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Environmental Frameworks Overview and Analysis

Financial reporting does not provide enough information to fully represent a corporation’s risks and impacts on society and the environment. There is growing pressure from investors and the public for businesses to report and consider social, environmental, and economic impacts in their activities to better account for risks (Cleveland, Lynn, and Pike. 2015). An infrastructure is needed that provides businesses with the tools necessary for developing effective integrated reporting to adapt to these shifting demands.

Several standards have been created to provide guidance to organizations regarding environmental, social, and governance (ESG) in business activities. The overarching theme that all major frameworks provide is a focus on materiality ensuring that information businesses are reporting is concise and useful. The complexity of materiality creates a situation where different frameworks focus on differing content that is important to their principles. These diverse standards show variation in the structure, intended audience, quality, and content of the reports produced. Organizations select frameworks that best align with their business needs. While the different frameworks provide strong elements that can be specific to a variety of organizations, each has strengths and weaknesses within their standards. An analysis of major integrated reporting standards provides insight into opportunities for better reporting.

Framework Requirements Summaries

SEC and Other Mandatory Reporting Requirements

The US Securities and Exchange Commission (SEC) is an independent agency of the federal government designated to help regulate the stock market and protect investors. The SEC requires public companies to submit annual reports that include items regarding the description of the business, risk factors, and legal proceedings that may impact a company’s future financial performance (Condon. 2015). The purpose of these reports is to provide information that investors can evaluate and determine whether to invest in an organization. This process-based framework has three different sections that require companies to describe their business, identify any risk factors, and disclose any legal proceedings.

The SEC’s S-K Item 101 requires a listing of any climate investments that an organization makes in its business description. Reporting section S-K Item 503(c) forces companies to provide disclosures around any risks that are deemed to be material to the company. Environmental issues are not explicitly categorized but are often found within this risk section due to the potential of future regulations increasing costs. Mandatory reporting seeks to guarantee that anything that can directly impact a company’s economic capital is disclosed. Item 103 requires organizations to report any material pending legal proceedings while item 303 focuses on management discussion elements and requires companies to disclose items that the administration views as likely having a material impact to operations (Condon. 2015). These mandatory requirements have room for improvement regarding environmental aspects and represent the bare minimum in environmental reporting.

Global Reporting Initiative Standards

The Global Reporting Initiative (GRI) is an independent international organization that provides a voluntary standard for organizations to improve communication about their impacts. These standards are some of the most well defined and comprehensive environmental standards currently available. The GRI standards incorporate both principle and process-based elements that provide strong vision and framing along with detailed guidelines for specific industries.

The GRI is developed in a hierarchical way with 100 tier standards focusing on foundations, general disclosures, and management approach. These guidelines provide a common definition, language, and vision for any organization wanting to improve their environmental reporting. Further topic-specific standards are then developed in additional series with 200s on economic topics, 300s on environmental topics, and 400s on social topics. They provide clearly defined requirements for compliance as well as optional guidance that can be adopted for effective reporting. Topic-specific series provide clear definitions of performance measures and guarantee that metrics are calculated using the same methodology and are comparable between organizations (GRI. 2016, 3-4). This standardization of performance measures is one of the critical aspects of why GRI standards are effective for developing reporting and useful for investors and stakeholders attempting to better understand and compare different organizations and their impacts.

International Integrated Reporting Council Standards

The International Integrated Reporting <IR> framework was created by the International Integrated Reporting Council (IIRC). The IIRC is a global non-profit coalition whose purpose is to promote prosperity for all and protect the planet (IIRC. 2013). The <IR> standards are a principles-based framework in an attempt to balance variations across industries to allow sufficient comparability (IIRC. 2013, 7).

The IIRC views integrated reporting materiality as information that should be disclosed due to its ability to affect an organization’s capacity to create value over the short, medium, and long term (IIRC. 2013, 18). This standard does not use prescribed key performance indicators (KPI) but focuses the responsibility of defining and disclosing on those preparing the report (IIRC. 2013, 7). The use of company chosen KPI is encouraged to explain value creation amongst various capitals (IIRC. 2013, 8). <IR> framework creates a broad definition of capital by breaking it down into several subcategories: financial, manufactured, intellectual, human, social & relationship, and natural (IIRC. 2013, 11-12). These subcategories are not required but are to ensure that all forms of capital are considered.

The <IR> framework is made up of eight elements: A: Defines the business and its effects that its operation has on those around it; B: Explains how the organization’s structure supports value creation; C: Explains the business model; D: Expects to disclose the risks associated with the business and the company’s strategy for minimizing these risks; E: Seeks to understand the goals of preparing company and KPI that may be used to measure success; F: Stipulates KPI will be historically benchmarked to gauge success in the performance element; G: Highlights anticipated changes and their effects of the business model; and H: Identifies how the company determined material matters and they were evaluated (IIRC. 2013, 24-29).

