Sustainability Standards (Full Report)

Part
01
of four
Part
01

Sustainability Standards: Top Standards for Investors / Investment Funds

There has been an increased push among investors, investment funds and firms, and asset management companies in recent years to incorporate environmental, social, and governance (ESG) issues in their businesses. However, there are several overlapping sustainability standards that lead to a lack of consensus among investors and investment funds as to which one is the best among the lot. The top-5 most widely used sustainability standards (frameworks) that most investors and investment funds around the world follow are GRI, SASB, DJSI, CDP, and TCFD. A brief description of each standard and the methodology used to determine their relative ranking are described below.

Global Reporting Initiative (GRI)

  • The GRI was founded in 1997. The company's headquarter is in Amsterdam, Netherlands. GRI has offices in the United States, Colombia, Brazil, China, India, and South Africa. GRI's reports are used by investors / investment firms in more than 100 countries.
  • The GRI standard is the "most widely used sustainability reporting standard" and 93% of the largest 250 businesses in the world use the GRI Sustainability Reporting Standards.
  • The GRI standards are the first global standards for sustainability reporting. They represent the global best practices for reporting on economic, environmental and social impacts.

Sustainability Accounting Standards Board (SASB)

  • SASB was founded in 2011. The company's headquarter is in San Francisco. The SASB standards are popular among investors due to their focus on materiality.
  • The SASB standards contain 77 industry-specific standards. SASB provides investors with an Engagement Guide for engaging with companies.
  • Top investment firms like BlackRock, Capital Group, Fidelity Investments, among others use the SASB standards.

Dow Jones Sustainability Indices (DJSI)

  • First launched in 1999, the DJSI are a set of best-in-class benchmarks created specifically for investors that place special emphasis on sustainability and recognize the value of sustainable business practices for generating long-term shareholder value.
  • The DJSI are used by investors and investment funds in 61 countries. The DJSI focus on global, regional, and country benchmarks in their sustainability reports.

Carbon Disclosure Project (CDP)

  • CDP was founded in 2000. Their headquarter is in London. Currently, they have regional office in 50 countries. The CDP sustainability standards are used by businesses in over 90 countries. More than 8,400 companies spread across 800+ cities worldwide implement the CDP guidelines.
  • The CDP guidelines mainly focus on the issues of deforestation, climate change, and water security. As of 2019, CDP’s disclosure request has been signed by 525 investors with a combined asset value of $96 trillion.

Task Force on Climate-related Financial Disclosures (TCFD)

  • The TCFD is a branch of the Financial Stability Board (FSB) and it was established in December 2015 to establish a set of voluntary and consistent disclosure recommendations to be used by companies to provide information to lenders, insurance underwriters, and investors about their climate-related financial risks.
  • The TCFD is currently supported by 785 organizations that comprise the world’s largest banks, pension funds, and asset managers and pension funds. These organizations have a combined asset value of $118 trillion.

Research Strategy

We began our research by trying to find readily available lists that rank the most widely used sustainability standards used by investors, investment funds and firms, and asset management firms. We searched for articles from reputed sources like Harvard Business Review, McKinsey, PwC, Greenbiz, CFA Institute, Ernst & Young, UN PRI, NBS, and several others. However, we could not find any such ready lists in the public domain. This is because the issue of sustainability has only been taken seriously by the investors, investment funds and firms, and asset management companies in recent years. Hence, there is not a lot of information available as to the standards that most investors and investment funds/firms prefer to use. Then, we tried to identify the list of top investors, investment firms and funds, and asset managers around the world. We surmised that since these top players represent a major portion of the investment industry by market share and revenue, their opinion would represent the opinion of the majority. We went through the websites of these individual players and established that the majority of them use these five sustainability standards: GRI, SASB, DJSI, CDP, and TCFD. Other than GRI which is clearly the leader among sustainability standards, the rest of the top-5 could not be ranked explicitly due to insufficient publicly available data. Hence, we have refrained from ranking these standards. Apart from these top-5, a few other standards came close but could not be included in the top-5 due to their low popularity among players in the investment industry and shortage of data in the public domain. These are the standards set by the Climate Disclosure Standards Board (CDSB), International Integrated Reporting Council (IIRC), the Organization for Economic Co-operation and Development (OECD), UN Global Compact (Communication on Progress), and International Organization for Standardization (ISO 26000 Guidance on social responsibility).












