ESG Frameworks

SG Frameworks

TCFD

The Task Force on Climate-related Financial Disclosures (TCFD) was established by the G20 Financial Stability in 2015 to develop recommendations on the type of climate risk information that companies should disclose to their stakeholders.

Who: As of November 2022, more than 4,000 organizations from 100+ countries have pledged support for TCFD. Governments around the world are also beginning to integrate the TCFD framework into climate disclosure policy, and at least ten countries have adopted or announced TCFD-aligned reporting requirements. TCFD will be especially relevant for large public companies.

What: TCFD is a reporting framework for improving corporate transparency around climate risks in financial disclosures. It outlines reporting recommendations for climate-related financial disclosures around four thematic areas of business operations: governance, strategy, risk management, and metrics/targets. Each area has specific recommended disclosures that organizations should include in their financial filings for decision-useful information.

Why: With clear, consistent guidelines for climate-related disclosures, TCFD provides investors and other stakeholders with a better understanding of the potential financial implications of climate-related risks and opportunities. This puts them in a better position to make informed financial and underwriting decisions, allowing for more efficient allocation of capital. Benefits for companies include meeting stakeholder demand for transparency on material climate risks, better access to capital, and an improved ability to identify, monitor, and reduce climate risks.

How: The TCFD recommendations include guidance for all sectors on how to implement the recommended disclosures. Supplemental guidance is also provided for sectors most affected by climate change such as insurance companies, energy, transportation, etc. Companies can also refer to the TCFD Knowledge Hub to learn more through online training, reporting examples, case studies and more.

CDP

CDP, formerly the Carbon Disclosure Project, is an investor-led nonprofit that motivates companies and governments to disclose their environmental impacts and take action to reduce them. While using the CDP reporting framework is voluntary, companies can be asked to respond by their stakeholders.

Who: 13,000+ companies worth over 64% of global market capital disclose through the CDP, typically to respond to a request filed by investors or customers, or to voluntarily disclose (self-selected). Investors, companies, and governments use CDP insights to inform decision making, reduce risk, and identify opportunities. In 2022, over 680 investors, representing $130 trillion+ in assets, requested disclosures from nearly 10,400 companies. And in 2021, 200+ major companies, representing $5.5 trillion in procurement spend, requested information from over 23,000 suppliers.

What: CDP collects and reports information on the environmental performance of organizations through specific questionnaires on climate change, water, forests, and the supply chain. The information is collected through a global disclosure system, known as the CDP Online Response System (ORS) that organizations use to disclose the information requested by their stakeholders. Due to the volume of organizations responding, CDP has established one of the richest, most comprehensive databases on GHG emissions and corresponding climate action strategies.

Why: CDP uses the data supplied to score companies from A to D on each area upon which they were requested to disclose. Organizations that do not respond after receiving a request receive an F. Companies and cities that receive an A are published in CDP’s annual A-list report that showcases environmental leaders. Additional business benefits of using the CDP framework include building stakeholder trust through transparency, getting ahead of regulations, boosting competitive advantage, uncovering ESG risks and opportunities, tracking progress against others in your industry, cultivating employee pride, and more.

How: After collecting the environmental data needed, companies respond to the questionnaire through the ORS. The reporting period runs from April – July/Aug each year, and CDP provides guidance and workshops throughout the year to help organizations through the process. Once the data is submitted, CDP then scores organizations and publishes the results later in the year. As a CDP gold accredited solution provider, OneTrust can help you meet CDP requirements with streamlined data collection and automated reporting.

WEF Stakeholder Capitalism Metrics

In 2020, at the annual meeting of the World Economic Forum (WEF), 120 of the world’s largest companies collaborated to develop a common set of ESG disclosure standards. The resulting WEF Stakeholder Capitalism Metrics (WEF SCM) were designed to align with the UN SDGs and be based on existing standards whenever possible.

Who: Over 130 companies now include the Stakeholder Capitalism Metrics in their annual reporting.

What: The WEF SCM framework is organized into four pillars – People, Planet, Prosperity, and Principles of Governance – that align with the essential elements of the UN SDGs. Each of these pillars includes themes based on existing reporting standards and frameworks, such as GRI, SASB, TCFD, CDP, etc. It is comprised of 21 core and 34 expanded metrics that companies can use to measure and communicate sustainable value creation and impact.

Why: WEF SCMs provide a way for companies to measure and communicate sustainable value creation and contribution to the SDGs in a clear, consistent, and comparable way. By building on existing standards and frameworks, WEF SCMs are also helping to accelerate the consolidation of the same into a set of simplified, globally consistent ESG disclosure standards.

How: WEF provides multiple resources and example reports from members to help companies learn how to implement the WEF SCMs.

Source: onetrust