Sustainability Frameworks and Standards

A Comprehensive Tree Map and Exam Guide

This document provides a structured overview of sustainability reporting frameworks
and standards, organized as a tree map with detailed branches and sub-branches. It
includes a comprehensive analysis of all major sustainability standards and a summary
of 20 key points for exam preparation.

Table of Contents
1. Introduction
2. Sustainability Tree Map Structure
3. Major Sustainability Frameworks
4. Global Reporting Initiative (GRI)
5. Task Force on Climate-Related Financial Disclosures (TCFD)
6. Climate Disclosure Standards Board (CDSB)
7. Sustainability Accounting Standards Board (SASB)
8. International Integrated Reporting Council (IIRC)
9. International Sustainability Standards Board (ISSB)
10. European Sustainability Reporting Standards (ESRS)
11. Comparison of Standards
12. 20 Key Exam Points
13. Conclusion

Introduction
Sustainability reporting has evolved significantly over recent years, with various bodies
developing guidance and standards. This has often resulted in a lack of cohesive
approach, creating difficulties for companies in developing their own sustainability
reporting framework and for stakeholders seeking comparability in corporate
sustainability reports.

The sustainability landscape is moving toward greater consolidation, with three main
bodies providing guidance going forward: the International Sustainability Standards
Board (ISSB), the Global Reporting Initiative (GRI), and the Task Force on Climate-
Related Financial Disclosures (TCFD). This more coherent approach will bring benefits to
both preparers of sustainability reports and the stakeholders who use them.
Sustainability Tree Map Structure

1. Sustainability

• Definition: The practice of meeting present needs without compromising future

generations' ability to meet their own needs
• Key Aspects: Economic, Environmental, Social, Governance
• Importance: Risk mitigation, operational efficiency, reputational benefits, capital
access, opportunity creation, future-proofing

Major Sustainability Frameworks

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is a not-for-profit organization that promotes

sustainability. Its mission is to develop and disseminate globally applicable
sustainability reporting guidelines for voluntary use by organizations reporting on the
economic, environmental, and social dimensions of their activities, products, and
services.

Structure

• 100 Series: Universal Standards

• 101: Foundation
• 102: General Disclosures
• 103: Management Approach
• 200 Series: Economic Topics
• Tax
• Anti-competitive behavior
• Other economic impacts
• 300 Series: Environmental Topics
• Energy
• Biodiversity
• Emissions
• Other environmental impacts
• 400 Series: Social Topics
• Training and education
• Child labor
• Rights of indigenous peoples
• Other social impacts
Future Trends Identified by GRI

• Companies will be held more accountable

• Corporate decision makers will take greater account of sustainability issues
• Technological developments will enable scrutiny and correlation of data
• Decision makers will be guided by ethical values, reputation, and risk management
• New indicators of specific impacts of business activities will emerge
• Reports and disclosures will be both regulated and voluntary
• Sustainability data will be digital

Task Force on Climate-Related Financial Disclosures (TCFD)

Climate change creates significant risks for companies, both physical risks (such as those
arising from extreme weather) and risks of transitioning to a net-zero carbon economy. It
also creates opportunities, leading investors and stakeholders to demand better
disclosure on climate change.

Core Disclosure Areas

• Governance
• Board oversight of climate-related risks and opportunities
• Management's role in assessing and managing climate-related risks and
opportunities
• Strategy
• Climate-related risks and opportunities identified over short, medium, and long
term
• Impact on business, strategy, and financial planning
• Resilience of strategy under different climate scenarios
• Risk Management
• Processes for identifying and assessing climate-related risks
• Processes for managing climate-related risks
• Integration into overall risk management
• Metrics and Targets
• Metrics used to assess climate-related risks and opportunities
• Scope 1, 2, and 3 greenhouse gas emissions
• Targets used to manage climate-related risks and opportunities

TCFD disclosures are intended to complement rather than replace other bodies'
guidance, and many of these bodies have issued additional guidance on how TCFD
requirements can be incorporated into their existing frameworks.
Climate Disclosure Standards Board (CDSB)

The CDSB works to promote the alignment of financial and non-financial information. It
aims to fill gaps in sustainability reporting by considering how existing IFRS Accounting
Standards and other guidance can be adapted to report climate, natural capital, and
environmental information.

