Climate Change, Sustainability, and ESG are becoming more prominent in corporate boardrooms around the globe. Executives have many options when it comes to communicating and measuring corporate sustainability performance via sustainability ratings or reports. Companies are more likely to fall behind than choose the right reports or ratings, which don’t help their sustainability performance. This can lead to accusations of greenwashing. The sustainability reporting matrix is a tool that allows executives and sustainability managers focus on the reporting standards and ratings that best align with their strategic needs and those of their stakeholders.
It can be difficult for executives to decide which metrics to use in reporting on corporate sustainability performance. While some companies only report their greenhouse gas emissions, others provide detailed reports on their CSR (corporate Social Responsibility) initiatives, or even use their ESG ratings (environment.social.and governance) as a badge. Most executives don’t know when or why they should choose one report over the other.
The past decade has seen an explosion in sustainability reporting options. Executives can become overwhelmed by the number of options available. Companies can find themselves investing in sustainability disclosures while not meeting the expectations from clients, investors, legislators, employees, or investors. Moreover, disclosures of information are often not translated into meaningful action or impacts.
Dubai’s Sustainable City has recently created a better way for people to navigate the complex array of options. The 46-hectare mixed-use community is designed to achieve net-zero energy, but the developer’s knowledge arm (the SEE Institute) didn’t know how to best report on achievements towards that goal. It was hard to pick from the many reporting standards available, each one with its own view of what sustainability reporting should include. It found that the international sustainability ratings were not appropriate for the local context. However, locally-developed ratings lack international comparability.
We developed a matrix to help us categorize ratings and reporting standards. Executives at Sustainable City were able to create a sustainable reporting strategy that meets the needs of their stakeholders and company by categorizing all possible reporting and rating options based on the topics they cover and the target audience. This exercise led to an annual sustainability report, which focused on the most important environmental challenge the Sustainable City could impact: the reduction in greenhouse gas emissions. The Greenhouse Gas Protocol was used and verified by an outside party.
Because no existing rating was able to accurately summarize an entity’s greenhouse gases emissions reduction performance, it wasn’t decided to apply for a sustainability rating. This allowed the company to concentrate its communications on combating climate change. It also earned multiple regional awards for sustainability reporting. The Sustainable City residents were also able to learn how they can reduce greenhouse gas emissions by communicating information to them.
Dubai’s Sustainable City was not alone in making difficult choices. This matrix can be used to help others determine the best approach for sustainability rating and reporting. This is how it works.
Sustainability reporting standards
Sustainability reports refer to information companies provide to the outside world about their performance on a regular basis and in a structured manner. The sustainability ratings, discussed below, provide an overview indicator of an entity’s performance.
There are at most seven well-known sustainability reporting standards and frameworks, all of which have been backed by credible organizations with respected individuals on the Board. They are listed alphabetically:
- CDP – Carbon Disclosure Project
- CDSB- Climate Disclosure Standards Board
- GRI – Global Reporting Initiative
- IIRC – International Integrated Reporting Council
- SASB- Sustainability Accounting Standards Board
- TCFD – Taskforce on Climate Related Disclosures
- WEF IBC – World Economic Forum International Business Council
Each standard deals with a different scope of topic from narrow (an exclusive focus on greenhouse gas emissions, for example) to broad ones (encompassing all of ESG or the entire range of UN Sustainable Development Goals), and caters to different range of audiences from a narrow set of stakeholders (primarily investors) to broader groups, including customers, employees and society at large.
Dubai’s Sustainable City created the first matrix by separating topic from audience. After analyzing all major sustainability reporting standards worldwide, the company placed each one within the appropriate quadrant of the matrix.
Using this matrix, executives can see that if they want to report on the specific risks that climate change present to its financial results, they can choose to use CDSB (a specific standard) or TCFD (a broad fra