Management teams and boards must take note: the ESG moment is accelerating in the United States.
By Janet Rae-Dupree, Workflow contributor
Editor’s note: This story originally appeared in the ESG issue of Workflow Quarterly.
Companies worldwide face rising pressure to help people, society, and the planet. To meet this challenge effectively, leaders must choose from a confusing array of frameworks and standards to measure their environmental, social, and governance (ESG) programs.
These frameworks are meant to standardize reporting and disclosure of ESG performance, so that investors, regulators, and other stakeholders can get a transparent, apples-to-apples view. The challenge is that no standard ESG reporting framework exists. Instead we find an alphabet soup of standards that vary widely in focus and recommended metrics.
“We’re at an inflection point as discrete voluntary reporting standards move toward something that’s more harmonized and mandatory, but we’re not there yet,” says Adam Fishman, associate director at nonprofit sustainability consultancy BSR. “Every company will still need to report in line with their stakeholders’ information needs. But we’re starting to see the field converge around a streamlined and interoperable set of standards.”
Meanwhile, the lack of common standards often leaves decision-makers in the dark. Nearly three-quarters of CEOs feel standardized metrics would help their decision-making, according to PwC’s 2021 Annual Corporate Directors Survey. And board directors across industries say ESG is the No. 1 topic that investors want to discuss during shareholder engagements. Yet only 25 percent of directors surveyed say their board understands the company’s ESG risks very well.
Management teams and boards must take note: the ESG moment is accelerating in the United States.
Because of these varying needs, many companies choose multiple frameworks and standards as they develop their ESG reports. In 2020, five leading ESG standards bodies published a joint statement outlining their intent to work together toward more unified reporting. In December 2020 they released a prototype climate-related financial disclosure standard that may ultimately contribute to the development of a common standard to be issued by the International Sustainability Standards Board (ISSB).
“I don’t think ISSB is going to make life any easier for reporters such as myself,” says Tonie Hansen, senior director of corporate social responsibility at chipmaker NVIDIA. But she acknowledged the importance of frameworks to help make ESG reporting more relevant to stakeholders. NVIDIA adopted the GRI standards 12 years ago, and now uses a total of five frameworks to prepare its annual ESG report.
Hansen adds that a dozen years of ESG reporting informed NVIDIA’s recent decision to create a digital twin of the planet by building Earth-2, which it claims will be the world’s most powerful AI supercomputer to predict climate change. “We’d like to have a more significant impact in the climate change space,” she says. “We’d like to do well financially and do good at the same time.”
No single standard or framework exists to help companies measure their ESG performance. The entities below represent some of the biggest names in ESG reporting today.