Part
02
of four
Part
02

Sustainability Standards: Investors / Investment Funds Top Standard Details

Below are the requested details regarding the metrics and how exactly Global Reporting Initiative, Sustainability Accounting Standards Board, Dow Jones Sustainability Indices, Carbon Disclosure Project, and Task Force on Climate-related Financial Disclosures helps organizations. We've also included the industries that primarily use these standards, why the standards are preferred or unique, and an example of a company using each sustainability standard.

Global Reporting Initiative (GRI)

  • Founded in 1997, GRI developed the initial "corporate sustainability reporting framework," which helps global companies and governments understand and share the impact they are having on sustainability issues around climate change, well-being, human rights, and governance.
  • The GRI standards are used by a majority of organizations that report their sustainability information. The GRI standards help businesses stay accountable, and helps identify and manage risks. Additionally, the standards help organizations design "sustainability or corporate responsibility reports." The GRI standards have supported businesses, protected the environment, and improved societies, while also improving "governance and stakeholder relations, enhancing reputations and building trust."
  • GRI focuses on four areas which are to create standards that advance the development of sustainable efforts, "harmonize the sustainability landscape," guide reporting on sustainability efforts, and "drive effective use of sustainability information to improve performance."
  • Globally, more than 5,000 organizations use GRI standards, including 93 percent of the biggest 250 corporations in the world.
  • The industries that primarily use GRI standards are aviation, construction, real estate, electric utilities, event organizers, financial services, food processing, media, mining and metals, and oil and gas.
  • International Integrated Reporting Council (IIRC) is a "coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs" from around the world that promotes dialogue regarding creating value as corporate reporting evolves. GRI began collaborating with IIRC in 2017 to encourage "corporate leaders to explore the future of integrated and sustainability reporting." They partnered because they both share the same vision of companies focusing on creating value.
  • In 2017, GRI also collaborated with Principles for Responsible Investment (UN PRI), which focuses on "responsible investment" initiatives to promote sustainability development goals. These goals are aimed at aligning "sustainability reporting by businesses with investor expectations" and promoting projects that supported adopting sustainability reports.
  • The GRI standards are preferred by companies because it "pioneered corporate sustainability reporting" for more than two decades, and it has been built on "a unique multi-stakeholder principle," which guarantees the participation of various stakeholders. Overall, the standards allow organizations and stakeholders to make better decisions based on facts and take action that makes the world more sustainable.
  • Global chemical and ingredients distributor Univar Solutions uses GRI standards. Univar applies GRI’s principles to evaluate their products' quality, "accuracy, balance, comparability, clarity, reliability and timeliness." The company said using the GRI standards helped assess their stakeholder’s material issues, as well as Univar’s economic, environmental, and social impacts.

Sustainability Accounting Standards Board (SASB)

  • Established in 2011, SASB develops standards for investors to disclose their material sustainability information in financial disclosures. SASB has 77 industry standards, and it identifies "material sustainability factors" that are most likely to impact financial performance.
  • SASB's Engagement Guide provides investors with questions to consider when discussing "financially material issues" with companies. SASB's Conceptual Framework offers an overview of sustainability accounting based on SASB's standards.
  • Companies that use SASB standards evaluates which standards are relevant, "which disclosure topics are financially material to its business, and which associated metrics to report, taking relevant legal requirements into account."
  • SASB's interactive Materiality Map compares various disclosure topics in different industries.
  • There are 120 companies using SASB standards. Forty-four of the companies are international, while 76 are based in the United States. The firms together represent more than $34 trillion in total assets.
  • Industries that primarily use SASB are consumer goods, financials, food and beverage, health care, infrastructure, resource transformation, services, transportation, renewable resources and alternative energy, technology and communications, and minerals processing.
  • SASB is unique because it focuses on encouraging firms "to share the metrics that" are crucial to their industry in a way that investors can easily access. The standard also offers "investors a unique tool" for which they can use to compare different companies' sustainability performance.
  • JetBlue uses recommendations from the SASB and the TCFD. JetBlue used the SASB standard to understand its greenhouse gas emissions, labor relations, competitive behavior, and critical incident risk management. JetBlue said using these standards provided their stakeholders with relevant information about JetBlue’s business strategy. JetBlue also said the standards helped the company to not only think about the impact they have on the environment, but also the environment's impact on their business in regards to their risks and opportunities.

