How do the major corporate sustainability reporting initiatives measure up?


A detailed look at the pluses and minuses of the three major bodies pushing forward corporate reporting (GRI, SASB and IIRC).

A detailed look at the pluses and minuses of the three major bodies pushing forward corporate reporting.A recent survey highlighted that CEOs see many barriers to implementing a strategic and company-wide approach to ESG issues, but one of the major hurdles is feeling underwhelmed by investors. As one CEO noted: “Investors sit and listen politely when we bring these issues up, but they really don’t ask about it; we’re not doing this to please shareholders.” Pressure from investors as a factor driving CEOs to act on ESG has remained constant since 2010 at 12%, outstripped by regulation (24%), employee engagement (31%), revenue growth / cost reduction (44%), their own motivation (42%) and customer demand (39%). While global funds managed by RI/SRI/SI groups has increased, CEOs don’t feel any more pressure from investors in relation to ESG issues than they did three years ago. That’s especially confusing when other research shows that only 22% of investors think disclosure on ESG issues is adequate, and only 7% agree that it was sufficient for them to assess materiality. Investors, it seems, are demanding record levels of disclosure of ESG performance and integration. We have a misunderstanding here!
One element of this is a lack of consensus about important ESG issues, which is adding to the confusing – and growing – list of ESG metrics: over 2,000 and rising.

Sustainability Reporting Initiatives

Three European and US groups have laid down some ambitious plans to try to help investors and companies more effectively engage on ESG issues. The International Integrated Reporting Council (IIRC), Sustainability Accounting Standards Board (SASB) and Global Reporting Initiative (GRI) are promoting their sustainability reporting initiatives. They will each have a measure of success, and investors need to be aware of the focus of each group and their relative strengths and weaknesses.


In finance and legal circles (and for mainstream investors), materiality relates to the threshold for disclosure of important, financially significant issues. Failure to disclose certain ‘material’ issues in that sense can lead to the usual litany of consequences including personal liability for directors. For corporate CSR/sustainability teams, ‘materiality’ highlights where ESG issues can have financial consequences with quantifiable value. In that context, proponents have marshalled arguments in favour of disclosing ESG issues in public reports, regardless of whether they meet the traditional materiality thresholds. Materiality (in this new sense of the word) is used to get things on corporate agendas, while the traditional sense is used to take them off, at least in public discourse. Each of the following initiatives uses ‘materiality’ as a term to identify the most relevant ESG issues, but all have distinctly different understandings of the term.

Materiality, Transparency and Comparability

Materiality (in either or both senses) is only one part of the puzzle for investors though. Some investors want transparency on a wide-ranging set of metrics and others want comparability. The usefulness of all three factors will be driven by respective investment strategies. Transparency is probably most useful for negative screening investors. Positive screeners want comparability on a number of relevant metrics, although what they want varies widely. Investors using their own ‘secret recipe’ to determine performance from ESG metrics will want comparability, but on particular metrics. The lack of consistency from sustainability experts is matched by the variety of needs of ‘responsible’ investors. While the jury is still out on the effect of ESG materiality (new sense), investors focused on that factor will be helped somewhat by this trio of initiatives and may still be helped if their focus is on other factors.

International Integrated Reporting Council

IIRC logo


The International Integrated Reporting Framework was released on 9 December 2013. It focuses on integrating the most relevant ESG issues into annual corporate reports and avoids being wide-ranging and global. It strongly suggests that companies should use their version of the ‘capitals’ framework (financial, manufactured, human, social/relationship, intellectual and natural), although it’s not required.

+ Focussed on value creation within companies, from financial capital provider’s perspective
+ Responsive to negative and positive externalities
+ Flexibility to accommodate other frameworks (including GRI and SASB)
+ Potential for integration of ESG issues into business-as-usual reporting
− No guidance on metrics or KPIs
− Little standardisation
− Freedom may lead to poor ESG disclosure
− Lacks alignment with traditional materiality


SASB is working closely with the SEC and accredited by the US National Standards Institute to identify sector-specific ESG issues, with an expectation that US-listed companies will use their outputs for completing reporting forms like 10-K. It will produce guidance for 10 identified sectors covering 88 industries and all US listed companies. Its guide for the health care sector (6 industries) was released on July 31, 2013 and contained 5-11 issues for each industry. The remaining sectors will be progressively rolled out through 2013-2015.


