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What is ESG Reporting, and How is it Accomplished?

Updated: Jun 25

Environmental, Social, and Governance reporting is a method of data collection based on benchmarking and improving a company or an organization with the intent to reduce environmental impacts.


ESG reporting methods create a specific and measurable pathway to compliance with various regulatory changes. Although each region has its own reporting guidelines and compliance concerns, ESG metrics often include financial disclosures and can be submitted to the Securities and Exchange Commission (SEC), the European Financial reporting advisory group (EFRAG), the Financial Conduct Authority (FCA), and the International Sustainability Standards Board (ISSB). Reporting formats like the Sustainability Accounting Standards Board (SASB), or the Global Reporting Initiative (GRI) help businesses and organizations understand and communicate their impacts on issues like human rights, Sustainable material usage, climate change, and more.


The GRI reporting standards include Universal Standards, applicable to all businesses, Sector specific standards which are applicable to individual sectors of business, and Topic specific standards.

www.freepik.com - Sustainability standards make for consistency
www.freepik.com - Standards make for consistency

GRI STANDARDS EXPLAINED

Universal standards discuss core Sustainability issues associated with the economy, society, or the environment.


Sector Sustainability standards apply specifically to high environmental cost business activities, such as oil and gas extraction, or agriculture, or commercial fishing, etc.


Topic standards aim to disclose relevant information pertaining to waste, occupational health, energy, diversity, and other aspects of opportunities costs.


Main GRI Standards

The Global Reporting Initiative (GRI) Standards are structured as a modular system with three main types of standards, each serving a distinct purpose in sustainability reporting (1,5,6):


1. Universal Standards

These form the foundation for all GRI-based sustainability reports and are mandatory for every organization using the GRI framework. The three core Universal Standards are:

  • GRI 1: Foundation 2021 – Explains how to use the GRI Standards, outlines compliance requirements, and defines key reporting principles.

  • GRI 2: General Disclosures 2021 – Covers essential background about the reporting organization, including its size, activities, governance, and stakeholder engagement.

  • GRI 3: Material Topics 2021 – Guides organizations in identifying and disclosing their material topics, including how to use applicable Topic and Sector Standards (5,6,7).

2. Sector Standards

These provide additional, sector-specific guidance for organizations operating in industries with significant sustainability impacts. They are designed to increase the quality and consistency of reporting within sectors such as oil and gas, coal, agriculture, aquaculture, fishing, and mining (3,7,8). If a relevant Sector Standard exists, organizations are required to use it when reporting with the GRI Standards.


3. Topic Standards

These standards offer detailed guidance on specific sustainability topics and are organized into three series:

  • GRI 200 series: Economic topics (e.g., anti-corruption, market presence, procurement practices)

  • GRI 300 series: Environmental topics (e.g., energy, emissions, water, biodiversity, waste)

  • GRI 400 series: Social topics (e.g., labor practices, human rights, diversity, health and safety, community relations)(1,5,6)


Organizations select relevant Topic Standards based on the material topics identified in their materiality assessment.



ESG METRICS

Quantifiable metrics, like CO2 emissions, financial transparency, Supply chain efficiency and others can be used to make measurable steps more achievable for companies looking to comply with sustainability initiatives or regulations.


Regulations such as ISO 14001, and ISO 26000 present standards for assessing and reporting on environmental metrics and the management thereof.


ESG Metrics List


Environmental Metrics

  • Greenhouse gas (GHG) emissions (CO₂, CH₄, N₂O, CO)

  • Carbon footprint

  • Energy usage and energy efficiency

  • Percentage of energy from renewable sources

  • Air and water pollution

  • Water usage and water management

  • Waste generation, recycling, and waste management

  • Biodiversity impact and conservation

  • Deforestation

  • Business circularity (use of recycled materials, product lifecycle)

  • Product carbon footprint

  • Water security (1,4,5,6,7)


