextual and supporting narrative information on items such as organizational boundaries, governance, methodologies, and basis of preparation. The climate-related metrics support effective internal control for purposes of data verification and assurance. Hence. Climate-related metrics should be free from bias and value judgement so that they yield an objective disclosure of performance that stakeholders can leverage regardless of their worldview or outlook. In consistency of over time, there are three time horizons that are relevant to climate-related metrics: current, historical, and forward-looking, which are identified as: Current period data, outlining most recent reporting period and covering the same period as the current period in the organization’s financial filings (e.g., 12 months year to date). Historical, data for the period(s) prior the current year period, covering at a minimum the same period as in the organization’s financial fillings. Forward-looking is future period data, covering shot-, mid-, and long-term time horizons. Forward-looking metrics may be based on methodologies such as scenario analysis, trend analysis, sensitivity analysis, and simulations, as well as commitments and climate-related targets as shown in Figure 1. Unlikely historical and current data, forward-looking data are usually more appropriately reported as ranges based on assumptions about the future state of the world, often tied to one or more probable climate scenarios. Importantly, climate-related metrics are most effective when the same item is reported across all time periods. Measuring the same metrics over time period is a key to track progress. Disclosure of GHG emissions, for example, could include data on the organization’s previous GHG emissions levels, the amount of GHG emissions in the organization’s current reporting period – including an indication of progress against GHG-specific targets – and a forward-looking range for future GHG emissions.
For the second one, contextual and supporting narrative can help to create effective disclosure of climate-related metrics in general. Climate-related metrics, and associated narrative should be integrated with an organization’s other disclosures to provide a coherent set of information on the organization’s climate-related risk and opportunities and actual and potential financial impact. Organizations should also consider presenting climate-related metrics and associated contextual information with ranges or qualitative categories including confidence associated with the value of metrics. The first consideration is types of measurements used that include whether information comes from direct measurement, estimates, proxy indicators, or financial and management accounting processes. Methodologies and definitions used is another consideration, which include the scope of application, data sources, critical factors or parameters, assumptions, and limitations of the methodology. For example, the GHG protocol suggests that organizations discuss GHG emission factors, scope, and boundaries etc. For metrics informed by scenario analysis, organizations should include information on which climate scenarios were used and their assumptions and limitations as elaborate in Table 1. Organization should also provide context if they adjust the methodology or definition of particular metrics. Thirdly, trend data is another consideration for considering of how metrics have changed in absolute and relative amounts over time, including whether acquisitions, divestments or policies have affected results. The fourth consideration is how results are connected with business units, company strategy, and financial performance and position. Where it helps understanding, organizations should consider disaggregating information by categories such as geographical area, business unit, asset, type, upstream and downstream activities, source, and vulnerability of area. The fifth consideration is how value chains will be affected over time by climate-related transition and physical risks, including life cycle GHG emission reporting. The final consideration for disclosing climate-related metrics is reconciliation with financial accounting standard, if needed. If climate-related metrics are presented in financial terms, disclosures should clarify how such metrics reconcile with financial accounting standards and explain any differences.
Governance – Board oversight of strategy and scenario process
• Indicate and awareness and understanding of climate-related issues; level of expertise on or available to the Board on climate issues; reporting relationships to the Board regarding scenario analysis.
Risk Management
• Including the risks and uncertainties evaluated through scenario analysis; how the company believes these risks may develop over time based on scenario analysis; how the company plans to manage or address their risks.
Strategy – Scenario analysis process
• Describe processes used for scenario analysis; the range and assumptions of scenarios used; key finding, whether it is a standalone analysis or integrated with company’s risk management and strategy processes.
Strategy -Strategy resilience
• Indicate awareness and planning for the potential physical climate and transitional changes indicated by scenario analysis; indicate adjustments made to strategy in light of scenario analysis. • Indicate whether financial plans are aligned with strategic plans related to climate risks and opportunities (e.g., capital expenditure, investments, R&D, etc.)
Target and Metrics
• Indicate whether useful metrics have been identified related to strategy, strategy resilience, and scenario signposting; how these metrics are connected to the organization’s strategy and scenario analysis; and how they are being used
Remark: Using a common set of scenarios and inputs (e.g., parameters, timelines, industry-specific metrics, methodologies) increases comparability across companies, provides greater reliability and relevance, and can help reduce the resources required by preparers to develop scenarios in- house. On the other hand, using a common set of scenarios across organizations may reduce their ability to assess their individual situations and how climate-related risks may uniquely affect them, and thus could increase concentration of risk.
