Efforts to Align Reporting Frameworks for Environmental, Social and Governance (ESG) Areas Started

Business world attaches more and more importance to the management of environmental, social and governance (ESG) areas each year. From investor relations specialists to senior executives, a great number of business people follow the developments in this area closely. Accordingly, interest in green bonds, loans, Sustainable Development Goals (SDG) bonds, and various sustainability-related debt options has been increasing. Banks and other lending institutions develop products that link interest rates to sustainability performances of borrowing institutions and supply high performing institutions with lower interest rates.

While the deadline for the Sustainable Development Goals is only 11 years away and it is clear that we have a long way ahead of us to achieve the goals, it is important to accelerate efforts and actions in this direction. The fact that international organizations and non-governmental organizations call on companies to make meaningful and traceable commitments shows that there is an increasing demand in terms of investors and of the society to provide data and conduct scenario analysis.

Investors who aim to make their investments based on the performances of companies in terms of ESG areas are waiting for the companies to announce their datas on the subject. However, the increasing diversity of ESG reporting methods and the question of where and how the data provided is used can pose a problem for companies trying to meet this demand. Also, the reports prepared with reporting methods using different criteria make it difficult for investors to make a comparison between the performances and objectives of the companies. Varying methods used by the rankers of ESG performance to quantify the impact of companies and the differences between rankers’ methodologies may hinder investors' understanding of these methodologies. To solve this problem, the launch of Better Alignment Project was announced by Corporate Reporting Dialogue. Better Alignment Project aims to develop a global, effective and consistent reporting tool to meet the information needs of companies, capital markets, and society.

 The Better Alignment Project aims to align the reporting frameworks on the ESG areas provided by the The Carbon Disclosure Project (CDP), Climate Disclosure Standards Board, Global Reporting Initiative (GRI), and on the integrated reporting frameworks for financial and non-financial assets provided by the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) by mapping them. The project, which was initiated to help companies make effective and consistent reporting, is planned to last for two years. Better Alignment Project is first expected to develop methods for other objectives by taking the Taskforce on Climate-Related Financial Disclosure (TCFD), which is used in the measurement of financial risks associated with climate change, as a model. The first outputs of the process are expected to be announced by the third quarter of 2019. Within the scope of the study, global stakeholder consultations and regional stakeholder roundtables were organized in order to make sure all relevant stakeholders contribute to the process.

 

Global frameworks such as the Sustainable Development Goals and the Climate-Related Financial Disclosure Taskforce are promising in terms of eliminating the confusion on the issue and to reach an agreement. Seeing the importance of aligning global sustainability reporting standards and to seize on the opportunities arising from the issue will help the business world make better contributions for a sustainable future. The new tools to be developed are expected to help companies discover where risks and opportunities lie in across their operations and value chains.

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