Relevant IFRS Standards

• IFRS 7: Financial Instruments Disclosures – the framework within the standard for
disclosing risks arising from financial instruments can be transferred to the
disclosure of risks related to climate change.
• IAS 36: Impairment of Assets – there is a risk that the valuation of assets is
overstated when the valuation does not take account of the impact of climate
change.
• IAS 37: Provisions, Contingent Liabilities and Contingent Assets – contains useful
information on how to deal with risk and uncertainty in the financial statements.

Key Findings

A 2020 CDSB review found that while all 50 of the largest companies in Europe provided
narrative reporting on climate-related matters, only 10% referred to climate-related
issues in their financial reporting, highlighting a significant gap.

Sustainability Accounting Standards Board (SASB)

The SASB is now part of the Value Reporting Foundation (VRF) with the IIRC. Before the
merger, it published a series of non-mandatory Standards which remain in issue.

Structure

• Disclosure Topics: Industry-specific material sustainability topics

• Accounting Metrics: Measurements for performance on each topic
• Technical Protocols: Guidance on definitions, scope, implementation
• Activity Metrics: Quantification of business scale

Example: Household and Personal Products Industry

• Topic: Packaging lifecycle management

• Qualitative disclosure: Discussion of strategies to reduce the environmental
impact of packaging throughout its lifecycle
• Accounting metrics:
• Total weight of packaging
 • Percentage made from recycled materials
• Percentage that is recyclable/reusable/compostable
• Activity metrics:
• Units of products sold
• Weight of products sold
• Number of manufacturing facilities

In June 2021, the SASB merged with the IIRC to form the Value Reporting Foundation
(VRF). In August 2022, the VRF was consolidated into the IFRS Foundation. The SASB
Standards now serve as a key starting point for the development of the IFRS
Sustainability Disclosure Standards.

International Integrated Reporting Council (IIRC)

The IIRC developed the Integrated Reporting Framework. It has since merged with SASB
to form the Value Reporting Foundation, which was later consolidated into the IFRS
Foundation.

International Sustainability Standards Board (ISSB)

Standard Setting

The ISSB is responsible for developing a set of sustainability disclosure standards –

"Sustainability Disclosure Standards." In 2021, the IFRS Foundation Trustees announced
the creation of the ISSB to help meet the demands of international investors with global
investment portfolios for high-quality, transparent, reliable, and comparable reporting
on climate and other ESG matters.

Responsibilities

The ISSB has complete responsibility for all sustainability-related technical matters of
the IFRS Foundation including: - Full discretion in developing and pursuing its technical
agenda, subject to certain consultation requirements - The preparation and issuing of
Sustainability Disclosure Standards and exposure drafts, following the IFRS Foundation's
due process

Global Baseline

The ISSB will deliver a "comprehensive global baseline" of sustainability-related

disclosure standards: - Focused on developing standards that can provide a common
language for sustainability information - Enabling comparable and consistent
sustainability disclosures across global capital markets - Providing information that is
material to investors globally, with jurisdictions able to add their own "building blocks"
IFRS Sustainability Disclosure Standards

In June 2023, the ISSB issued its first two Sustainability Disclosure Standards: - IFRS S1
General Requirements for Disclosure of Sustainability-related Financial Information -
IFRS S2 Climate-related Disclosures

IFRS S1: General Requirements

• Nature: Underpinning standard (sustainability equivalent of IAS 1 and IAS 8)

• Effective Date: January 1, 2024 (first reports in 2025)
• Scope: Applies to sustainability-related financial disclosures, can be applied
regardless of financial statement GAAP
• Conceptual Foundations:
• Material information about sustainability risks and opportunities
• Connected information requirements
• Core Content Areas:
• Governance:
◦ Oversight body responsibilities
◦ Management's role in governance processes
• Strategy:
◦ Risks and opportunities affecting entity prospects
◦ Effects on business, value chain, decision-making, and finances
◦ Strategy resilience
• Risk Management:
◦ Processes to identify, assess, prioritize, and monitor risks and opportunities
◦ Integration with overall risk management
• Metrics and Targets:
◦ Required metrics from applicable standards
◦ Metrics for measuring and monitoring risks, opportunities, and performance
• General Requirements:
• Sources of guidance
• Location and timing of disclosures
• Comparative information
• Statement of compliance

