Journal Articles

A Case Study on the Blended Reporting Phenomenon: A Comparative Analysis of Voluntary Reporting Frameworks and Standards – GRI, IR, SASB, and CDP

A Case Study on ESG Frameworks or Sustainability Reporting Standards – GRI, IR, SASB, and CDP

Authors: Dr Kuntal Goswami, Australian Centre for Sustainable Development Research & Innovation (ACSDRI),         Dr Mohammed Kazi Saidul Islam, Central Queensland University (CQU), Winton Evers, EcoProfit, Australia

Abstract: The article presents a comparative analysis of the sustainability disclosures of four companies. Each of these organizations has adopted two or more contemporary ESG or Sustainability Reporting Frameworks and standards, as introduced by the Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC), Sustainability Accounting Standard Board (SASB), and Climate Disclosure Project (CDP).

The case study highlights how organizations apply these frameworks and standards in a blended format, manifesting the underlying issue of multiple overlapping ESG or Sustainability reporting frameworks. Thus, the article provides contextual reasons for alignment (with GRI, IIRC, SASB, and CDP) toward a proposed comprehensive corporate reporting standard, as in the process of drafting by the International Sustainability Standards Board (ISSB). 

All these frameworks and standards are designed with distinctive characteristics to satisfy the ESG information needs of stakeholders, especially those in the financial sector. Each framework and standard tries to position itself for niche identity within the voluntary ESG reporting domain. 

As a result, organizations adopt all of the available contemporary non-financial sustainability or ESG reporting frameworks and standards in a blended format. These organizations have presented all non-financial information as a buffet to gain legitimacy and confidence from all stakeholders. This new trend can be termed as a blended reporting format phenomenon. 

However, the study finds that reporting based on GRI is the most comprehensive, as it is designed to address the information expectations of all stakeholders. 

The study also found that the Task Force on Climate-Related Financial Disclosure (TCFD) is an essential normative institutional framework that motivates companies to present sustainability information to cater to the decision-making information needs of capital markets and investors, while the Sustainable Development Goals (SDGs) act as the most respected global moral sustainability compass.

However, the question remains whether sustainability information should only be seen from the financially material perspective of capital markets or if it should be considered as economic, social, and ecological material information for all stakeholders.

Keywords: ESG Frameworks, Sustainability Reporting, Global Reporting Initiative (GRI), Integrated Reporting (IR), Sustainability Accounting Standard Board (SASB), Climate Disclosure Project (CDP), Climate Disclosure Standard Board (CDSB), Task Force on Climate-Related Financial Disclosure (TCFD), Sustainable Development Goals (SDGs), International Sustainability Standards Board (ISSB)

Citation: Goswami, K., Islam, M. K. S., & Evers, W. (2023). A Case Study on the Blended Reporting Phenomenon: A Comparative Analysis of Voluntary Reporting Frameworks and Standards—GRI, IR, SASB, and CDP. The International Journal of Sustainability Policy and Practice, 19(2), 35-64. doi:10.18848/2325-1166/CGP/v19i02/35-64

Introduction to ESG Frameworks

The sustainability agenda has been mainstreamed over time (Threlfall, King, and Shulman 2020; Niemenmaa and Turtiainen 2013; Kuprionis and Styles 2017). With its growing importance, companies are experimenting with alternative sustainability reporting frameworks in various permutations and combinations to understand which combinations will better disclose their holistic sustainability (environmental, social, and economic) performance information to targeted stakeholders (Guthrie 2016). 

At the same time, regulators across the world are increasingly mandating organizations to disclose their non-financial performance information (Meech and Bayliss 2021).

For example: 

  • In France, Grenelle II stipulated organizations should provide externally assured non-financial information in annual reports; 
  • The Sao Paulo Stock Exchange of Brazil advocated reporting of non-financial key performance indicators (KPIs) on a “comply” or “explain” basis; 
  • In China, the Shanghai Stock Exchange published Guidelines on Environmental Disclosure for listed companies; 
  • The European Union introduced Non-Financial Reporting Directives to companies to publish sustainability reports on a comply or explain basis; 
  • In South Africa, the Johannesburg Stock Exchange (JSE) mandated listed companies to publish Integrated Reports and
  • In the UK, the Companies Act 2006 expanded the scope of mandatory non-financial disclosures for listed companies (Ernst & Young Global 2014; Meech and Bayliss 2021; World Business Council for Sustainable Development [WBCSD] 2014). 