+ Uses traditional definition of materiality
+ Certainty in relation to disclosure
+ High levels of comparability is targeted
+ Integrated into current reporting mechanisms
+ Easy integration with other frameworks (including IIRC and GRI)


− Very small number of issues identified per sector
− Little guidance on processes, standards or KPIs
− Might not identify all material issues for all companies (especially niche players)
− KPIs not mandated, decreasing comparability


GRI’s G4 version of materiality focuses on impacts of company operations and takes a value creation approach to determining the reach of ESG issues to be reported. That’s significantly broader than the previous test of control of influence and means that GRI reporting will have deep supply chain metrics. As something of a trade-off, companies have much greater flexibility in determining which issues are relevant.


+ Reliance on relevance of issues should mean better reporting on less issues
+ Focus on future targets and expected performance
+ Good flexibility to incorporate SASB and IIRC approaches
+ Widely used among large listed companies and good reputation
+ Requires process and compulsory metrics reporting


− More stringent tests for compliance than IIRC
− G4 reporting might result in less transparency and comparability overall
− Doesn’t identify relevant issues for some companies
− Extensive supply chain disclosure is likely to increase related costs

Each of the approaches will add something to various types of investors, and dialogue might increase, but companies and investors need to be involved if CEOs and responsible investors are to have a meeting of minds on the state of ESG reporting.
It’s not entirely clear that activity from all the above groups will fix the disconnect, but if the experience of compulsory reporting on JSE is anything to go by , a focus on materiality is likely to result in increased disclosure of future targets and estimations of future performance, a perspective that has been missing from ESG reporting for far too long.

This article was first published in Responsible Investor Magazine on 3 January 2014.

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  1. Since this article was first published, the IIRC and SASB mave signed a Memorandum of Understanding. Although the details are still a little light, it seems they are deliberately collaborating to streamline integrated reporting.

    The two frameworks take very different approaches to identifying relevant issues, so I’m not sure how they will resolve their differences.

  2. […] In an article which outlines the strengths and weaknesses of the IIRC, SASB and GRI frameworks, Bara… that, “each of the approaches will add something to various types of investors, and dialogue might increase, but companies and investors need to be involved if CEOs and responsible investors are to have a meeting of minds on the state of ESG reporting.” […]

  3. Andrew Kluth has been in touch, saying:

    “The thing I wanted to say is that I’m not sure that the ‘new’ definition of materiality that you state “For corporate CSR/sustainability teams, ‘materiality’ highlights where ESG issues can have financial consequences with quantifiable value” is correct. That would suggest that any ESG issue that can be quantified in financial terms is material and any that cannot, aren’t. But the IIRC states (para 3.23 in the consultation draft) that an issue is material if, in the opinion of its leadership, “it could substantively influence the assessments of the primary intended report users with regard to the organization’s ability to create value over the short, medium and long term”. It then states in the following paragraph that, again in the opinion of the leadership, a matter is material if the “matter substantively affects, or has the potential to substantively affect, the organization’s strategy, its business model, or one or more of the capitals it uses or affects in the short, medium or long term.”

    This is not the same as the interpretation you offer. I haven’t dug out the interpretations for the other two but, if memory serves me right, I am pretty sure they will also be different.

    Apart from that, a good and interesting article.”

    I broadly agree with Andrew’s sharp analysis. The fight for supremacy in the world of sustainability materiality is heating up, and the definition I offered was pragmatic and far from the specific definitions provided by each of SASB, GRI and IIRC. The next article goes some way to providing clarity on the more subtle differences.

  4. […] How do the major corporate sustainability reporting initiatives measure up? […]

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