IFRS S2: Climate-related Disclosures

• Focus: Climate-related risks and opportunities

• Effective Date: January 1, 2024
• Key Concepts:
• Physical risks: Extreme weather events
• Transition risks: Policy changes, technology evolution
 • Climate-related opportunities: New business, product development
• Disclosure Requirements (following the same four core content areas as S1):
• Governance: Oversight body and controls for climate-related risks and
opportunities
• Strategy:
◦ Business model impacts
◦ Financial effects
◦ Scenario analysis for resilience assessment
• Risk Management:
◦ Assessment and monitoring processes
◦ Integration with broader risk management
• Metrics and Targets:
◦ Greenhouse gas emissions
◦ Cross-industry metric categories
◦ Industry-based metrics
◦ Climate-related targets

European Sustainability Reporting Standards (ESRS)

Enforceability

From September 2023, sustainability reporting in accordance with the European

Sustainability Reporting Standards (ESRS) is mandatory for all organizations subject to
the Corporate Sustainability Reporting Directive (CSRD).

Effective Date

EU large public interest entities (PIEs) and large non-EU companies listed on an EU-
regulated market exchange are required to publish ESRS-compliant sustainability
reports for the period commencing on or after January 1, 2024.

Scope

By 2028, all the following will need to comply with CSRD: - EU-based large undertakings,
listed or not - "Third-country" undertakings, including non-EU parent companies of EU
subsidiaries

Target Users

ESRS 1 General Requirements defines two main groups of stakeholders: - Affected

stakeholders: Individuals or groups whose interests are affected by the undertaking's
activities - Users of sustainability statements: Primary users of general purpose
financial reporting, as well as other users including business partners, trade unions, civil
society, governments, analysts, and academics

Structure

12 ESRS standards organized in four categories: - Cross-cutting Standards: - ESRS 1:

General Requirements - ESRS 2: General Disclosures - Environmental Standards: - ESRS
E1: Climate change - ESRS E2: Pollution - ESRS E3: Water and marine resources - ESRS E4:
Biodiversity and ecosystems - ESRS E5: Resource use and circular economy - Social
Standards: - ESRS S1: Own workforce - ESRS S2: Workers in the value chain - ESRS S3:
Affected communities - ESRS S4: Consumers and end-users - Governance Standard: -
ESRS G1: Business conduct

Materiality Approach

The ESRS require sustainability matters to be assessed using the "double materiality"
principle: - Impact materiality: Sustainability-related impacts that a company exerts on
its environment and stakeholders - Financial materiality: Sustainability-related
financial risks and opportunities that arise from dependencies on resources

Location Requirements

Sustainability information must be included in a clearly identified single section of the

management report and referred to as "sustainability statements."

Sector-specific Standards

ESRS sector-specific standards will be developed in the next phase. In the meantime, a
transitional provision allows the first two annual sustainability reports to refer to
previous practices and available best practices and/or frameworks.

Comparison of Standards

ISSB Standards vs. European Standards

Aspect ISSB Standards European Standards (ESRS)

Voluntary unless required by Mandatory for companies under

Enforceability
jurisdiction CSRD

From 2024 (first reports in From 2024 (first reports in 2025)

Effective date
2025) for EU large PIEs
 Aspect ISSB Standards European Standards (ESRS)

All profit-oriented and EU large undertakings and non-

Scope
public sector entities EU parent companies

Target users Investors, lenders, creditors Wider range of stakeholders

Coverage IFRS S1 and IFRS S2 12 ESRS across four categories

Materiality
Financial materiality Double materiality
approach

Materiality Disclosure depends on Some mandatory disclosure

assessment materiality assessment requirements

Specified order in management

Location of reports No prescribed approach
report

Sector-specific
Included in ISSB Standards To be developed from 2024
disclosures

Framework Convergence

• Current Trend: Moving toward three main bodies (ISSB, GRI, TCFD)
• Benefits: More coherent approach for preparers and users
• Integration: SASB and IIRC now part of IFRS Foundation

Importance of Effective Sustainability Reporting

For Investors

Effective sustainability reporting provides investors with: - Understanding of relevant

governance structures and processes - Balanced information on risks and opportunities -
Insight into the company's approach to managing risks and opportunities - Better
information on how key corporate decisions take their perspective into account - A
coherent "story" linking risk with objectives, business model, and long-term viability

