Top ESG Reporting Frameworks & Raters in USA

As a senior business executive, you are no doubt well aware of the importance of ESG (Environmental, Social, and Governance) reporting in today’s global economy. ESG reporting, also known as corporate sustainability reporting, enables businesses to monitor their performance on key sustainability metrics such as carbon footprint management, diversity and inclusion initiatives, energy efficiency efforts, and more.

The adoption of ESG frameworks has been driven largely by the capital markets and financial sector requiring proven sustainable business practices. As a result, many companies are now looking for the best ESG reporting frameworks that can help them better understand their impact on the environment and society.

Source: Global Reporting Initiative

The Differences between ESG Standards, Frameworks, and Raters and Rankers

It is important to note that while ESG frameworks provide companies with the structure necessary to measure their progress and performance on sustainability initiatives, standards, raters, and rankers also play important but different roles during the process.

ESG Standards

ESG reporting standards create a clear-cut barometer for what is deemed acceptable performance in certain areas (such as greenhouse gas emissions, diversity, and inclusion) from all businesses.

Popular ESG standards (also known as sustainability standards) include the International Sustainability Standards Board (ISSB), GRI Standards, and the International Financial Reporting Standards (IFRS).

NB. The Climate Disclosure Standards Board (CDSB) recently merged with the International Financial Reporting Standards (IFRS) Foundation to support the activities of the recently formed International Sustainability Standards Board (ISSB). As part of their supervisory responsibilities, the IFRS Foundation Trustees also monitor and oversee the International Accounting Standards Board (IASB).

ESG Frameworks

ESG Frameworks provide a more detailed roadmap for companies to follow to measure their progress and performance on ESG initiatives.

ESG Raters and rankers

Raters and rankers are independent organizations or entities that assess how well companies are doing against these standards or frameworks by ranking them according to specific criteria.

Top ESG Frameworks for companies in the United States

If you’re based in the United States, then you have a wide range of options when it comes to choosing an ESG framework. From tried-and-true industry standards to newer, more innovative approaches, there are many ESG reporting frameworks available. In this resource, we take a look at the top ESG frameworks for companies based in the USA. We’ll explore what each of the reporting frameworks has to offer and provide an overview of its key features so that you can make an informed decision about which ESG framework is right for your business.

Each ESG framework has its own unique strengths and weaknesses, so it’s important to carefully consider your company’s specific needs before making a final decision. By researching the options available and understanding the nuances of each ESG framework, you can ensure that you choose the ESG framework that best fits the goals and objectives of your company.

SEC Climate Disclosure Rule

The Securities and Exchange Commission (SEC) has proposed a Climate Disclosure Rule that, if enacted, would require companies to report information about their climate-related activities and risks. The SEC is mandating public companies to provide comprehensive climate-related financial data and valuable greenhouse gas emissions insights as part of their disclosure filings beginning in March 2022. Dubbed the "issuer rule," this requirement will require corporations to report not only the emissions for which they are directly responsible but also those from their supply chains and products. By doing so, investors can make informed decisions about businesses that have a meaningful impact on our environment.

In May, the Securities and Exchange Commission (SEC) put forth a new "investor rule" requiring ESG-minded firms to reveal more detailed information on their Environmental, Social & Governance strategies in documents such as annual reports and fund prospectuses.

At present, the SEC does not demand a comprehensive and in-depth breakdown of ESG matters. However, that might be about to change soon as their suggested regulations for ESG reporting will transcend beyond what is now expected from companies. This proposed rule stands out notably in requiring climate-related disclosure beyond the traditional materiality standard. Specifically, companies would need to indicate any risks related to climate which is equal to or higher than 1% of a certain line item for their financial statements every year.

If this proposed rule comes into effect, the SEC will likely provide guidance on which reporting frameworks and reporting standards companies should follow in order to comply with the new requirements. Thus, companies need to stay up-to-date on the changes and understand which ESG reporting frameworks are available so they can make sure their disclosures are up-to-date and compliant with the new regulations.

Top ESG reporting frameworks for US-based companies

1. Sustainability Accounting Standards Board (SASB)

2. Global Reporting Initiative (GRI)

3. Carbon Disclosure Project (CDP)

4. Task Force on Climate-related Financial Disclosures (TCFD)

5. Integrated Reporting Framework (IR)

Top ESG raters and rankers for US-based companies

1. Morningstar Sustainalytics

2. ISS ESG

3. MSCI ESG Fundamentals

4. Dow Jones Sustainability Index (DJSI)

Sustainability Accounting Standards Board (SASB)

The SASB Standards Board (SASB) is an independent nonprofit that develops industry-specific accounting standards for public companies. The board was founded in 2011 with the mission of helping businesses identify and report financially material sustainability information to investors to improve long-term performance. SASB provides a comprehensive framework of ESG disclosure requirements based on industry-specific standards, which helps companies to better measure and report their environmental, social, and governance (ESG) performance.