Many voluntary non-financial reporting frameworks and standards have evolved as regulatory bodies acknowledge the importance of non-financial disclosures. In addition, there has been a growing need for climate-related disclosures as there is mounting evidence of human-induced climate change. All these factors led to a shift in the information dissemination focus of sustainability accounting and reporting from impact assessment to risk identification models (O’Dwyer and Unerman 2020; Meech & Bayliss 2021). 

The five most prominent organizations that have presented contemporary ESG Frameworks or sustainability reporting frameworks and standards are:
  • the Global Reporting Initiative (GRI), 
  • International Integrated Reporting Council (IIRC) or Integrated Reporting (IR), 
  • Sustainability Accounting Standard Board (SASB), 
  • Climate Disclosure Project (CDP), and 
  • Climate Disclosure Standards Board (CDSB) (Threlfall, King, and Shulman 2020; Impact Management Project [IMP], n.d.; Bose 2020).

With a multiplicity of voluntary reporting frameworks, there has been a “brainstorming effect” of ideas on how to improve the decision-usefulness of Environmental, Social, and Governance (ESG) information. At the same time, there has been confusion about which standard to follow (Davies, Dudek, and Wyatt, 2020). The situation has also led to the proposed convergence and alignment of different streams of approaches toward a comprehensive corporate reporting standard called the International Sustainability Standards Board (ISSB) (IMP, n.d.). 

In this context, it is imperative to analyze the characteristics and applications of each existing framework in the pre-convergence period. This will facilitate mapping and documentation of the situation that has led to the alignment of GRI, IIRC, SASB, CDP, and CDSB. Hence, this article compares five contemporary reporting frameworks and standards introduced by the GRI, IIRC or IR, SASB, CDP, and CDSB to understand each framework’s normative characteristics. The article concentrates on only four out of five frameworks and standards—GRI, IR, SASB, and CDP—to compare each standard’s and framework’s applications. It is because CDSB only prescribes broad guidelines and does not provide any specific measures, indicators, and metrics to quantify sources of environmental impact.

Literature Review on ESG Frameworks or Sustainability Reporting Standards 

With the proliferation of non-financial reporting frameworks and standards, there has been a change in the perception of corporate accountability on how to integrate and address sustainability issues with business. Since 2000, GRI has become the de facto standard language for sustainability disclosures. GRI provides indicator-based guidelines to produce standalone corporate sustainability reports or information within annual reports for various stakeholders (McKean-Wood, Gaussem, and Hanks 2016). 

However, with the release of IR’s principles-based framework, the focus has shifted from single capital to multi-capital-based strategic and future orientation rather than historic orientation (Thomson 2015). It proposes a new corporate reporting format integrating financial, social, environmental, and governance information for financial capital providers (McKean-Wood, Gaussem, and Hanks 2016). 

IR’s inputs and outcomes-based framework also introduces the concept of value creation as the primary purpose of the disclosures. The case study of Sciulli and Adhariani (2021) mentioned that there are four common motivations for adopting Integrated Reporting: 

  • to project a “first mover” impression to the stakeholders. 
  • to portray a strong management ethos for transparency and accountability. 
  • to overcome any deficiency in the annual report and 
  • to respond to changing demands from investors and other stakeholders who wish to know about the organization’s long-term sustainability strategy and business model.

Value creation is the primary goal of any business organization (Perrini and Tencati 2006). IR’s reporting format was primarily designed to satisfy the information needs of financial capital providers. Hence, Flower (2015) criticized IR for not focusing on the stakeholder theory’s perspective (i.e., value to stakeholders), the sustainability concepts (i.e., value to present and future generations), and the social and environmental accounting (i.e., value to society). Supporting this critical argument, Yusof (2018) finds that information presented conforming to the IR framework less supports other stakeholders, society, and the environment. Information based on the IR framework is less grounded in social and environmental disclosure practices than GRI-based sustainability reporting.

Furthermore, both the GRI and IR frameworks have distinctive materiality perspectives. GRI prescribes disclosure of those material topics that have significant economic, environmental, and social impacts or such information that has the potential to substantively influence the assessments and decisions of stakeholders.

The IR framework prescribes reporting on matters that substantively affect an organization’s ability to create value over the short, medium, and long terms (McKean-Wood, Gaussem, and Hanks 2016). 

A study of 167 listed companies, who all voluntarily published material non-financial information based on Integrated Reports, shows that, except in a regulatory environment where IR is mandatory, there is a lack of evidence to justify the fact that voluntary adoption of IR is positively affecting a company’s value or benefiting an analyst to forecast company earnings accurately (Wahl, Charifzadeh, and Diefenbach 2020). 

