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How to navigate the ESG reporting in 2023



ESG disclosure has become a prerequisite to access financial capital, insurance, and clients. It will soon be a legal requirement as sustainability reporting will be mandatory for large EU companies in 2025. They need to plan now and implement sustainability transformation actions to be able to report and avoid being fined by the regulatory bodies and the financial markets. Multiple ESG reporting frameworks have emerged, serving different sets of stakeholders. GRI is the oldest and most popular standard, addressing the widest stakeholder group, and can be used by companies of all sizes. SASB and TCFD focus on investors and provide ESG data easy to compare across sectors. If both target audiences are relevant, a combination of GRI and SASB is widely used, mostly applicable to multinational corporations. Many companies report along all three formats. In the EU, a reporting standard ESRS is developing to consolidate all vital data and address all necessary stakeholders, among other changes to comply with the EU regulation. Its content overlaps with the GRI standard at the moment – it will be possible to build on it, closing the gap between the two if you are already reporting using GRI. If in 2023 you are starting the reporting from scratch, for the EU companies, it may be wise to immediately consider ESRS framework for compliance with CSRD.


Bloomberg reports that Sweden is closing access to its €85 Billion (1 trillion Swedish kroner) pensions pot for non-ESG funds. The CFA Institute Survey of 900 institutional investors, 3,500 private investors, and 2,800 financial sector professionals worldwide, reveals that 85% of investment managers are increasingly including ESG criteria into their investment strategies. PwC forecasts the ESG-focused institutional investment to soar to US$33.9 trillion in 2026, accounting for 21.5% of total assets under management. The auditors conclude that demand for ESG investment products is outstripping supply.


Private clients monitor it less keenly – when was the last time you read a company’s ESG report before applying for a job there or before buying groceries from your local convenience store?


Many in the media question the objectivity of ESG funds’ performance evaluation. Negative comments around sacrificed returns for the sake of good ESG performance highlight the potential breach of fiduciary duty to the stockholders. ESG is sometimes seen as redundant because risk management is already a key component of management best practices. The recent collapse of Silicon Valley Bank (SVB) does not help the case for ESG as the bank had secured an “A” stock rating in terms of ESG by MSCI, whilst the inexperience of its board in banking matters has emerged.


Reporting becomes a legal obligation


EU large companies will have to disclose their non-financial data:

  • In 2025 for 2023: companies currently subject to NFRD

  • In 2026 for 2025: large companies, currently no subject to NFRD

  • In 2027 for 2026: listed SMEs (with 2-year opt-out clause)

  • In 2029 for 2028: companies listed in EU regulated markets, companies with subsidiaries in the EU and companies outside of the EU (or non-EU) with more than €150 M turnover, group level

In addition, ESG disclosure is increasingly becoming a prerequisite to tap financial capital, secure insurance, and even serve clients.


Options for reporting


The reporting universe evolved sharply in recent years, with various sets of standards and guidelines each addressing specific stakeholder groups. Harmonising the different reporting standards and hopefully consolidating them into a single standard, serving all stakeholder groups, is under way in the EU by EFRAG (European Financial Reporting Advisory Group). One important component and aim for harmonisation is comparability amongst the peers. It will help stakeholders navigate, and for the governments to design set of actions to strategically move sustainability on the national level. It is also expected to reduce burden for the companies, introducing very clear guidelines to navigate by.


If you are preparing your ESG report now, this article is your navigation guide through 2023, and hopefully becomes redundant afterwards.


What actions companies must take to be ready to report?


Companies must start planning and implementing their CSRD compliance approach already now, to have basis for reporting and demonstrating progress along with the targets still to reach. What are the actions that companies need to already today?


As an examples, if you are a manufacturer, your actions will be assessing current volumes of environmental impact, including the carbon emissions across scopes 1 and 2 at least, ideally also 3 (I will introduce this concept in my following articles). Review opportunities for reducing energy use (or self-generation), waste, and water consumption. Review the business model and processes to identify potential for efficiency or circularity, move to less polluting or biodegradable materials, etc.