For Reporting Entities

Benefits of effective sustainability reporting to companies include: - Risk mitigation:

Better understanding of the operating environment and regulatory compliance -
Operational efficiency: Streamlining processes through more sustainable operations,
potentially leading to lower costs - Reputational benefit: Increased transparency,
credibility, and accountability - Capital access: Improved relationships with investors
and lenders - Opportunity creation: Better understanding of social and economic
challenges, opportunities, and threats - Future-proofing: Better positioned to react to
future developments, including increased government focus on sustainable business

20 Key Exam Points

1. Sustainability Definition: Meeting present needs without compromising future
generations' ability to meet their own needs, encompassing economic,
environmental, social, and governance aspects.

2. Major Frameworks: The sustainability reporting landscape includes GRI, TCFD,

CDSB, SASB, ISSB, IIRC, and European standards, with convergence toward ISSB,
GRI, and TCFD.

3. GRI Structure: GRI Standards include Universal Standards (100 series) and topic-
specific standards covering Economic (200 series), Environmental (300 series), and
Social (400 series) topics.

4. TCFD Core Areas: TCFD recommendations are structured around four pillars:
Governance, Strategy, Risk Management, and Metrics and Targets.

5. Climate-related Risks: Include physical risks (extreme weather events) and

transition risks (policy changes, technology evolution), both requiring disclosure
under TCFD and ISSB S2.

6. SASB Approach: Provides 77 industry-specific standards with disclosure topics,

accounting metrics, technical protocols, and activity metrics tailored to each
industry.

7. ISSB Formation: Created in 2021 by IFRS Foundation Trustees to develop a

comprehensive global baseline of sustainability disclosures for capital markets.

8. IFRS S1 Purpose: Sets general requirements for sustainability-related financial

disclosures, serving as an underpinning standard similar to IAS 1 and IAS 8.

9. IFRS S2 Focus: Specifically addresses climate-related risks and opportunities,

requiring disclosure of greenhouse gas emissions and climate-related targets.

10. Effective Dates: Both IFRS S1 and S2 are effective from January 1, 2024, with first
reports expected in 2025.
 11. European Standards: ESRS comprises 12 standards across cross-cutting,
environmental, social, and governance categories, mandatory for companies under
CSRD.

12. Double Materiality: ESRS requires assessment using double materiality (impact
materiality and financial materiality), while ISSB focuses on financial materiality
only.

13. Framework Consolidation: SASB and IIRC merged to form the Value Reporting
Foundation, which was later consolidated into the IFRS Foundation.

14. Disclosure Location: ESRS requires sustainability information in a clearly

identified section of the management report, while ISSB has no prescribed
approach.

15. Sector-specific Guidance: ISSB incorporates SASB's industry-specific standards,

while ESRS sector-specific standards will be developed from 2024.

16. Investor Benefits: Effective sustainability reporting provides investors with

understanding of governance structures, balanced risk information, and coherent
organizational narratives.

17. Business Benefits: Companies gain from risk mitigation, operational efficiency,
reputational enhancement, improved capital access, and future-proofing.

18. Compliance Statement: IFRS S1 requires an explicit and unreserved statement of

compliance with all requirements of IFRS Sustainability Disclosure Standards.

19. Connected Information: IFRS S1 requires information to be provided in a manner

that enables users to understand connections between sustainability items and
with financial statements.

20. Value Chain Concept: Sustainability reporting considers the full range of
interactions, resources, and relationships related to a reporting entity's business
model and external environment.

Conclusion
The sustainability reporting landscape is evolving toward greater coherence, with the
ISSB, GRI, and TCFD emerging as the main standard-setters. This consolidation will
benefit both preparers and users of sustainability reports by providing more consistent
and comparable information.
Effective sustainability reporting is increasingly important for both investors and
reporting entities. For investors, it provides crucial information for decision-making and
assessing long-term viability. For companies, it offers benefits ranging from risk
mitigation and operational efficiency to reputational enhancement and future-proofing.

As sustainability reporting continues to develop, understanding the key frameworks,

their requirements, and the relationships between them will be essential for all
stakeholders in the financial reporting ecosystem.