Now that climate disclosure is becoming mandatory, ESG reporting standards are more important than ever. They offer context and standardization to sustainability reporting, but due to a lack of global standards, they can also be a little confusing. We’re here to clear things up.

What Is ESG Reporting?

ESG reporting is a company’s disclosure of its environmental, social, and governance data. To adequately publish your ESG impact, you must collect quantitative and qualitative data that follows trusted frameworks and standards. Voluntary sustainability reporting offers transparency to stakeholders while also providing your business’s decision-makers with a full picture of your ESG impact. This way, they can create informed strategies to improve ESG scores and achieve sustainability KPIs.

Why Are ESG Reporting Standards Important?

ESG reporting is important for a number of reasons. 

• Avoidance of greenwashing: Reporting your ESG data will provide evidence to back up your sustainability claims. Learn more about how to avoid greenwashing.
• Display climate-related risks: Stakeholders care about your impact. Investors want to know that your company is low risk in terms of resource use and compliance with current and future climate laws. Customers want to know that you’re aware of and addressing your greatest areas of impact. Sustainability reporting will display this.
• Compliance: The SEC will soon require publicly traded companies to report their climate-related risks, and California has already passed a law requiring all companies with revenues over $1 billion that do business in the state to report their GHG emissions and climate risks. The E.U. also has its own similar legislation. Even if your company doesn’t fall under the jurisdiction of these laws, these new rules indicate a trend in climate legislation. Forward-thinking business owners and decision-makers should start collecting ESG data now so that they can easily comply when future legislative action inevitably affects their business, too.
• Become more competitive: Customers want to support businesses that can demonstrate a high-level commitment to sustainability. According to a report by PDI Technologies, 80% of consumers in 2024 prioritize a product’s sustainability over its price. This trend has been steadily rising as sustainability becomes increasingly important to consumers.

ESG reporting software makes this process easier by integrating with your existing systems to consistently collect ESG data and provide everything you need when it comes time to report. 

Download our FREE ebook:

ESG reporting frameworks and standards ensure that a company’s sustainability audits and data collection methods are consistent and comparable. They also create transparency and encourage a thorough analysis of a company’s ESG performance. Trusted standards have detailed data collection methodology that results in a full picture of a company’s ESG impact. Without ESG reporting standards, companies could report data in whatever way they wanted, and the entire purpose of ESG disclosures would be nullified.

Here are the biggest reasons why ESG reporting frameworks and standards matter.

• Standardization: Standardizing the way that ESG data needs to be collected and reported ensures that the most important pieces of information are disclosed using specific metrics and that they can be compared to other companies within their industries. 
• Accountability: If companies practiced ESG reporting in their own way, they could easily manipulate the data to make it seem as though they are more sustainable than they actually are. Sustainability reports need trusted standards so that companies can report their data in a responsible way.
• Structure and guidance: Companies that desire transparent and complete ESG reporting need trusted standards to guide their ESG data collection. ESG reporting standards provide a blueprint to follow so that business leaders can create comprehensive strategies to quantify their impact.

Read more: Understanding ESG Credits

Types Of ESG Frameworks And Standards

Although ESG frameworks and standards are often described as the same thing, there is a clear difference. 

ESG reporting frameworks are more general, focusing on big-picture considerations such as how data is collected and structured. ESG standards are more detailed, providing requirements on specific metrics that need to be reported. Both need to be used together, as ESG standards outline what needs to be collected, and frameworks outline how it needs to be reported. 

A report by Nareit analyzed twelve different ESG reporting frameworks and found that there are three different types: Voluntary Disclosure Frameworks, Guidance Frameworks, and Third-Party Aggregators. 

• Voluntary Disclosure Frameworks are used by companies across industry sectors that actively disclose their ESG data. This type of data is typically collected using questionnaires or online surveys.
• Guidance Frameworks are used by companies that actively disclose their ESG data but need guidance as to how they might collect and manage that data. These have more specific data collection methodologies and are more akin to ESG standards. 
• Third-Party Aggregator Frameworks are used by those outside of the company to collect and analyze publicly available data.

Unlike frameworks, there are many different types of ESG standards that are specific to a company’s industry. Because ESG reporting standards outline specific metrics and data collection methodologies, they have to be specific to the company’s sector so that the data has the proper context.

Leading Sustainability Reporting Frameworks And Standards

The entire point of ESG reporting frameworks and standards is to provide context and transparency surrounding ESG data collection methodology. Therefore, you must adhere to trusted and well-used frameworks and standards to adequately participate in sustainability reporting. 

