Deciphering ESG frameworks, assessments, and audit tools: Why now is the time to act
Updated: 5 days ago
By Pamela Cone.
“Regardless of the pandemic, our carbon reduction goals have not changed. We expect our vendors and supply chain partners to continue their progress as well.” -- Procurement professional at global insurance company
During the pandemic, you might assume clients would have taken their foot off the gas when it comes to assessing the environmental, social, and governance (ESG) status of their vendors and suppliers. The opposite is true.
Companies are feeling a heightened awareness and responsibility to make socially responsible choices and respond to current issues. And they increasingly expect their vendors and suppliers to do the same.
If your firm has received questionnaires, assessments, or audit requests from your clients—even during this pandemic—you would be well-advised to respond. If you haven’t received such requests yet, now is the time to prepare.
An alphabet soup of acronyms
Companies are using a variety of assessment and reporting tools to measure and manage ESG metrics and performance. Many of them are known by acronyms: GRI, SASB, TCFD, CDP, to name a few. Your clients also may use services such as EcoVadis and IntegrityNext to assess ESG performance of their suppliers/vendors, including outside professional service firms.
Here are some of the prevalent standards and tools and their characteristics to help you understand what your clients are looking for when they request you share your ESG metrics.
You can also adopt one or more of these tools now in order to assess your business and prepare for requests by prospects, vendors, and other stakeholders.
Global Reporting Initiative (GRI) – www.globalreporting.org
GRI is an independent, international organization that has pioneered sustainability reporting since 1997. GRI helps businesses and governments worldwide understand and communicate their impact on critical sustainability issues such as climate change, human rights, governance, and social well-being. This enables real action to create social, environmental, and economic benefits for everyone. The GRI Sustainability Reporting Standards feature true multi-stakeholder contributions and are rooted in the public interest.
Sustainability Accounting Standards Board (SASB) – www.sasb.org
SASB helps companies around the world report on the sustainability topics that matter most to investors. SASB standards focus on financially material information covering a range of industry-specific sustainability areas, including environmental and social topics and their governance.
Whether used alone, alongside other reporting frameworks, or as part of an integrated report, SASB standards and metrics provide a detailed, powerful way to communicate with investors.
Task Force on Climate-Related Financial Disclosures (TCFD) – www.fsb-tcfd.org
TCFD develops voluntary, consistent, climate-related financial risk disclosures for companies to provide to investors, lenders, insurers, and other stakeholders. The Task Force considers the physical, liability, and transition risks associated with climate change and what constitutes effective financial disclosures across industries.
These recommendations help companies understand what financial markets want from disclosures in order to measure and respond to climate change risks. And they encourage firms to align their disclosures with investors’ needs.
CDP – www.cdp.net
The CDP (formerly the Carbon Disclosure Project) is a not-for-profit charity based in the United Kingdom that runs the global disclosure system for investors, companies, cities, states, and regions. It helps companies measure, manage, disclose, and ultimately reduce their greenhouse gas emissions.
CDP aims to make environmental reporting and risk management a business norm and help its members take action to build a truly sustainable economy. Over 8,400 companies with over 50% of global market capitalization disclosed environmental data through CDP in 2019. This is in addition to the more than 920 cities, states, and regions who disclosed, making CDP’s platform one of the richest sources of information globally on how companies and governments are driving environmental change.
United Nations Global Compact (UNGC) – www.unglobalcompact.org
The UNGC launched in 2000 as the world’s largest corporate sustainability initiative. It is a call to companies to align their business strategies and operations with its 10 Principles on human rights, labor, environment, anti-corruption, and take actions that advance societal goals. Companies are using this framework to guide their social impact efforts. By signing on to the United Nations Global Compact, firms incorporate its 10 Principles into their strategies, policies, and procedures. Through its Local Networks and over 10,000 companies who have signed on around the world, the UNGC is uniting businesses to address some of the world’s most pressing problems.
International Standards Organization 26000:10 (ISO 26000) – https://www.iso.org/iso-26000-social-responsibility.html
ISO 26000 provides guidance for socially responsible businesses who recognize that respect for society and environment is a critical success factor. As well as being the “right thing to do,” ISO 26000 is a way to assess an organization’s commitment to sustainability and its overall performance.
ISO 26000:10 provides guidance rather than requirements, so it isn’t a certification unlike some ISO standards. Instead, it helps clarify what social responsibility is, helps businesses and organizations translate principles into effective actions, and shares social responsibility best practices.
It’s aimed at all types of organizations regardless of their activity, size or location. Its guidance is often used in conjunction with other frameworks, including the UN Sustainable Development Goals.
Organisation for Economic Cooperation and Development Guidelines (OECD) – www.oecd.org
The OECD Guidelines provide principles and standards for responsible business conduct for multinational corporations operating in or from countries that adhere to the OECD Declaration on International Investment and Multinational Enterprises. The goal is to shape policies that foster prosperity, equality, opportunity and well-being for all.
OECD works with governments, policy makers, and citizens to establish evidence-based international standards and find solutions to social, economic, and environmental challenges. From improving economic performance and creating jobs to fostering strong education and fighting international tax evasion, it provides a knowledge hub for data and analysis, exchange of experiences, best practices, and advice on public policies and international standards.
EcoVadis – www.ecovadis.com
Since its founding in 2007, EcoVadis has become a trusted partner for procurement teams in more than 450 leading multinational organizations to reduce risk and drive innovation in their sustainable procurements. EcoVadis envisions a global marketplace where sustainability intelligence influences every business decision—improving economies, people’s lives, and the planet. The EcoVadis sustainability assessment methodology is at the heart of its Ratings and Scorecards and evaluates how well a company has integrated principles of Sustainability/CSR into its business and management system.
IntegrityNext – www.integritynext.com
IntegrityNext enables procurement organizations to qualify and monitor their suppliers to improve sustainability and compliance and meet customer demands and regulatory requirements. IntegrityNext is a cloud-based platform that covers all major aspects of CSR and sustainability requirements, allowing companies to monitor thousands of suppliers with minimal administration.
A growing movement to measure social impact
Over the last few decades, social and environmental awareness and reporting have undergone rapid development. This movement has been amplified by the pandemic. Your clients, prospects and suppliers are exponentially increasing the level at which they evaluate and assess the ESG performance of business they work with. All businesses, including professional service firms, need to plan for and respond to these audits/assessments. Now is the time to prepare—before you receive the first inquiry from a client.
Explore which of these reporting frameworks is best suited for your firm and take steps now to participate.
The process will not only provide you with a resulting “grade” or “score”—but you’ll see where your firm can make improvements.
Stakeholder expectations, and in some cases regulatory pressures, now require a much wider perspective of corporate responsibility and transparency. Your firm will be called on to communicate your practices covering sustainability, triple bottom line, and all related corporate social responsibility initiatives and programs. Are you ready?
If you’d like assistance to determine what tools and frameworks are best for your firm or to learn more about the ESG metrics and requirements, please contact me.
About the Author
Pamela Cone has more than 25 years of professional services experience in marketing, communications, and social impact and sustainability.
She is founder and CEO of Amity Advisory, a consultancy that helps firms strengthen their social impact and sustainability programs and go beyond transactional efforts to achieve truly transformational outcomes. For more information, contact her at email@example.com