Panning your actions falls into following steps:


  • Planning workforce: Who will be responsible for reporting and coordinating the change in the company? What positions should we hire and what part should we outsource?

  • Data inventory and assessment: What do we do already and what data do we have already? What is our baseline environmental and social impact?

  • Target setting: How ambitious should be our targets and timelines?

  • Designing roadmap and budget, and planning the resources: What are required investments for each transformation position, what is the return on this investment, and what is the cost of BAU? Difference between your ambition and today’s situation draws your roadmap. Cost of BAU identifies the urgency. And investment versus return will define your timeline. Through each step optimisation and maximisation of output from your resources, as an extension on our ROA (Return on Assets) will move you towards a long-term performance excellence, the core idea of sustainability. Planning the workforce to actually implement the change will be key.


The reporting standard you need to be aware of


  • EU CSRD (ESRS) - Corporate Sustainability Reporting Directive, European Union Sustainability Reporting Standards. An EU standard passed by the European Union Council on November 2022 with the intention to standardise and simplify sustainability reporting for organisations – as was previously done for financial accounting and reporting. Many companies are under pressure to use multiple reporting frameworks today as they try to satisfy the needs of various stakeholders. CSRD aims to consolidate these frameworks into a single report meeting the needs of regulators, clients, investors, and other stakeholders. Drafts are in progress in cooperation with the European Financial Reporting Advisory Group (EFRAG). Core disclosures have already been drafted, and sector-specific ones are being developed.


The three formats currently dominating the ESG reporting arena


  • GRI - Global Reporting Initiative. Pioneered in the late 1990’s, it is the first and most popular global non-financial reporting standard, offering a deep dive measuring a business’ sustainability contributions. The latest GRI Standards are divided into three sets (economic, environmental, and social) of 34 topic-specific standards. In addition, a new suite of Sector Standards is being developed, with three published so far. In frames of EFRAG-GRI cooperation, signed in 2021, experts of both organisations have joined each other’s technical expert groups to collaborate with information exchange in standard setting activities.

For companies intending to use the ESRS standards, you're quite well prepared if you already use GRI. More than 90% of the recommended changes submitted by us to EFRAG have now been included in their draft standards. The essence of the impact reporting in ESRS comes from GRI.

Eelco van der Enden, GRI CEO


Since the early stages, we have actively engaged with EFRAG in the development of the ESRS. We’ll continue to do so, as the remaining standards are developed. Our focus is on how to ensure optimal interoperability between the GRI Standards and ESRS – minimizing reporting burden and challenge for companies

Judy Kuszewski, Chair of GRI’s Global Sustainability Standards Board


In April 2023, the precise position of GRI in the context of ESRS is not yet known. It will be subject to choices made by EFRAG and the European Commission. Currently, there are indications that the ESRS will be very closely aligned with the GRI Standards.


In practice the evolution is ambiguous. GRI is hopeful that companies will be able to produce GRI and ESRS report through the same process, covering all ESRS components to be compliant with EU regulatory requirements, and taking advantage of the GRI benefits.


Suitable for any type of company and addresses all stakeholders. 78% of the world’s 250 largest companies and around 11,000 companies use this standard. Companies are well prepared for ESRS reporting if they start with following GRI Standard. Future use of the Standard in the EU is subject to EFRAG and the European Commission decisions on ESRS evolution.


  • SASB - Sustainability Accounting Standards Board. Founded in 2011 as a non-profit organisation to help bridge the communication between organisations and investors, it focuses on risks, with a perspective on financial performance, operations and risk profile. It was designed for financial capital providers to have comparable data for investment decisions. Standards are provided for 77 industries across 11 sectors. In 2021, SASB merged with the IIRC (International Integrated Reporting Council), creating the Value Reporting Foundation, to design an integrated reporting framework to bridge sustainability reporting with financial disclosure. Recently, the ISSB took over SASB, and is integrating SASB into the new ISSB (IFRS) sustainability reporting standards. More suitable for large companies and focuses on investors and financial capital providers. More than 1000 companies use this standard.