• International Financial Reporting Standards (IFRS): This framework, developed by the International Sustainability Standards Board (ISSB), has taken over the Task Force on Climate-Related Financial Disclosure (TCFD). It seeks to offer international ESG reporting standards for a more unified ESG reporting approach. 
• CDP: The CDP, previously known as the Carbon Disclosure Project, began as a framework for carbon emissions disclosure but has since widened its scope to include more areas of environmental impact. It provides letter grades to companies and is used by over 18,000 brands worldwide.
• Sustainability Accounting Standards Board (SASB Standards): The Sustainability Accounting Standards Board provides ESG reporting standards for dozens of industries. It provides specific metrics that need to be measured and includes evidence-based metrics and a broad range of participation from companies allowing for ample comparison. 
• Global Reporting Initiative (GRI) Standards: The Global Reporting Initiative offers three different standard types—Universal Standards, Sector Standards, and Topic Standards—to align with almost any organization, no matter their size or industry. Although they are U.S.-based, they work with companies all over the world.
• United Nations Global Compact: Over 20,000 companies participate in this principle-based framework that aligns with the Sustainable Development Goals. 
• The Science-Based Targets Initiative (SBTi): This entity offers standards surrounding a company’s carbon footprint. It collaborates with the CDP and UN Global Impact, among others, to provide specific metrics for GHG emissions reporting and clear definitions for net-zero and carbon-neutral claims.

How To Choose An ESG Framework

Choosing ESG reporting frameworks involves determining which frameworks and standards align with your sustainability goals, business size, and sector. Here are the most important things to consider when making this decision.

• Compliance: Firstly, you must determine which standards comply with any climate law that your company falls under. For example, the new SEC Disclosure Rule has very specific requirements concerning ESG disclosure. If you’re a publicly traded company, and therefore required to report your climate-related risks to the SEC, you should choose ESG frameworks and standards that align with these requirements.
• Business sector: When choosing an ESG reporting standard, you need to ensure that you pick one that’s within your sector. The entire point of ESG reporting standards is to put your scores into context and offer a comparison with other companies. Not only should the standard that you choose have specifications for your sector, but it should also have plenty of participating companies within your sector, too.
• Company goals and sustainability KPIs: The framework and standard that you choose need to align with your company’s overall goals. For example, if GHG emissions are a key part of your sustainability KPIs, you should make sure that your chosen frameworks and standards carry robust requirements for GHG emissions accounting. This way, you can be sure that your data collection methodologies provide you with a clear view of your carbon emissions so that you can stay on track to achieve your goals.
• Stakeholder expectations: One major purpose of ESG reporting is to offer transparency to your stakeholders. Therefore, you must ensure that the frameworks and standards that you choose highlight the areas of ESG performance that your stakeholders are looking for.
• Trustworthiness: It’s essential that your sustainability reporting frameworks and standards are trustworthy. Therefore, you should stick to the leading ESG reporting frameworks, and when you invest in sustainability management software, make sure that it aligns with the top frameworks and standards.

Read more: How to Obtain ESG Certification

ESG Reporting By Ecommerce Business Size 

ESG reporting is essential for modern businesses, but it comes with its challenges. EcoCart offers plenty of tools to help companies circumvent these obstacles and achieve their sustainability goals. No matter your company’s size, we have the tools that can help.

Up to $50K in total monthly revenue 

Small businesses that see up to $50,000 in monthly revenue can implement a do-it-yourself ESG reporting approach. Typically, their impacts are low and easily traceable, making it simple to track and measure in-house. Here at EcoCart, we offer sustainability insights software, like a carbon emissions dashboard, to help ecommerce businesses track emissions associated with deliveries. It offers real-time data with specific metrics so that you gain a full picture of your carbon footprint and greatest areas of impact. We also offer a sustainability scorecard so that you can visualize your current impact and create strategies to improve it.

$50K-$100K in total monthly revenue 

Mid-sized businesses can still gather ESG data by themselves, but they may want to invest in tracking software that seamlessly integrates into the rest of their tech stacks. EcoCart offers holistic solutions that provide everything from marketing resources to insights into your day-to-day operations. Use our sustainability management software across platforms to gain a full view of your impact.

Over $100k in total monthly revenue 

Larger companies that have over $100,000 in revenue can benefit from a sustainability partner that offers a customized sustainability management approach. Often, these businesses carry a larger impact with specific points of interest, and it takes a sustainability professional to address their sustainability KPIs adequately. EcoCart offers a custom sustainability program builds, entailing a comprehensive corporate sustainability approach that takes all aspects of your business’s operations into consideration.

Is Your Business Ready For ESG Reporting?

If your ecommerce business is ready to begin ESG reporting, but finds the first steps to be challenging, then EcoCart may be the partner that you need. Regardless of your business size, we have the tools to help you achieve your sustainability goals and report your ESG effectively. Ready to learn more? Reach out to our team for a demo today.