Dow Jones Sustainability Indices (DJSI)

  • DJSI is unique and rated as "the most respected independent sustainability ranking system" by some people because it allows companies to evaluate what progress they are making when it comes to achieving sustainability goals. Some people believe DJSI is valuable because it serves as a management tool, and helps companies consistently improve their sustainability performance.
  • Dutch paints and coatings company, AkzoNobel, uses the DJSI standard. The company's management said while they have been ranked number one in their sector for the last two years, the DJSI assessment highlights areas of improvement for them. For example, in 2013, the DJSI noted that AkzoNobel can improve its "operational eco-efficiency and talent attraction and retention." Since then, the company has been working on improving in these areas. Additionally, AkzoNobel has a vision for what they want to achieve in 2020, and they use their DJSI performance as "a barometer for measuring" their success level.

Carbon Disclosure Project (CDP)

  • Founded in 2000, CDP is a London-based non-profit organization that supports thousands of global companies, investors, cities, and states to measure their risks, as well as opportunities "on climate change, water security and deforestation."
  • CDP then takes the information and scores companies and cities based on their disclosure and their journey "towards environmental leadership." The scoring methodology helps CDP "measure corporate and city progress and incentivize action on climate change, forests and water security."
  • CDP has offices and partners in 50 countries, and its sustainability standards have been used by "companies, cities, states and regions from over 90 countries." More than 8,400 companies, 800 cities, and 120 states and regions have implemented the CDP guidelines. Since 2019, more than 525 investors with a total of $96 trillion in assets signed CDP’s disclosure request.
  • CDP's standard is primarily used in the oil and gas, electric utilities, metals and mining, coal, and agricultural commodities industries.
  • CDP is unique because it tracks progress against the Sustainable Development Goals. Its comprehensive collection of environmental data dates back to more than a decade, which can be utilized "to track progress against global or national SDG indicators." This information helps policy-makers make informed decisions about the environment, and understand how companies and governments are taking action.
  • L’Oréal uses CDP's guidelines and tools to evaluate the current actions aimed at reducing forest losses. The brand used the CDP Reporter Services to explore the "best practice targets set," and the progress made by market leaders to help them develop their own plans. In utilizing the CDP Reporter Services, L’Oréal reported that it "achieved 82 percent Roundtable for Responsible Soy (RTRS) Chain of Custody certification for its soy-bean oil."

Task Force on Climate-related Financial Disclosures (TCFD)

  • BHP Billiton is using the standard because the company said addressing the issues around climate change has been a priority for them for almost two decades, and they have a "track record of action" they have taken. In 2015, they launched their Climate Change: Portfolio Analysis report, which entailed their approach to evaluating their portfolio and planning scenarios that included figuring out the implications of transitioning "to a lower emissions future for" their portfolio.
  • BHP Billiton said, "We continue to reduce our emissions, adapt to physical impacts and invest in low emissions technology. Alongside other recommendations, the TCFD Phase II report’s recommendation in relation to scenario analysis is aligned with our company commitment to transparent engagement with investors, governments, industry and society."
  • By using the TCFD standard, BHP Billiton published a report called Views after Paris, where they described the possible impacts to their portfolio, and climate change-related actions they have taken.
Part
03
of four
Part
03

Sustainability Standards: Top Standards for Businesses / Organizations

Introduction

The top 5 sustainability guidelines (frameworks) in use by businesses and organizations — excluding investment funds/investors — are listed below. The ISO and OECD Guidelines for Multinational Enterprises were not found to be part of the top 5 most widely-used sustainability guidelines due to the lack of their mentions and rankings in the top 5 across a variety of sources. The way in which these rankings were determined can be found below in the Research Strategy section.