Driving toward comparability is the third connective tissue that help the disclosure get aligned with global trend. Climate-related metrics can be generally categorized into 2 groups – those that apply to all organizations (cross-industry) and those that are specific to an industry (industry specific). These 2 types of climate-related metrics can be referred to the International Sustainability Standards Board (ISSB) that established by the IFSC Foundation. The Task Force recommends that preparers disclose metrics consistent with the cross- industry, climate-related metric categories for the current, historical, and forward-looking periods. It is also important to note that the recommended disclosures within both the Strategy and Metrics and Targets recommendations are subject to materiality, except for the disclosure of Scope 1 and Scope 2 GHG emissions. Organizations typically use a wide variety of information internally and externally to manage their operations. These cross-industry, climate-related metric categories are not meant to supplant or replace other information that organizations track as part of their business planning or that industries converge on to track climate-related risks or opportunities specific to their industry or organization. 7 Cross-Industry, Climate-Related Metric categories and examples are described in Table 2. (TCFD, 2021)
• Absolute Scope 1, Scope 2, and Scope 3 GHG emission • Financed emissions by asset class • Weighted average carbon intensity • GHG emission per MWh of electric produced • Gross global Scope 1 GHG emissions covered under emission-limiting regulations
Transition Risks Amount and extent of assets or business activities vulnerable to transition risks*
Amount or percentage
• Volume of real estate collaterals highly exposed to transition risk (General industry) • Concentration of credit exposure to carbon-related assets (General industry) • Percent of revenue from coal mining (Energy industry) • Percent of revenue passenger kilometers not covered by Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) (Aviation industry)
Physical Risks Amount and extent of assets or business activities valuable to physical risks*
Amount or Percentage
• Number and value of mortgage loans in 100-year flood zones • Wastewater treatment capacity located in 100-year flood zones • Revenue associated with water withdrawn and consumed in regions of high or extremely high baseline water stress • Proportion of property, infrastructure, or other alternative asset portfolios in an area subject to flooding, heat stress, or water stress • Proportion of real assets exposed to 1:100 or 1:200 climate-related hazards
Climate-RelatedOpportunities Proportion of revenue, assets, or other business activities aligned with climate-related opportunities
Amount or percentage
• Net premiums written related to energy efficiency and low-carbon technology • Number of 1) zero-emissions vehicles (ZEV), 2) hybrid vehicles, and 3) plug-in hybrid vehicles sold (PHEV) • Revenues from products or services that support the transition to a low-carbon economy • Proportion of homes delivered certified to a third-party, or multi-attribute green building standard
Capital Deployment Amount of capital expenditure, financing, or investment deployed toward climate-related risks and opportunities
Reporting currency
• Percentage of annual revenue invested in R&D of low-carbon products/services • Investment in climate adaptation measures (e.g., soil health, irrigation, technology)
Internal Carbon Prices Price on each ton of GHG emissions used internally by an organization
Price in reporting currency, per MT of CO2e
• Internal carbon price • Shadow carbon price, by geography
Remuneration Proportion of executive management remuneration linked to climate consideration**
Percentage, weighting, description, or amount in reporting currency
• Portion of employee’s annual discretionary bonus linked to investments in climate-related products or services • Weighting of climate goals on long-term incentive scorecards for Executive Directors • Weighting of performance against operational emissions’ targets for remuneration scorecards
*Transition and physical risks: Due to challenges related to portfolio aggregation and sourcing data from companies or third-party fund managers, financial organizations may find it more difficult to quantify exposure to climate-related risks. The Task Force suggests that financial organizations provide qualitative and quantitative information, when available.
**Remuneration: While the Task Force encourages quantitative disclosure, organizations may include descriptive language on remuneration policies and practices, such as how climate change issues are included in balanced scorecards for executive remuneration.
References:
FSB (2020) About the FAB. [online] Basel: Financial Sustainability Board. Available from: https://www.fsb.org/about/ [Access 28 May 2023].
TCFD (2020) Task Force on Climate-related Financial Disclosures: Guidance on Scenario Analysis for Non-Financial Companies. [online] New York: Task Force on Climate-related Financial Disclosures. Available from: https://www.fsb-tcfd.org/publications/ [Access 29 May 2023].
TCFD (2021) Task Force on Climate-related Financial Disclosures: Guidance on Metrics, Targets, and Transition Plans. [online] New York: Task Force on Climate-related Financial Disclosures. Available from: https://www.fsb-tcfd.org/publications/ [Access 28 May 2023].
TCFD (2022) Task Force on Climate-related Financial Disclosures: Overview. [online] New York: Task Force on Climate-related Financial Disclosures. Available from: https://www.fsb-tcfd.org/publications/ [Access 28 May 2023].