Sustainability Accounting Standards Board Standards

The Sustainability Accounting Standards Board (SASB) is an independent 501(c)(3), non-profit organization from California. The SASB conceptual framework directives are to develop and disperse industry specific sustainability accounting standards for disclosing relevant material issues to investors (SASB. 2017, 1). These goals are accomplished by stringent, evidence-based research and continual rapport between stakeholder and corporation. Standards vetting is done by a handpicked committee composed of one-third corporate professionals within their industry, one-third investors, and one-third stakeholders outside of upper management (SASB. 2017, 15).

Requirements of the SASB conceptual framework under accounting criteria should provide: 1. Fair representation of performance relating to the disclosure topic, as well as proxies of performance aspects; 2. Metrics useful to operational management in financial analysis; 3. Metrics applicable to comparable industries within their contexts; 4. Metrics producing mainly quantitative data be comparable in order to facilitate benchmarking efforts; 5. Data is complete in order for comprehension of a performance aspect or goal; 6. Data should be verifiable with the capability to support control measures; 7. Metrics must align with current and continually used methods and practices; 8. Metrics must be unbiased and objective in order to disclose useful environmental information; and 9. Metrics should have the propensity to yield a discernable array of usable data (SASB. 2017, 19).

Climate Disclosure Standards Board Standards

The Climate Disclosure Standards Board (CDSB), a special project of Carbon Disclosure Project Worldwide (CDP), is an international conglomerate of business and environmental NGO’s founded in 2007 at the annual World Economic Forum (WEF) meeting (CDSB. 2015, 3). In 2010, CDSB released the first iteration of its frameworks: The Climate Change Reporting Framework. This subset of reporting requirements enumerated the risks and prospective/potential opportunities that global climate change may present to a business or corporate entity’s financial performance (CDSB. 2015, 3). This framework later expanded disclosure requirements beyond greenhouse gases (GHG) in 2013 to include natural capital and environmental information, as further developments in reporting shifted scrutiny to jurisdictional mandates in an effort to procure a more holistic view of a business (CDSB. 2015 5).

There are twelve total requirements enumerated within the CDSB framework: 1. A review of how the company deals with environmental policies and strategy; 2. Upper management’s policies with targets and planned timelines for design goals; 3. Inopportune/opportune risks associated with material issues; 4. Requires the environmental impacts both qualitative and quantitative with the proper methodologies to determine them; 5. The performance and comparative element relating to impacts determined in Requirement 4; 6. Requires the overall outlook from upper management on environmental risks and what they pose for the future of the company, as well as their positioning; 7. Assures that organizational boundaries are defined, and that the method in which environmental information is prepared stays similar among stakeholders; 8. Requires companies to cite the reporting provisions used in annual periods; 9. Mandates that reports should be published annually; 10. Determines that annual restatements are present and properly analyzed; 11. Requires that disclosures be sent with a statement of conformance to CDSB guidelines; and 12. Any third-party assurance companies have determined conformance to CDSB guidelines it should be cross referenced or listed (CDSB. 2015, 18).

United Nations Global Compact Standards

The United Nations Global Compact (UNGC) is considered the world’s largest corporate sustainability initiative. Their mission is to mobilize a global movement of sustainable companies and stakeholders who align their strategies and operations with universal principles (UNGC. 2014). Through a principled-based framework, valuable resources, best practices, broad societal goals, and networking forums the UNGC helps companies meet their commitments to the environment and society.

The UNGC recognizes corporate sustainability as an essential criterion for long-term success. It outlines five elements for businesses to strive for. The first is operating in a way that aligns with the ten universal principles on human rights, labor, environment, and anti-corruption. The incorporation of these ten principles is the starting point of a company’s journey to corporate sustainability as it provides common ground for partners, a moral code for employees, and accountability measures for critics (UNGC. 2014, 8).

The second element recognizes the importance of supporting society in ways that include collaborating with stakeholders and taking action to address major societal challenges. The United Nations launched the Sustainable Development Goals (SDGs) to aid in these challenges which define global sustainable development priorities (UNGC. 2015, 4). To more effectively utilize these goals and establish long-term change, high-level leadership commitments are needed.

The third element discusses the requirements of chief executives and Board of Directors to take instigative action in areas of policies, practices, training, supply chain, and disclosure efforts.

The fourth element concerns reporting progress to company stakeholders. The UNGC Communication on Progress (COP) is an annual public disclosure to stakeholders on progress made toward implementing the ten principles that assists in enhancing transparency and accountability (UNGC. 2015).

