Environmental, Social, and Governance (ESG) – it’s quickly become a term that businesses and corporations recognize as an integral part of their operations. Still, there are hundreds of ESG frameworks that companies utilize to measure their performance in each ESG silo and report their annual findings.
With so many different ESG frameworks to choose from, it can be hard to know which one is right for you. In fact, if you choose the wrong framework for reporting your ESG performance, you could face penalties that include fines and operational suspensions, depending on the country, industry, and its regulations.
What are ESG frameworks?
ESG frameworks are sets of structured guidelines that allow businesses to measure their impact throughout the three pillars of ESG factors: Environmental, Social, and Governance. While each ESG framework differs from the next, they all evaluate performance across those specific business operations.
ESG frameworks help standardize an otherwise ‘non-standardized’ measurement of performance, and they help businesses construct, develop, and improve ESG strategies while communicating those sustainability efforts to other stakeholders and investors.
With increasing pressure from investors and the public, businesses are adopting ESG frameworks at a record pace.
According to KeyESG, 90% of S&P 500 companies released ESG reports in 2024, while 89% of investors now consider ESG reporting when making investment decisions. With corporate philanthropy and responsible investment on the rise, it provides a great opportunity for businesses to grow their investor portfolio.
The role of ESG frameworks
ESG frameworks are the roadmaps companies follow to meet sustainability reporting standards, at least when first starting their ESG journey. ESG reporting frameworks help businesses understand their current impacts when it comes to social and environmental issues, strategize for improvement, and build resilience to the ever-changing ESG landscape and corporate sustainability issues.
However, if those who adopt ESG frameworks don’t track their KPIs consistently and report without fail year after year, they will lose sight of the bigger opportunities the roadmap can present.
For example, suppose your ESG reporting uncovers inefficiencies that result in unnecessary emissions in a certain area of your company’s operations. In this case, the ESG framework has done two things (at least).
First, it points out that there are inefficiencies within your operations. Second, it allows you to fix those inefficiencies and limit waste, which, in turn, provides mid- to long-term benefits that also help curb global climate change. But when no action is taken to reduce those emissions, it would quickly spell trouble: public distrust, wavering investors, and a lack of management accountability.
By adhering to the ESG frameworks, reporting annually, and showing how ESG efforts are improving year-by-year, you position yourself and your business for success and build resilience to sustainability-related global challenges.
Key benefits of ESG frameworks
See below for a quick and easy outlook into the key benefits of ESG frameworks.
Improved transparency
ESG frameworks enable businesses to communicate their sustainable business practices to the public, investors, and stakeholders – reducing the risk of greenwashing and enhancing credibility.
Clear corporate sustainability goals
With an ESG framework in place, businesses set measurable goals for environmental impact, corporate social responsibility, and governance practices, all of which support a company’s financial performance when executed thoughtfully.
Boosted stakeholder trust
A structured approach to ESG reporting builds trust among investors, customers, and employees, enhancing a company’s reputation and long-term relationships with stakeholders. With more than 70% of consumers staying loyal to at least one brand, sustainable practices and ESG reporting can drive meaningful improvements in your business.
Risk mitigation and long-term success
While it might seem abstract at first, ESG frameworks help businesses identify risks and strategize to mitigate environmental, social, and governance pressures through a proactive approach. ESG risks come with lots of caveats, with the most important potential ESG issues being brand reputation and a company’s bottom line.
ESG frameworks pave the way to lasting success through risk management practices that might go unnoticed without.
Popular ESG frameworks in the US market
As we said in our opening, there are hundreds of ESG frameworks available today (more than 600, to be exact). While ESG frameworks often impact businesses on a global scale, there are a select few that have become popular in the United States.
Keep in mind, while some ESG reporting frameworks are mandatory for certain businesses, others, like the Carbon Disclosure Project, are voluntary. While not always the case, voluntary ESG reporting frameworks can drive brand recognition and long-term investment.
Sustainability Accounting Standards Board (SASB)
The Sustainability Accounting Standards Board (SASB) is an ESG framework that enables industry-specific businesses to carry out ESG reporting with a unique focus on financial materiality, economic growth, and climate related financial disclosures.
