The Alphabet Soup of ESG: Introducing Key Frameworks

ESG? SDGs? SASB? GRI? TCFD? The world of ESG (Environmental, Social and Governance) is littered with acronyms and can seem like an alphabet soup to companies just getting started. This article introduces you to some of the most common ESG standards and frameworks that are relevant to private companies.

United Nations Sustainable Development Goals (UN SDGs)

Who it’s relevant to: any ESG-focused company.

The United Nations Sustainable Development Goals (UN SDGs) were adopted by all United Nations Member States in 2015 as a “a blueprint to achieve a better and more sustainable future for all”. The framework features 17 goals that are focused on reducing global inequality by ending poverty, addressing racial and gender disparities, improving access to healthcare and education, and tackling climate change.  Though the goals are broad and interdependent, the UN has adopted specific targets for each goal, along with indicators that are being used to measure progress toward each target. The goals were originally meant to guide governments, but many businesses have begun reporting to their stakeholders and customers how their efforts align with specific UN SDGs. We often see companies commit to the UN SDGs even at early stages and map their operations to the SDG framework. 

The UN SDGs are free and can be accessed here.

Because the UN SDGs are largely aspirational commitments and are focused more on behavior change rather than disclosure, they’re a great framework for ESG-focused emerging companies to get started with.  Start by taking a look at the UN SDGs and seeing which goals your company may already be aligned with due to its business model, industry or operations. 

B Impact Assessment (BIA)

Who it’s relevant to: startups and companies considering B Corp Certification.

Developed by B Lab (the same organization that certifies companies as B Corps), the B Impact Assessment is a digital tool used globally to help companies measure, manage and improve their ESG performance. The assessment asks questions across five categories: governance, workers, community, the environment, and customers.  Once complete, companies are able to compare their performance to thousands of other businesses who have also completed the assessment, as well as access a knowledge bank which houses customized improvement reports, best practice guides and case studies.  If your company is considering B Corp Certification, you should take the B Impact Assessment to gauge whether you meet the certification eligibility—you’ll need to demonstrate a score of at least 80 points to begin the certification process. 

The B Impact Assessment is free and can be accessed here.

The BIA’s user-friendly interface and plain-language questions make it a great entry point for ESG-focused startups, especially those considering B Corp Certification.  For a well-rounded ESG report, consider coupling the Impact Assessment with another framework, like the UN SDGs. 

Sustainable Accounting Standards Board (SASB)

Who it’s relevant to: late-stage private companies preparing to go public.

The Sustainable Accounting Standards Board (SASB) is a leading ESG disclosure framework for public companies.  While developed originally for US-based disclosure, it is also supported by or used in many other countries in connection with investment decision-making.  SASB’s mission is to help businesses and investors develop a common language about the financial impacts of sustainability. SASB Standards identify sustainability disclosure topics that are reasonably likely to significantly impact the financial condition, operating performance, or risk profile of a typical company in each of 77 industries.  Each industry-specific standard includes general disclosure topics and quantitative and qualitative accounting metrics intended to measure performance on those topics. The SASB standards also provide guidance on methods of collecting and presenting this data. Increasingly public companies are aligning their reporting with the SASB framework; for example, over half of the companies represented in the S&P 1200 utilize SASB standards in their investor communications.

The SASB standards are free to download for non-commercial use and can be accessed here.

For an early-stage company, it may be helpful to review your industry standards and begin to integrate key metrics early on, but a full SASB assessment may be a heavy lift for a lean management team. As companies mature and begin to prepare for an IPO or acquisition by a public company, there can be significant benefits to tracking the industry metrics and aligning external reporting with the SASB standards.

Task Force on Climate-Related Financial Disclosures (TCFD)

Who it’s relevant to: late-stage private companies preparing to go public.

The Task Force on Climate-Related Financial Disclosures (TCFD) is a global organization formed to develop a set of recommended climate-related disclosures that companies and financial institutions can use to better inform shareholders and other stakeholders of their climate-related financial risks.  The goal of these disclosures is to bring transparency to companies’ climate-related risks.  The TCFD framework breaks down a company’s climate reporting into four major categories: Governance, Strategy, Risk Management and Metrics and Targets, and includes eleven specific disclosures linked to climate-related risks and opportunities.

The TCFD disclosures are free and can be accessed here.

For early-stage companies that are not particularly sensitive to climate risks, the TCFD framework may not be as relevant initially. A late-stage pre-IPO company should consider leveraging the TCFD framework to conduct a climate risk analysis and prepare for mandated climate risk disclosure.  

Global Reporting Initiative (GRI)

Who it’s relevant to: mid- to late-stage private companies committed to robust stakeholder communications.

One of the oldest sustainability frameworks, the Global Reporting Initiative (GRI) Standards are widely used standards for sustainability reporting worldwide.  The GRI Standards are focused on the broader economic, environmental, and social impacts of a company in relation to sustainable development, not just financially material impacts. This facilitates reporting to a broader set of stakeholders, including investors, customers, policymakers, and civil society.  The Standards are modular and include universal standards (e.g., general disclosures relating to a company’s structure and reporting practices), sector standards (e.g., oil & gas, agriculture) and topic standards (e.g., waste, occupational health, and safety).  Companies build a personalized reporting tool based on their individual needs.  Recently GRI and SASB announced a partnership to better demonstrate how companies can use the two standards together and increasingly, public companies align their sustainability reporting with both the SASB Standards and the GRI framework, particularly those with international operations.

The GRI standards are free and can be accessed here.

GRI is a great tool for high-growth private companies that are looking to get ahead of the ESG curve. GRI’s framework provides a way to benchmark your company’s ESG performance against industry peers and outlines a gold-standard process of stakeholder engagement.

Many thanks to Allie Marshall for her contribution to this article.