Social Metrics

  • Diversity, equity, and inclusion (DEI) percentages

  • Gender pay gap

  • Employee engagement and satisfaction

  • Employee turnover rates

  • Labor standards (living wage, workplace safety)

  • Health and safety (work-related injuries)

  • Reskilling/training participation

  • Community engagement and impact

  • Corporate social responsibility initiatives

  • Data protection and privacy

  • Product safety

  • Responsible sourcing and sustainable supply chain

  • Conflict minerals (1,2,3,5,6,7)


Governance Metrics

  • Board composition and diversity

  • Board independence ratio

  • Executive compensation (CEO pay ratio)

  • Management diversity

  • Shareholder rights

  • Accounting transparency

  • Reporting and disclosures

  • Anticorruption and conflict of interest policies

  • ESG policy development and adherence

  • Risk management practices

  • Investor relations

  • Lobbying activities

  • Shareholder actions (2,5,6,7)


These metrics are commonly used to assess and report a company’s ESG performance. The specific metrics chosen may vary by industry, regulatory requirements, and company strategy125.


In these regulations and metrics listed above, environmental impacts and management of the consequences across many industries and sectors are measured based on company size, sales volumes, and many specific factors.


SASB STANDARDS

The SASB standards measure impacts across 77 different industries and in many sectors of business. From Consumer goods and manufacturing, to health care and transportation, each sector has its own impacts and own accounting for sustainability metrics.


Here is a list of the 77 industries the SASB focuses on with a few sources identified:


Consolidated List of the 77 SASB Industries

The SASB (Sustainability Accounting Standards Board) standards are organized into 77 industries across 11 sectors, according to the Sustainable Industry Classification System® (SICS®)56. Below is the consolidated list of all 77 industries, grouped by sector:


1. Consumer Goods

  • Apparel, Accessories & Footwear

  • Appliance Manufacturing

  • Building Products & Furnishings

  • E-Commerce

  • Household & Personal Products

  • Multiline and Specialty Retailers & Distributors

  • Toys & Sporting Goods


2. Extractives & Minerals Processing

  • Coal Operations

  • Construction Materials

  • Iron & Steel Producers

  • Metals & Mining

  • Oil & Gas – Exploration & Production

  • Oil & Gas – Midstream

  • Oil & Gas – Refining & Marketing

  • Oil & Gas – Services


3. Financials

  • Asset Management & Custody Activities

  • Commercial Banks

  • Consumer Finance

  • Insurance

  • Investment Banking & Brokerage

  • Mortgage Finance

  • Security & Commodity Exchanges


4. Food & Beverage

  • Agricultural Products

  • Alcoholic Beverages

  • Food Retailers & Distributors

  • Meat, Poultry & Dairy

  • Non-Alcoholic Beverages

  • Processed Foods

  • Restaurants

  • Tobacco


5. Health Care

  • Biotechnology & Pharmaceuticals

  • Drug Retailers

  • Health Care Delivery

  • Health Care Distributors

  • Managed Care

  • Medical Equipment & Supplies


6. Infrastructure

  • Electric Utilities & Power Generators

  • Engineering & Construction Services

  • Gas Utilities & Distributors

  • Home Builders

  • Real Estate

  • Real Estate Services

  • Waste Management

  • Water Utilities & Services


7. Renewable Resources & Alternative Energy

  • Biofuels

  • Forestry Management

  • Fuel Cells & Industrial Batteries

  • Pulp & Paper Products

  • Solar Technology & Project Developers

  • Wind Technology & Project Developers


8. Resource Transformation

  • Aerospace & Defense

  • Chemicals

  • Containers & Packaging

  • Electrical & Electronic Equipment

  • Industrial Machinery & Goods


9. Services

  • Advertising & Marketing

  • Casinos & Gaming

  • Education

  • Hotels & Lodging

  • Leisure Facilities

  • Media & Entertainment

  • Professional & Commercial Services


10. Technology & Communications

  • Electronic Manufacturing Services & Original Design Manufacturing

  • Hardware

  • Internet Media & Services

  • Semiconductors

  • Software & IT Services

  • Telecommunication Services


11. Transportation

  • Air Freight & Logistics

  • Airlines

  • Auto Parts

  • Automobiles

  • Car Rental & Leasing

  • Cruise Lines

  • Marine Transportation

  • Rail Transportation

  • Road Transportation


This list reflects the most recent and consolidated industry classification as maintained by the IFRS Foundation under the SASB Standards (5,6,7).