While the SASB was founded in the US, it is used globally. Still, SASB standards guide US businesses on which ESG factors matter most to stakeholders and investors, enabling them to report on the things that have the most impact.
The IFRS standards
The International Financial Reporting Standards (IFRS) are increasingly becoming an important part of global ESG reporting, particularly in terms of financial materiality and transparency in sustainability practices. The IFRS Foundation has recently enhanced its focus on sustainability reporting by introducing the International Sustainability Standards Board (ISSB).
The ISSB aims to standardize ESG-related disclosures, making them consistent and comparable across industries and regions. This is essential for global businesses looking to align with international sustainability standards and ensure transparency in their carbon emissions, governance practices, use of natural resources, and other ESG-related information.
Additionally, the Climate Disclosure Standards Board (CDSB), now integrated into the ISSB, plays a critical role in shaping climate-related reporting standards. The CDSB focuses specifically on the disclosure of environmental impact, guiding companies on how to report on their climate risks and opportunities in a way that is aligned with the financial reporting requirements of IFRS.
This combination of frameworks enables businesses to present a more comprehensive, clear, and reliable picture of their sustainability efforts, helping stakeholders make informed decisions on ESG investing and partnerships.
U.S. Securities and Exchange Commission (SEC) ESG disclosure rules
The US Securities and Exchange Commission (SEC) provides ESG disclosure rules to US businesses, with the aim of enhancing the transparency around climate-related disclosures.
The rules set by the US SEC are a critical component for US-based public companies and require them to report on climate risks, governance risks, and may require greenhouse gas emissions (GHG) disclosures in the near future following the EU’s regulations to curb climate change.
The Global Reporting Initiative (GRI)
The Global Reporting Initiative (GRI) was founded in Europe and has become one of the most recognized and widely utilized ESG frameworks to date – even in the US. The Global Reporting Initiative framework is used by all sizes and types of businesses, helping them disclose their environmental, social, and corporate governance impacts through a complex approach to non-financial sustainability data.
This particular ESG framework focuses largely on social and environmental impact, emphasizing how a company takes accountability for each impact.
The task force on climate-related financial disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD) was an influential framework designed to help businesses disclose climate-related financial risks and opportunities through an ESG lens. Although the TCFD has been disbanded, its guidelines continue to be widely used by companies around the globe.
How to choose the right ESG framework for your business
With so many ESG frameworks to choose from, understanding how to pick the right one for your business is the first consideration to make.
Aligning with industry standards
Industry reporting standards are among the most important considerations to make when choosing an ESG reporting framework to follow. Each industry has specific ESG priorities, which align with the operations and customer base in the industry. Regardless of the industry, be it manufacturing, technology, or financial investment, ensuring that the framework you choose is aligned with industry priorities is step one.
Understanding stakeholder expectations
Another important consideration to make is how your investors are prioritizing their investment portfolios and how stakeholders prioritize purchases and loyalty. Regulatory bodies, customers, and investors all have personal interests, which change alongside the corporate sustainability landscape. If you don’t choose an ESG reporting framework that aligns with their needs and expectations, you could soon see a sharp decline in ESG investing and customer retention.
How Sweep can help with ESG framework implementation
Simplifying data collection and ESG reporting
Sweep’s platform streamlines ESG data tracking and reporting, making it easier for businesses to collect accurate information and measure progress against ESG frameworks.
Ensuring compliance and transparency
Sweep helps businesses align with multiple ESG practices and reporting frameworks and ensures that all ESG reporting is accurate, transparent, and compliant with regulatory requirements. When companies report on sustainability, it must always be with compliance and transparency.
Actionable insights and continuous improvement
With Sweep, businesses can identify areas for improvement in their ESG strategies and implement data-driven changes that lead to better performance over time – ultimately fostering a more sustainable future for the world.
Real-time ESG monitoring and sustainability reporting
Sweep’s platform provides real-time updates on ESG metrics, enabling businesses to stay on track with their sustainable development goals and make informed decisions as conditions change for more sustainable business practices. ESG risks must be monitored closely to ensure any and all ESG issues are avoided when reporting.