1. Global Reporting Initiative (GRI)

  • The GRI has offered their sustainability reporting framework for businesses to use since 1997. The company itself is based in Amsterdam, Netherlands but also has offices in the U.S., China, Brazil, Colombia, India, and South Africa.
  • The GRI states on their website that 93% of the largest 250 businesses in the world use the GRIs Sustainability Standards to report.
  • Businesses in 100 different countries around the world use the GRI sustainability framework to report findings on their companies.
  • The four areas that the GRI Sustainability Reporting Standards focus on are 1) advancing sustainable development, 2) unity in sustainability, 3) efficient and effective reporting, and 4) effectively using sustainability info for performance enhancements.

2. Dow Jones Sustainability Index (DJSI)

  • The DJSI was first implemented in 1999 as a sustainability benchmark that especially focused on stocks and economic criteria.
  • The DJSI is used by businesses in 61 countries around the world. Data obtained with the DJSI is always broken down via global, regional, and country benchmarks.
  • Data calculated with the DJSI is available both in terms of price and total return versions.

3. Carbon Disclosure Project (CDP)

  • The CDP was first established in the year 2000. Currently, they have regional office in 50 countries and businesses in over 90 countries use their guidelines to publish sustainability findings. More than 8,400 companies across 800+ cities around the world use the CDP guidelines.
  • The CDP is also an international non-profit organization with over 525 investors providing the company with $96t in assets.

4. UN Global Compact

  • A total of 10,435 companies in 166 countries around the world make use of the UN Global Compact to report their sustainability metrics.
  • There are 10 major principles found within 4 core values that are used to outline the UN Global Compact's sustainability framework: 1) Human rights, 2) labour, 3) environment, 4) anti-corruption.

5. International Integrated Reporting Council (IIRC International Framework)

  • The IIRC is a non-profit that is based in both England and Wales. The reporting framework was first released for publish use in December 2013 and over 359 companies around the world use these guidelines.
  • The organization itself is actually comprised of businesses, NGOs, investors, regulators, and more that together, compose the framework of the IRRC guidelines.
  • The IIRC Framework is grounded around six capitals: 1) financial, 2) manufactured, 3) human, 4) social and relationship, 5) intellectual, and 6) natural.


Research Strategy

The top 5 sustainability standards/frameworks were determined and ranked in the listed order based on two main factors:

1) their mentions as most widely used and trusted over a spread of years
2) the number of times they were mentioned as "most widely used" or the like across different sources.

Unfortunately, there was limited recently-published information that was publicly available for the top or most widely-used sustainability frameworks. This was determined by searching first for rankings and hard data in white papers and industry reports. The most recently available report of this sort was published in 2019, but only stated the top contender (the GRI). From there, other reports either required requests to be sent to the report owners, or were outdated and from 2012-2014. Next, research was done to see if perhaps rankings were available via credible news outlets or research organizations, such as McKinsey & Co., Forbes, etc. However, this did not produce any viable information that could be verified.

To make use of the older but still available reports, the information stated in these findings was compared with what was located from alternative sources that were published in 2019. If the findings stated from 2013-2014 contained data that appeared to be consistent with mentions of the same frameworks in more recently-published articles, even less credible ones, then it was assumed that some of the data and rankings may still be accurate. This was found to be the case. As a result, the rankings were largely based on the two criteria stated above.

Based on those factors, the GRI was noted across almost every source from 2013 to 2019 as the most widely-used sustainability framework, and thus was ranked as number 1. The DJSI was ranked in the top 3 in three different sources that were published between 2012 and 2019. The CDP was also mentioned in the top 3 across four sources. However, because the DJSI was mentioned in the top for more recent sources, it was ranked as number 2 above the CDP, which was last mentioned as a top contender in 2019 compared with the CDP in 2014. Finally, the UN Global Compact and the IIRC Framework were both tied for numbers 4 and 5. The UN Global Compact was placed in the number four spot because it was ranked as number 4 in 2013, but number 3 in 2017 in another source. The IIRC, on the other hand, was ranked as number 5 in 2017 but mentioned as a top 3 framework in 2016.

