Top Sustainability Reporting Standards: GRI, SASB, and TCFD Explained
Sustainability reporting has become a basis for businesses looking to demonstrate their commitment to environmental, social, and governance (ESG) practices.
With the growing demand for transparency and accountability, organizations are increasingly turning to well-established frameworks to guide their sustainability reporting efforts.
Among these, the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD) stand out as the most widely recognized.
Each offers unique approaches and standards, making it important for organizations, including those working with an audit firm in Malaysia, to understand their differences.
Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) is the most widely adopted sustainability reporting framework globally. Established in 1997, GRI’s mission is to help organizations disclose their impacts on the economy, environment, and society in a standardized way.
GRI provides a comprehensive set of guidelines that can be applied across various industries, making it a versatile tool for organizations of all sizes.
GRI standards are designed to be universally applicable, enabling companies to measure and communicate their sustainability performance transparently.
The framework covers a broad range of topics, including greenhouse gas emissions, labor practices, human rights, and community impact. The focus is on the organization’s overall contribution to sustainable development rather than on specific financial metrics.
One of the key features of GRI is its stakeholder inclusiveness principle. This principle emphasizes the importance of considering the interests and expectations of all stakeholders, including customers, employees, investors, and the community.
By doing so, GRI encourages organizations to address the issues most relevant to their stakeholders, leading to more meaningful and impactful sustainability reporting.
Sustainability Accounting Standards Board (SASB)
The Sustainability Accounting Standards Board (SASB) offers a more targeted approach to sustainability reporting. Founded in 2011, SASB focuses on the financial materiality of sustainability issues, providing standards tailored to specific industries.
Unlike GRI, which takes a broad view of sustainability, SASB emphasizes the economic impact of ESG factors on a company’s financial performance.
SASB’s industry-specific standards are designed to help organizations identify and report on the sustainability issues that are most likely to affect their financial condition. This approach is particularly useful for investors and financial analysts who need to assess the financial risks and opportunities associated with ESG factors.
For instance, an audit firm in Malaysia working with clients in the energy sector may use SASB standards to evaluate the financial implications of climate change on their operations.
SASB’s focus on financial materiality makes it a valuable tool for companies looking to integrate sustainability into their financial reporting.
In this regard, SASB helps organizations demonstrate the economic value of their ESG initiatives, thereby attracting socially responsible investors and enhancing their overall market position by aligning sustainability metrics with financial performance.
Task Force on Climate-related Financial Disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD) was established in 2015 to address the growing concern over climate-related risks and their impact on financial markets. Unlike GRI and SASB, which cover a wide range of sustainability topics, TCFD is specifically focused on climate-related financial disclosures.
TCFD provides a framework for organizations to disclose climate-related risks and opportunities in their financial filings. The recommendations are structured around four key areas, namely governance, strategy, risk management, and metrics and targets.
These areas are designed to help organizations assess the potential financial impact of climate change on their business and develop strategies to mitigate these risks.
One of the unique features of TCFD is its forward-looking approach. TCFD encourages organizations to consider the long-term implications of climate change and to disclose how they are positioning themselves to manage these risks in the future.
This approach is particularly relevant for industries with high exposure to climate risks, such as the energy and manufacturing sectors.
TCFD has gained significant traction among investors, regulators, and companies alike, with many organizations voluntarily adopting its recommendations.
The framework’s emphasis on climate-related financial disclosures aligns with the growing demand for transparency and accountability in corporate sustainability practices.
Comparing GRI, SASB, and TCFD: Which Framework Should You Use?
With the availability of multiple sustainability reporting standards, organizations often face the challenge of choosing the right framework. Each of the three standards—GRI, SASB, and TCFD—serves different purposes and caters to different audiences.
The following key differences between them can help organizations make informed decisions:
Scope and Focus
GRI is the most comprehensive of the three, which covers a wide range of sustainability topics. It is suitable for organizations looking to provide a holistic view of their sustainability performance.
SASB, on the other hand, is more focused on the financial materiality of ESG issues and is particularly useful for investors. TCFD is highly specific, concentrating solely on climate-related financial risks and opportunities.
Audience
GRI is designed for a broad audience, including stakeholders such as employees, customers, and the community.
SASB targets investors and financial analysts who are interested in the financial implications of sustainability issues. TCFD also appeals to investors but with a specific focus on climate-related risks.
Industry Applicability
While GRI provides general guidelines applicable to all industries, SASB offers industry-specific standards, making it more tailored to the unique challenges faced by different sectors.
TCFD, although focused on climate-related issues, can be applied across various industries, particularly those with significant exposure to climate risks.
Reporting Requirements
GRI requires organizations to report on a broad set of indicators, covering both qualitative and quantitative aspects of sustainability. SASB’s standards are more quantitative and financially oriented, with an emphasis on metrics that directly impact financial performance.
TCFD’s recommendations are structured around governance, strategy, risk management, and metrics, with a strong emphasis on forward-looking disclosures.
Integration with Financial Reporting
SASB and TCFD are more closely aligned with financial reporting, making them suitable for companies looking to integrate sustainability into their financial disclosures.
GRI, while comprehensive, is often used as a standalone sustainability report rather than being fully integrated into financial statements.
All in All
Selecting the right sustainability reporting framework depends on the organization’s objectives, target audience, and industry. For companies seeking a comprehensive overview of their sustainability performance, GRI offers the broadest coverage.
Organizations focused on the financial implications of ESG factors may find SASB’s industry-specific standards more relevant. For those addressing climate-related financial risks, TCFD provides a strong framework tailored to these challenges.
Consulting with an audit firm in Malaysia can further help organizations determine the most appropriate framework to align with their business goals and stakeholder expectations.