SASB has partnered with several organizations in the business sector, including KPMG, EY, Nasdaq, Dow Jones Sustainability Index (DJSI), Bloomberg ESG Data Solutions, and PwC. Each of these organizations has contributed to the development and implementation of SASB standards, which are now being adopted by hundreds of companies across various sectors.

SASB’s framework is particularly popular among large-cap companies in heavily regulated industries such as banking, insurance, energy, utilities, and healthcare. Despite its popularity with large publicly traded companies, SASB has also experienced increasing acceptance by mid-and small-cap companies in more niche industries.

The main advantage of using the SASB framework is its industry-specific standards, which allow companies to report specific information that’s relevant to their particular sector. Additionally, the board has developed a set of ESG disclosure principles that help companies identify and report material sustainability information, such as emissions and wastewater management. Companies that adopt SASB’s disclosure standards benefit from greater transparency in their ESG performance, as well as improved investor confidence.

However, there are some drawbacks associated with the SASB framework. For example, reporting using the framework is often costly and time-consuming, and companies may need to invest resources in order to become compliant with the standards. Additionally, some investors have noted that SASB’s disclosure requirements are often too broad for individual company reporting.

Overall, the Sustainability Accounting Standards Board has become one of the most popular ESG frameworks for companies based in the USA. With its industry-specific standards, companies can accurately report information with financial materiality and increase investor confidence in their ESG performance. Despite some drawbacks, the framework offers a comprehensive approach to measuring and reporting corporate sustainability.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is an international organization that develops sustainability reporting standards for organizations worldwide. Founded in 1997, GRI is the world’s most widely adopted sustainability reporting framework, with over 10,000 reporters from over 90 countries utilizing its guidelines. GRI has partnered with a number of organizations, including the United Nations Global Compact and World Resources Institute, to develop its reporting standards.

GRI’s framework is popular among companies of all sizes and industries. Many multinational companies have adopted this standard for their sustainability reporting, as well as mid-sized companies from numerous sectors such as technology, retail, oil and gas, and healthcare. GRI has also become popular among smaller companies within various industries.

The main strengths of the GRI framework are its scalability and flexibility. Companies can use all or just a portion of the standards, depending on their size and industry. Additionally, the GRI Framework is highly adaptable, enabling organizations to customize their reporting according to their particular sustainability goals and objectives. However, some companies find the framework’s complexity daunting, as it requires significant resources and energy to become compliant with the standards.

Overall, the GRI Framework is one of the most common standards for ESG reporting. It provides companies of all sizes and industries with the flexibility and scalability they need to accurately report their sustainability performance. Although the framework can be complex, many companies find its comprehensive approach to reporting useful for gaining investor confidence in their ESG efforts.

Carbon Disclosure Project (CDP)

The Carbon Disclosure Project (CDP) is an independent, not-for-profit organization that operates a global disclosure system for companies to report on their environmental performance. Founded in 2000, CDP has since become the largest voluntary corporate disclosure platform in the world, with over 8,000 organizations from more than 90 countries disclosing data through its platform.

CDP’s platform allows companies to report their greenhouse gas emissions, climate change strategies and plans, as well as associated risks and opportunities. It provides organizations with the tools they need to measure, manage and reduce their environmental impacts. The CDP also helps guide companies in developing their climate-related risk management strategies and tracking their progress toward achieving their environmental goals.

The CDP platform has become increasingly popular among corporations worldwide, with major companies such as Microsoft, Unilever and Wal-Mart all reporting through the system. The platform is particularly beneficial to organizations that wish to track and measure their carbon footprint and understand what risks they face due to climate change. Additionally, investors increasingly look to the CDP platform when making investment decisions, highlighting the need for companies to accurately report and manage their environmental performance.

Overall, the Carbon Disclosure Project offers a comprehensive system for organizations to document and track their environmental performance. By providing organizations with the tools they need to measure and reduce their carbon footprint, as well as helping investors understand the risks associated with climate change, the CDP is an invaluable resource for companies looking to improve their ESG reports and gain trust from investors.

Task Force on Climate-related Financial Disclosures (TCFD)

The Task Force on Climate-related Financial Disclosures (TCFD) is a global framework designed to provide companies with guidance on how to disclose the financial risks associated with climate change. Founded in 2015, the TCFD has become an internationally recognized standard for companies of all sizes and industries. The group consists of over 400 members from businesses, investors, regulators, and standards setters.