The International Organization for Standardization (ISO) was not ranked as a top 5 framework in this instance because across all sources from 2013-2019, there was only one source that mentioned it, and it wasn't an industry report ranking, but rather an opinion article. In this source, the author ranked the ISO as the number 5 most commonly used sustainability framework. No other sources were found that mentioned the ISO as one of the top or most widely-used guidelines, and thus it was excluded from the top 5 list. The same goes for the OECD Guidelines for Multinational Enterprises. No recent, or even older sources, were located during the research process that mentioned it as a top contender.
Part
04
of four
Part
04

Sustainability Standards: Businesses / Organizations Top Standard Details

A detailed description of the top five sustainability standards for businesses/organizations (mentioned in the previous report), can be found below. The descriptions include: key metrics, industries where the standards are used, an explanation of why the standard/framework is preferred or unique, and examples of companies using the standard.


GLOBAL REPORTING INITIATIVE (GRI)

DETAILED DESCRIPTION

  • The Global Reporting Initiative (GRI) was established in 1997 by CERES (a United States non-profit organization) and the United Nations' Environment Program (UNEP).

INDUSTRIES

  • The GRI initiative is more of an umbrella set of standards (carried out by organizations of all types, sizes, and sectors), rather than one that targets a specific industry.
  • As a result, 93% of the world’s largest 250 corporations report on their sustainability performance, and 82% of those companies use GRI's Standards to do so.

WHY IS THE STANDARD UNIQUE

  • Finally, they follow a modular and interrelated structure that represents the global best practice for reporting on a range of economic, environmental and social impacts.

EXAMPLES

  • Total, starting from reporting period 2014, has used the GRI G4 guidelines and has also reported in a manner conforming with the Core level.
  • Moreover, starting in 2017, Total adopted the GRI Standards and has continued to report in line with the Core level since then.

DOW JONES SUSTAINABILITY INDEX (DJSI)

DETAILED DESCRIPTION

  • The Dow Jones Sustainability Index, launched in 1999, focuses on tracking the equity performance of the world's leading companies in terms of economic, environmental, and social criteria.

INDUSTRIES

  • The DJSI analyzes a total of 61 industries.
  • Ultimately, only the top-ranked companies within each industry (top 10%) are selected for inclusion in the Dow Sustainability Index.

WHY IS THE STANDARD UNIQUE

EXAMPLES

  • Sandvik is a member of the prestigious DSJI World Index.

CARBON DISCLOSURE PROJECT (CDP)

DETAILED DESCRIPTION

  • Their vision and mission is to see a "thriving economy that works for people and planet in the long term. We focus investors, companies, and cities on taking action to build a truly sustainable economy by measuring and understanding their environmental impact".
  • They do this by taking information supplied in an annual reporting process, and scoring companies (as well as cities) based on their progress towards environmental leadership, in hopes that this incentivizes action on: 1) climate change, 2) forests, and 3) water security.
  • Their detailed scoring methodology is based on the leadership, management, awareness, and disclosures of the organization being analyzed.
  • The CDP project has regional offices and local partners in 50 countries, and works with organizations from over 90 countries (that disclose to the CDP)
  • Moreover, in 2019, more than 8,400 companies as well as 920 cities, states, and regions disclosed data to the CDP.

INDUSTRIES

WHY IS THE STANDARD UNIQUE

  • The CDP has developed a system over the last two decades that has lead to unparalleled engagement, especially on environmental issues across the world.
  • Moreover, Ban Ki-moon, the Former Secretary-General of the United Nations has noted that "No other organization is gathering this type of corporate climate change data and providing it to the marketplace".

EXAMPLES

  • Rolls-Royce has been a part of the CDP project for over a decade.


UN GLOBAL COMPACT

DETAILED DESCRIPTION

  • The UN Global Compact is a call for global companies and organizations to align their strategies, goals, and operations with a ten-point principle-based framework.
  • The ten principles focus on issues of human rights, labor, environment, and corruption.
  • The UN Global Compact's mission is to "mobilize a global movement of sustainable companies and stakeholders to create the world we want".
  • This UN-led initiative also hopes to promote activities that aid in the achievement of the Sustainable Development Goals (SDGs).

INDUSTRIES

WHY IS THE STANDARD UNIQUE

EXAMPLES


INTERNATIONAL INTEGRATED REPORTING COUNCIL (IIRC INTERNATIONAL FRAMEWORK)

DETAILED DESCRIPTION

INDUSTRIES

WHY IS THE STANDARD UNIQUE

  • The Integrated Reporting Council (IIRC) consists of a global coalition of stakeholders (including regulators, investors, companies, standard setters, accountants, academia, and NGOs).
  • The International <IR> Framework was released only after extensive consultation and testing from both report preparers and users.
  • Around 140 business and investors participated in the IIRC's Pilot Program.