  • TCFD - Task Force on Climate-Related Financial Disclosures. Established in 2015 by the Financial Stability Board (FSB), it focuses on reporting on the organisation’s impact on global climate. It is designed to disclose climate-related financial risks to investors, lenders and insurers. It consists of 11 disclosure topics divided into four pillars: governance, strategy, risk management, and metrics and targets. It is increasingly being used by the finance and banking sectors, and is championed by the US Securities and Exchange Commission (SEC), UK Financial Conduct Authority (FCA), the National Association of Insurance Commissioners (NAIC), and the Singapore Exchange (SGX). It currently is a voluntary framework, but more countries are considering making a TCFD climate-risk reporting mandatory. The TCFD framework addresses the same stakeholder group as SASB – the investors. The major differences between the two is that SASB focuses on the financial consequences of sustainability topics, whilst TCFD concentrates on how climate-related issues affect financial performance. Both formats can be used in concert. Most suitable for large companies. Its core stakeholder audience is investors and capital providers. Over 2,600 organisations support this framework, and over 1,600 organisations in 80 countries have aligned their reporting to it.

To capture a wider stakeholder group, simultaneously providing investors with consistent and comparable data, many businesses opt to use both SASB and GRI. The combination of both forms a Goldilocks effect, with Complex GRI versus simple SASB reporting logics. Over 120 organisations use the duo, including Nike, General Motors, and JetBlue. Some companies report on all three, Apple for instance.


Comparing the three reporting frameworks


Conclusion and recommendation


  1. If your company needs to comply with CSRD, you need to plan and implement sustainability related activities to report in due time. Amongst these actions are planning the workforce, who to hire and what to outsource, assessing the current situation, setting targets and designing a roadmap, evaluating business case of each transformation step and urgency. It is yet unclear how the European Commission and member states will penalise non-compliance with CSRD. Businesses will potentially be subject to a meaningful fine. Financial capital providers may “penalise” through your loan application rejection or higher rates. Clients are increasingly implementing ESG framework for their supply chain, and may be forced to reject you in light of incompliance, albeit leniency in timeline to adjust should be expected.

  2. Which standard of framework to select to be CSRD compliant if you are reporting in 2023? ESRS is still in progress, and GRI future is subject to EFRAG and European Commission decision on ESRS evolution. GRI and ESRS standards overlap highly in their content, yet there are strong differences. My discussions with the practitioners of sustainability and ESG reporting, mostly major consulting companies, shown a split in bets which approach to select. My conclusion is:

    1. If a business has been already reporting according to GRI standard, it is permissible they continue to do so until the next reporting cycle, and then gradually integrate ESRS framework. Important to keep in mind ESRS will bring some innovation compared to GRI. When moving to ESRS, your first step will be a gap assessment, then closing these gaps for full compliance with CSRD.

    2. If an EU company wished to start from scratch this year, the safest bet is using ESRS as a basis.

  3. If your company is not CSRD eligible, selecting your reporting framework depends on what stakeholders you need to address.

    1. GRI is recommended for reporting if you need to appeal to a broader stakeholder set, while SASB is recommended if you need to focus on financial stakeholders.

    2. If you need to capture both targets, GRI and SASB are compatible for sustainability reporting and combining both is a common practice.

    3. Incorporating TCFD is also possible to benefit from their advantages, for instance, understanding and communicating climate-related risks and opportunities. It is of significant importance to the investors, since climate risks starts representing substantial financial risks.

The analysis and conclusion hold true as of April 2023, and may change during the course of evolution of the regulatory framework and reporting standards, inter alia.


Sources: European Commission, CSRD, EFRAG, Sustainability Magazine, KPMG, PwC, reporting standard and framework providers: GRI, SASB, TCFD, comments and recommendations from the analysists and consultants, GRI organisation commentary.



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Many thanks for reading!

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