The TCFD provides organizations with a comprehensive framework for disclosing the impacts of climate change on their financial performance. The framework is divided into four key areas: governance, strategy, risk management, and metrics & targets. Each area includes recommendations on how to accurately report the risks associated with climate change and how it could impact the organization’s financial performance.

The TCFD framework has become increasingly popular among companies looking to improve their ESG strategies, with many large corporations such as Microsoft, Goldman Sachs and Nestle all signing up to use the standard. The framework is particularly beneficial for organizations who need to report on climate-related risks but do not have the resources or expertise to develop their own reporting system.

The TCFD framework offers numerous benefits for companies looking to improve their ESG reporting, including increased investor confidence and improved decision-making around climate-related risks. However, it is important for companies to understand that the framework does not provide a one-size-fits-all solution. Organizations should carefully consider the framework and make sure it is aligned with their specific goals and objectives before implementing it.

Overall, the TCFD is a valuable tool for organizations looking to improve their environmental social, and governance performance by accurately disclosing the risks associated with climate change. By providing companies with a structured system for reporting on financial risks, the framework has helped to improve transparency and trust from investors. With more companies signing up to use the standard, the TCFD is set to become an invaluable resource for organizations looking to maximize their ESG metrics in the years ahead.

Integrated Reporting Framework (IR)

IR is an internationally recognized ESG framework designed to promote the concept of “integrated thinking”. This concept encourages companies to consider the interconnections between their financial and non-financial performance when making decisions. The IR was developed in 2013 by the International Integrated Reporting Council (IIRC) and its members consist of large international organizations, professional associations, and standards-setting bodies.

The IR framework provides a comprehensive system for reporting on the social, environmental, and financial impacts of an organization's operations. The framework encourages companies to view their business in terms of its “integrated value creation” and guides how to report this information effectively. The IR framework also encourages companies to consider the “long-term sustainability” of their business by considering factors such as future economic, environmental, and social trends.

The IR Framework is becoming increasingly popular amongst businesses of all sizes, with many large corporations such as Microsoft, Nestle, and Goldman Sachs already having adopted the standard. The IR framework is particularly beneficial for organizations that need to report on the long-term impacts of their operations, as it provides a comprehensive system for doing so.

The main advantages of IR over other ESG frameworks include its holistic approach to reporting and its ability to take into account a wide range of factors. However, some critics have raised concerns over the complexity of IR and the difficulty for small companies to implement it. Additionally, as this is a relatively new framework, there are still some issues that need to be addressed in terms of data collection and reporting standards.

Overall, the Integrated Reporting Framework is an invaluable resource for organizations looking to report on their ESG data in a comprehensive and meaningful way. By encouraging companies to consider the interconnections between their financial and non-financial aspects, the IR provides a powerful tool for organizations looking to maximize their long-term impact on society. With more businesses adopting the standard each year, it is sure to become an increasingly important resource in years to come.

Top ESG Raters and Rankers in the United States

Morningstar Sustainalytics

Sustainalytics, owned by Morningstar, is an internationally recognized ESG rating and ranker service provider. The company is a leading provider of investment research and analysis. The system assesses companies based on their sustainability performance and provides investors with data-driven insight into the ESG ratings of over 6,000 publicly listed companies. Established in 2019, Morningstar has become one of the most widely recognized ESG frameworks and is used by many large corporations, multinationals, and investors.

The Morningstar Sustainalytics system uses a data-driven approach to measure the performance of companies based on their risk exposure, financial health, and corporate behavior. It evaluates various ESG criteria such as governance structure, human rights policies, and employee engagement, Morningstar's rating system is supported by several well-known financial institutions, including BlackRock, JPMorgan, and Goldman Sachs. In addition to providing investors with insight into companies’ ESG data, Morningstar also encourages companies to improve their ratings through its sustainability roadmap program.

A key benefit of the Morningstar Sustainalytics ESG Rating System is that it offers a very detailed and transparent assessment of companies’ performance. Additionally, since it is supported by well-known financial institutions, investors can be confident in its accuracy and reliability. On the other hand, some have argued that Morningstar does not account for certain ESG factors such as employee diversity or long-term environmental impacts.

Overall, this Rating System is an invaluable tool for companies looking to demonstrate their sustainability credentials. With its comprehensive assessment and data-driven approach, it provides investors with a reliable way to evaluate the performance of organizations based on their ESG metrics. As more stakeholders become aware of the importance of ESG, companies will continue to strive for higher ratings to improve their reputation and attract institutional investors and financial capital.

ISS ESG

Sustainability ratings and rankings provider ISS ESG is a global leader in benchmarking and risk analysis. Founded in 1992, the company focuses on empowering investors to make informed decisions by providing research and tools that uncover potential ESG risks within organizations. With over 20 years of experience, ISS ESG has established partnerships with some of the world's largest investors, including Blackrock and Vanguard. ISS ESG offers a wide range of ratings and rankings to help clients assess their ESG data and identify areas for improvement. These ratings are based on a comprehensive set of data points, covering all major sectors such as energy, banking and finance, healthcare, retailing, and consumer products.