EXAMPLES

Sources
Sources

From Part 02
From Part 03
Quotes
  • "When we asked which of the following sustainability frameworks your organization values, three rose to the top. These included the CDP (cited by 67 percent), GRI (49 percent) and the DJSI (45 percent)."
  • "In an analysis of the comments from 86 respondents, 20 percent indicated that these surveys provided market recognition while 37 percent cited the importance of third-party validation of a company’s accomplishments. "
  • "The largest number of commenters, 60 percent, declared that the major frameworks (CDP, GRI, DJSI) provide a useful tool set for influencing discussions with stakeholders and within their companies."
  • "When we asked which frameworks helped CSOs develop their sustainability program, five initiatives stood out: 1) Carbon Disclosure Project (51%), 2) Global Reporting Initiative (44%), 3) Dow Jones Sustainability Index (31%), 4) UN Global Compact (23%), 5) Ceres (19%)."
Quotes
  • "One of the most widely used comprehensive sustainability reporting standards has been issued by the Global Reporting Initiative (GRI)."
  • "A different approach is used by the Sustainability Accounting Standards Board (SASB), a nonprofit organization that publishes industry-specific sustainability accounting standards. SASB maintains standards for 77 industries across 11 sectors using an industry classification system."
  • "Yet another approach to grading sustainability efforts is found in the CDP (formerly the Carbon Disclosure Project) global disclosure system that enables companies and local governments to measure and manage their environmental impacts by completing a program-specific questionnaire...third parties like Bloomberg and Google Finance publish the scores."
Quotes
  • "The most widely used comprehensive sustainability reporting standard in the world are the GRI Sustainability Reporting Guidelines."
  • "There are several sustainability frameworks and standards recognized internationally. The major providers of non-financial reporting guidelines include: 1) Global Reporting Initiative (GRI Sustainability Reporting Standards) 2) The Organisation for Economic Co-operation and Development (OECD Guidelines for Multinational Enterprises) 3) UN Global Compact (Communication on Progress) 4) International Organization for Standardization (ISO 26000 Guidance on social responsibility) 5) The International Integrated Reporting Council (IIRC International Framework)"
Quotes
  • "This question has acquired even more relevance with the announcement of the Exposure Draft of the GRI Standards to “compete” with the existing standards of the Sustainability Accounting Standards Board, SASB, and the Integrated Reporting Framework of the International Integrated Reporting Council, IIRC."
Quotes
  • "CDP and DJSI are considered the most credible and widely adopted reporting frameworks according to a recent GlobeScan/SustainAbility survey"
  • "GRESB is one of the fastest growing industry-specific standards applying exclusively to real estate owners, asset managers and developers. Then there’s GRI, which is the dominant, broad based framework used for general corporate reporting."
  • "Meanwhile an upstart – the Sustainability Accounting Standards Board (SASB) – has emerged as the new standard for integrating non-financial with financial reporting for publicly traded US companies. "
  • "Top 5 Sustastainability Frameworks You Should Know: 1) CDP 2) Dow Jones Sustainability Indexes (DJSJ) 3) Global Reporting Initiative (GRI) 4) GRESB 5) Sustainability Accounting Standards Board (SASB)"
Quotes
  • "The five most credible ratings remained the same as in 2012, although the order shuffled. The top five in 2013 are CDP, the Dow Jones Sustainability Index, Access to Medicines Index, the FTSE4Good Index Series and oekom Corporate Ratings."
  • "As with 2012, the Dow Jones Sustainability Index, CDP and FTSE4Good Index Series are the most familiar ratings to experts."
  • "Experts deem the CDP, Dow Jones Sustainability Index and Access to Medicines Index as the three most credible ratings."
  • "The three most credible ratings - CDP, DJSI and ATMI - had notable increases in credibility from 2012 to 2013."
Quotes
  • "59% of companies use the Reporting Guidelines of the GRI"
  • "The reporting guidelines of the Global Reporting Initiative remain the most widely used reporting guidelines for conducting sustainability reports and support a culture of transparency"
From Part 04