Overview of ESG Reporting

Environmental, Social, and Governance (ESG) reporting is the structured process by which companies disclose data on their performance and impact in three key areas: environmental stewardship, social responsibility, and corporate governance. The primary aim is to benchmark and improve organizational practices to reduce negative environmental impacts, enhance social responsibility, and strengthen governance, while also meeting the expectations of investors, regulators, and other stakeholders (3,5,6).


ESG Reporting Methods and Frameworks

Key Steps in ESG Reporting:

  • Planning and Preparation: Companies conduct materiality assessments to identify which ESG issues are most relevant to their business and stakeholders. This step also involves selecting the appropriate reporting framework and assembling an ESG team (1,5).

  • Data Collection and Analysis: ESG data is gathered from across the organization, covering environmental metrics (like CO2 emissions and energy use), social data (such as workforce diversity and labor practices), and governance information (like board structure and compliance policies)(1,5,6).

  • Report Compilation and Drafting: Data is aligned with framework requirements and compiled into a clear, transparent report. Auditing and validation ensure accuracy and compliance (1,2).

  • Stakeholder Engagement: After publishing the report, companies engage with stakeholders for feedback and continuous improvement (1,4).

Major ESG Reporting Frameworks:

  • Global Reporting Initiative (GRI): Provides Universal Standards (applicable to all businesses), Sector Standards (for high-impact industries), and Topic Standards (covering specific issues like waste, energy, and diversity) (4,5).

  • Sustainability Accounting Standards Board (SASB): Offers sector-specific standards for 77 industries, enabling companies to report on material sustainability issues unique to their sector4.

  • Other Frameworks: Include the Task Force on Climate-related Financial Disclosures (TCFD), International Sustainability Standards Board (ISSB), and region-specific regulations such as those from the SEC, EFRAG, and FCA (2,4,5).


ESG Metrics and Compliance

Common ESG Metrics:

  • Environmental: CO2 emissions, energy consumption, waste management, water usage

  • Social: Workforce diversity, labor conditions, human rights, community engagement

  • Governance: Board composition, ethics policies, compliance, executive compensation3568

These metrics are quantifiable and allow companies to set measurable goals for improvement and regulatory compliance.


Regulatory Standards:

  • ISO 14001: Focuses on environmental management systems.

  • ISO 26000: Provides guidance on social responsibility.

  • Double Materiality: Some regulations now require companies to assess both how ESG factors impact the business and how the business impacts society and the environment (5).


Importance and Impact of ESG Reporting

  • Transparency and Accountability: ESG reporting builds trust with investors, regulators, and the public by providing clear, verifiable data on sustainability performance (2,3,6).

  • Regulatory Compliance: Adhering to recognized frameworks and standards helps companies comply with evolving global and regional regulations (2,4).

  • Business Value: Effective ESG reporting can attract investment, manage risks, enhance reputation, and drive long-term value creation (2,3,6).


Best Practices for ESG Reporting

  • Integrate ESG data collection across all departments for accuracy.

  • Use technology and ESG software to centralize and automate data management(5,6).

  • Regularly update policies and conduct audits to keep pace with regulatory changes(4).

  • Engage stakeholders continuously to keep reporting relevant and credible(1,4).


Conclusion

ESG reporting is a comprehensive, evolving group of disciplines that enables companies to systematically measure, disclose, and improve their environmental, social, and governance performance. By aligning with established standards like GRI and SASB, and following robust data collection and stakeholder engagement practices, organizations can not only comply with regulations but also drive meaningful, measurable progress toward sustainability (1,3,4).



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