The ratings provided by ISS ESG are designed to be easily understood by investors and other stakeholders, giving clients a powerful tool for communicating their sustainability performance. Additionally, their rankings provide invaluable information on how companies compare with others in the same industry, helping companies understand their competitive position.

Dow Jones Sustainability Index (DJSI)

The Dow Jones Sustainability Index (DJSI) is an index that tracks the performance of companies that have strong ESG practices. Companies are scored for their ESG performance, and those with the highest scores are included in the index.

The Dow Jones Sustainability Indices are an internationally recognized ESG benchmarking and rating system created in 1999 by the world’s largest financial services provider, Dow Jones & Company. The DJSI tracks the performance of companies that have strong ESG practices, scoring them for their sustainability efforts and reporting those scores to investors. The DJSI is one of the most widely used ESG frameworks, with over 3,400 companies across 61 countries using the system.

The DJSI is particularly popular amongst large corporations and multinationals, as well as those in energy-intensive industries such as mining, oil, and gas. These companies are often subject to strict regulatory requirements and the DJSI provides a comprehensive framework for them to ensure they are meeting these requirements. Additionally, many investors prefer companies with high DJSI ratings, as they believe these companies have a better long-term outlook.

The main advantage of the DJSI is that it takes an objective and scientific approach to ESG metrics. The system is also highly transparent, with companies able to view their scores and compare their performance against other organizations. However, one criticism of the DJSI is that it focuses mainly on large multinationals and may not be suitable for small or medium-sized businesses. Additionally, some have argued that the system does not take into account specific ESG factors such as human rights or labor conditions.

Overall, the Dow Jones Sustainability Index is an invaluable tool for large organizations that need to demonstrate their ESG credentials. With its objective and transparent approach to rating companies’ performance, it provides a comprehensive framework for corporations looking to maximize the long-term sustainability of their operations. As more investors begin to recognize the value of ESG, companies will increasingly strive to earn a higher DJSI rating to attract capital and improve their reputation.

MSCI ESG Fundamentals

MSCI ESG Fundamentals provides investors with data and analytics on over 68,000 companies and their ESG performance. It is based on a comprehensive set of ESG indicators, including ESG criteria.

MSCI ESG Fundamentals is an internationally recognized ESG rating and benchmarking system created by MSCI, a leading provider of financial market indices and analytics. The system provides investors with data and analytics on over 68,000 companies across the globe and their ESG reports. Its materiality assessment evaluates companies' environmental, social, and corporate governance (ESG) performance, as well as corporate practices and policies.

MSCI ESG Fundamentals was launched in 2009 with the support of several major financial institutions such as Citigroup, Merrill Lynch, and Barclays. Since then, it has become one of the most widely used ESG frameworks, with over 6,000 organizations from 40 countries using the system. It is particularly popular amongst larger corporations, energy-intensive industries such as mining, oil, and gas, as well as multinationals with large operations in multiple countries.

The main advantage of MSCI ESG Fundamentals is that it takes an objective and scientific approach to rate companies’ performance. Additionally, it provides investors with a comprehensive overview of the company's ESG reporting, allowing them to make better-informed decisions. On the other hand, some have argued that the system may not take into account specific ESG factors such as human rights or labor conditions. Additionally, since MSCI ESG Fundamentals primarily focuses on large and multinational companies, it may not be suitable for smaller enterprises.

Overall, MSCI ESG Fundamentals is an invaluable system for organizations that need to demonstrate their ESG credentials. With its comprehensive framework and data-driven approach, it provides investors with a reliable tool to assess companies’ performance. As more stakeholders become aware of the importance of ESG, companies will increasingly strive to receive a higher rating to improve their reputation and attract capital.

Conclusion

Overall, when considering your company’s ESG reporting needs, it is important to consider all of the available options and select ESG frameworks that best meet your goals. As you evaluate different sustainability frameworks and reporting standards, always keep in mind any upcoming changes or regulations that could impact your organization’s ESG report. By utilizing any of these many ESG frameworks, organizations can improve their reputation, attract capital, and position themselves for long-term corporate sustainability.

In conclusion, ESG reporting frameworks provide investors with data and analytics that allow them to make better-informed decisions. It is an invaluable system for organizations that need to demonstrate their ESG credentials and it provides a comprehensive framework for maximizing the long-term sustainability of their operations. As more stakeholders become aware of the importance of ESG, companies need to strive to receive higher ratings to demonstrate their commitment to sustainability and ethical behavior.