Furthermore, given IR’s narrow materiality approach and limited stakeholder focus, it can be seen as a victim of regulatory capture by accounting professionals and multinational enterprises. In this context, Flower (2015) and Thomson (2015) argue that IR “privileges a neo-liberal programmatic and incorporates the elements of sustainability that are aligned with the underlying principles of capitalism.”

A similar comparison between GRI and SASB highlights that GRI has a broader approach toward materiality and addresses more comprehensive stakeholder expectations. In contrast, SASB’s materiality approach is based on financially significant factors, and its disclosure model mainly focuses on investors and capital providers (GRI and SASB 2021). 

In addition, the literature also highlights the phenomenon of blended reporting. Many companies are following the new trend of blended reporting, where the corporate report combines various non-financial frameworks (GRI, IIRC, Sustainable Development Goals [SDGs], and SASB) to meet the information expectations of different stakeholders and perspectives (GRI and SASB 2021). Hence, the overall comparison between leading contemporary frameworks also highlights different emphases in terms of scope, stakeholder focus, and materiality definitions (Barckow et al. 2019; Guthrie 2016). 

An analysis by Guthrie (2016) also acknowledges that there are underlying collective unities, agreements, and synergies across different sustainability reporting frameworks, even though they look fragmented and confusing on the surface. However, the literature recommends and recognizes a need for further harmonization (SASB, n.d.-a).

The scientific evidence has confirmed that the rise in global temperature is above 1°C, and with that, the potential for significant physical impact due to climate change is also becoming certain (United Nations Climate Change [UNCC], n.d.). In this context, Kuprionis and Styles (2017) described the gravity of the situation by mentioning that while sustainability may have mainstreamed, “global warming and climate change” remain the elephants in the room. Hence, climate change issues top all other sustainability issues. As a result, there is an urgent need for green finance to decarbonize the economy and to minimize companies’ climate-related risk exposure. 

Climate-related risks can manifest in regulatory, technological, market, reputational, and physical risks. Hence, the Task Force on Climate-Related Financial Disclosure (TCFD) categorized these climate-related risks into two broad categories: 

  • Transitional risks (policy and legal, technology, market, and reputation) and
  • Physical risks (acute and chronic) (De Bernardi, Venuti, and Bertello 2019). 

In the current and future context, climate-related risks will impact an organization’s financial performance and position and will affect an organization’s income statements, cash flow statements, and balance sheets. The climate-related risks will impact an organization’s asset quality, ability to generate revenue and cashflows, and ability to raise capital (De Bernardi, Venuti, and Bertello 2019).

Quality of ESG or Sustainability Reporting

Concerning on trust and quality of sustainability disclosure, Esty (2020) highlights there is a lack of “investment-grade” sustainability metrics. Esty (2020) mentioned that investors cannot distinguish between corporate “greenwash” and authentic corporate leadership toward sustainability. Therefore, the lack of trust in companies’ ESG data among investors is one of the core issues underlying the lack of commitment toward sustainable investment (Esty 2020). 

Similarly, there are still informational disclosure gaps across companies relating to the financial impacts of climate-related risks, as highlighted by De Bernardi, Venuti, and Bertello (2019). Therefore, contextualizing this rising climate-related risk scenario, the Financial Stability Board’s TCFD has recommended that companies should provide financially material climate-related information around four thematic areas: 

(1) governance, (2) strategy, (3) risk management, and (4) metrics and targets (TCFD, n.d.).

The TCFD’s recommendations, therefore, paved the way for an institutional shift in non-financial disclosure from a sustainability impact focus to a climate-related risk focus (O’Dwyer and Unerman 2020). This change also facilitates the flow of global finance toward green investments. 

However, O’Dwyer and Unerman (2020) also argued that there are challenges to implementing TCFD’s recommendation regarding risks and opportunities for climate change. Therefore, companies need to develop new climate-related scenario analysis and reporting practices. 

In order to address the concerns raised by critics, SASB and CDSB are ensuring companies can a) identify and access climate-related risks and opportunities and b) integrate climate change factor information into their mainstream financial reports cost-effectively. Thereby an organization can fulfill the TCFD’s recommendations (SASB, n.d.-a). 

In the context of the various arguments and conceptual distinctions between non-financial reporting frameworks and standards, the study analyzes distinguishable features alongside the depth and quality of disclosures based on these frameworks. READ MORE