To further encourage dialogue, the fifth element supports taking global action through networking. The UNGC established the Global Compact Local Networks that gathers small and large companies around the world with key stakeholders to identify and discuss sustainability challenges and opportunities (UNGC. 2014, 43). Overall, the UNGC’s guidance on corporate sustainability will aid all types of companies desiring to operate responsibly and support society.

Sustainable Stock Exchanges Initiative Standards

The Sustainable Stock Exchanges (SSE) Initiative recognizes itself as a peer-to-peer learning or partnership platform for exchanges, investors, regulators, and companies to collaborate and enhance corporate transparency and performance on ESG issues. Through guidance from the United Nations SDGs, the SSE Initiative’s purpose is to create more sustainable capital markets. As part of this platform the SSE created a principle-based model framework for reporting on ESG information that can be used by stock exchanges.

The principles begin with identifying the roles, responsibilities, and capabilities that are applicable in preparing an ESG report. It underlines the essential roles senior management and Board leadership must play in providing strategic oversight and how their commitments provide credibility to a company’s claims (SSE. 2015, 13). The second principle mandates the need for clarification on how the company’s strategic goals, business model, risks, opportunities, operational indicators, and financial performance are connected. The importance of identifying and understanding investors’ interests and needs are also insisted upon. The next principle discusses the need to determine the scope and content of a company’s reporting from a range of potential ESG factors. Furthermore, this principle points out the importance of identifying themes of the content and disclosing performance indicators to demonstrate progress. The fourth principle provides guidance on how ESG reports should be disclosed whether it should be stand alone, included within financial reports, or incorporated into an integrated report that recognizes the creation of value over time. The fifth principle identifies ways to create credibility and responsiveness through ESG channels, stakeholder engagement, and assurance options. These guiding principles will help the SSE Initiative attain its objective of enhancing performance on ESG issues.

Synthesis and Evaluation

Qualitative Element

The main focus for integrated reporting is to communicate with investors and stakeholders to gain a holistic understanding of business operations. The reviewed standards should clearly define all stakeholders that can be affected by material information. The exception is the SEC which offers a minimal mandatory reporting framework.

Sustainability context creates greater variance across the standards reviewed. SEC does not use an ESG model, even though additional information is often given by companies. GRI, IIRC, SASB, CDSB, UNGC and SSE all center around the ESG model and create transparency from a sustainability context. While the balance of all three pillars are adjusted in each framework, each one recognizes the necessary inclusion of them all.

Materiality covers the impact of all significant ESG topics. Since the SEC framework does not use the ESG model, it lacks material coverage. All formats allow for the reporting company to have the final determination in relevant versus material information. The US Supreme Court stated that materiality should be determined case-by-case rather than an all-encompassing definition. All frameworks take the broad approach to defining material information as pertinent in stakeholder decision making.

A framework’s completeness requires the previous three areas to be covered. While reports in every framework may include these items, they may not be expressly stated in some frameworks. SEC guidelines would fall short in completeness due to its format while all others contain necessary elements.

Quantitative Element

In addition to qualitative elements, each framework can be ranked based on content and principles. Frameworks that focus solely on the financial impacts have some of the lowest total scores. The GRI standards offer flexibility and depth for organizations and represent the most comprehensive standards. The other frameworks have their own strengths, but a holistic view is compromised by the narrow focus.

Synthesis and Recommendation Element

Similarities and Differences

An overhead view of modern frameworks affords a cross-sectional study of key elements and foci integral to performance regarding sustainable reporting. Similarities drawn from the origin of the framework do not supplant one another but instead bolster the effectiveness and impact on the stakeholder by providing crucial disclosure information. The SEC’s tiered system of regulation progresses in complexity or specificity of disclosure. GRI and the SASB are similar as they are determined by topic and metric relevancy as material issues are distilled from this categorization. These three frameworks were all borne from accounting and assurance institutions, and therefore their primary directive is value creation over the medium and long term. The SASB approach and SEC regulation S-K would work well together because SASB methodology has existing provisions for market and evidence-based approaches whereas Regulation S-K does not (SASB. 2017, 1).

The CDSB approach has similar provisions to IIRC in terms of stakeholder inclusion with regard to social and natural capital but are lacking in terms of explicit guidance in life cycle management and business modelling. The two complement each other with the overall focus of intertwining mainstream financial reporting with environmental information pertinent to maintaining legitimacy in operations. It is this environmental context that investors and stakeholders’ base determinations of material issues that ultimately affect the corporation’s performance.

UNGC and SSE are perfect complements, as the UN has developed a very thorough code of ethics but with few provisions for economic capital disclosures. SSE is the opposite, with little guidance on governance or ethics, but contains much more stringent consideration to economic capital and its underpinnings. It is through these nuanced differences that determine the “line of best fit” for the particular industry or respective global environmental context a business plays a role in.

Framework Applicability

SSE Initiative model guidance and the SEC mandatory requirements only apply to publicly traded companies, so these frameworks are meant for medium to large public organizations. Technology companies make up some of the largest publicly traded companies, but environmentally impacting industries, like the agricultural, automotive, chemical, and energy companies, are best suited to these requirements. Investors of industries creating revenue directly from the utilization of natural resources benefit greatly when those companies report on the impacts their business activities have on the environment.

GRI standards are voluntary so the effective nature of those standards will be more appropriate for a variety of organizations. The requirements are detailed so medium and larger organizations would benefit the most from resources invested in this reporting standard. These specificities best fit public agencies and conglomerates, as well as waste, water, and electric utilities by defining and standardizing the impacts of their business activities across all ESG areas with the utilization of GRI standards.

The <IR> framework is a principles-based reporting system to be inclusive of all industries. IIRC desires integrated reporting to be the norm so has designed the framework for all companies who wish to begin this type of reporting. The definitions of capitals show value creation over a broad spectrum, allowing the use in any business. The framework was designed for private companies but can be adapted for the public sector or non-profit companies.

The SASB works well in conjunction with SEC regulation items S-K and 10-K and is suited to larger, more established companies. Non-carbon intensive industries will find that many of the provisions could be too specific for use, but SASB is also voluntary. Being similar to CDSB’s framework, it has a stronger determination of materiality in carbon heavy industry, using three forms of approaches. Industries such as agriculture or mining operations would be best suited for use of SASB standards.

The CDSB approach is tailored for the small to medium sized company with considerations of long-term value creation under the premise of proper natural capital guidelines. Mainstream reports commonly focus on financial matters with a certain sense of rigor and use that same approach to environmental information, standards, and methodologies. This specific framework would be integral in industries with heavier carbon footprints, as the intertwining of financial reporting paints a different picture of the corporation.

As the world’s largest global corporate sustainability initiative, the UNGC principle-based framework is not only applicable for companies of all sizes, it is also applicable for non-business participants both foreign and domestic. The top industry sectors supported by the UNGC frameworks include leisure, media, financial services, computers, and construction, but the industry that gets the most use lies within support services.

Framework Effectiveness

While each framework has different strengths and weaknesses, the GRI standards provide the most comprehensive and useful sets of standards. They cover all of the content and principles required for a strong reporting framework and provide detailed guidelines to improve any size organization across the globe. While improvements could be made to further embed ethics and integrity into performance measures, the GRI standards represent the current best framework for developing useful and effective environmental reports.


All of the frameworks reviewed differ, but their overall objective is to enhance or complement traditional financial reports in ways that identify an organization’s environmental, economic, and societal impacts. As the demand for more transparent reporting styles increases, organizations are looking for methods to better measure ESG issues and meet the evolving expectations of their investors and stakeholders. Although continued improvements will be necessary for each framework to address all of the elements and meet all of the criteria for a complete report, they have established an evolution of environmental reporting that will ultimately aid in the creation of more transparent organizations and more aware stakeholders.

Authors: Logan Callen, Taylor Day, Chris Feng, and William Foy


Cleveland, Nancy, David Lynn and Stephen Pike. 2015. “Sustainability Reporting: The Lawyer’s Response.” Business Law Today (January).

Climate Disclosure Standards Board. 2019. CDSB Framework for Reporting Environmental & Climate Change Information: Advancing and Aligning Disclosure of Environmental Information in Mainstream Reports.

Condon, Clare. 2015. “Your SEC Requirements and Environmental Risk.” EHS Daily Advisor (December 9).

Eccles, Robert, and Michael P. Krzus. 2015. The Integrated Reporting Movement: Meaning Momentum, Motives, and Materiality. New York: Wiley.

Global Reporting Initiative. 2016. GRI 101: Foundation.

International Integrated Reporting Council. 2013. The International Framework.

Sustainability Accounting Standards Board. 2017. SASB Conceptual Framework. Retrieved from

Sustainable Stock Exchanges Initiative. 2015. Model Guidance on Reporting ESG Information to Investors: A Voluntary Tool for Stock Exchanges to Guide Issuers.

United Nations Global Compact. 2014. Guide to Corporate Sustainability: Shaping a Sustainable Future.

United Nations Global Compact. 2015. Communication on Progress: 2015 Key Facts. New York: United Nations.

United Nations Global Compact. 2015. SDG Compass: The Guide for Business Action on the SDGs.

US Securities and Exchange Commission. 2016. Business and Financial Disclosure Required by Regulation S-K.

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