ESG Reporting Frameworks: Comparing the GRI and the SASB

As the emphasis on Environmental, Social, and Governance (ESG) factors continues to grow in the business world, companies are increasingly adopting comprehensive reporting frameworks to disclose their ESG performance. The Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB) are two of the most widely used frameworks for ESG reporting, each with its unique approach to reporting ESG information. In this article, we will delve into the key differences between the GRI and the SASB, and discuss their respective strengths and weaknesses.

Global Reporting Initiative (GRI)

Established in 1997, the GRI is a pioneer in sustainability reporting and has played a significant role in defining the reporting landscape. The GRI Standards are a set of flexible and universally applicable guidelines that help organisations measure and report their economic, environmental, and social impacts. The GRI is primarily aimed at a wide range of stakeholders, including investors, employees, customers, regulators, and the wider public.

The GRI adopts a principle-based approach, which emphasises the importance of materiality, stakeholder inclusiveness, sustainability context, and completeness. The framework offers three levels of reporting: Core, Comprehensive, and Sector Disclosures. The Core level requires organisations to report on general disclosures and management approach, while the Comprehensive level mandates organisations to provide detailed information on all aspects of their ESG performance. Sector Disclosures are tailored for specific industries and address industry-specific risks and opportunities.

Sustainability Accounting Standards Board (SASB)

Founded in 2011, the SASB is a relatively newer player in the ESG reporting space. The SASB Standards are designed to help companies identify, manage, and report on the ESG factors that are most relevant to their industry and which have a material impact on their financial performance. The SASB is specifically targeted at investors, with the goal of providing them with standardised, comparable, and decision-useful information.

The SASB adopts an industry-specific approach, with 77 unique standards covering 11 sectors and 93 sub-industries. The standards are based on the concept of materiality, which is defined as the likelihood of an ESG factor having a significant impact on a company’s financial condition or operating performance. The SASB’s materiality-focused approach helps companies prioritise the ESG issues that matter most to their business and investors.

Key Differences Between the GRI and the SASB

Target Audience

The GRI is designed for a broader range of stakeholders, while the SASB is specifically aimed at investors. The GRI’s principle-based approach encourages organisations to engage with multiple stakeholders, including employees, customers, regulators, and the public. In contrast, the SASB’s industry-specific standards focus on providing investors with relevant and comparable ESG information that is directly tied to financial performance.

Materiality and Scope

The GRI defines materiality as the significance of an organisation\’s economic, environmental, and social impacts on its stakeholders, whereas the SASB’s definition of materiality is focused on the financial materiality of ESG factors. This difference in emphasis on materiality assessment results in a broader scope of reporting for the GRI, as it requires organisations to consider a wide range of ESG factors that may be relevant to different stakeholder groups. On the other hand, the SASB’s narrower focus on financial materiality helps companies prioritise the ESG factors that are most likely to impact their financial performance.

Industry-Specific Standards

The SASB’s industry-specific standards provide detailed guidance on the ESG factors that are relevant to each industry, enabling companies to report comparable information across sectors. In contrast, the GRI’s sector disclosures are optional and not as comprehensive as the SASB’s industry-specific standards. While the GRI offers more flexibility in reporting, it may result in less comparability across companies within the same industry.

Flexibility vs. Comparability

The GRI’s principle-based approach allows organisations to customise their reporting based on their unique context and stakeholder needs, which can lead to more meaningful and contextually relevant disclosures. However, this flexibility can also result in inconsistencies in reporting across companies, making it difficult for stakeholders to compare ESG performance. Conversely, the SASB’s standardised, industry-specific approach ensures greater comparability across companies but may limit the ability of organisations to tailor their disclosures to their specific circumstances.

Reporting Levels

The GRI offers three levels of reporting (Core, Comprehensive, and Sector Disclosures) that allow organisations to choose the level of detail and scope that best suits their needs and resources. This tiered approach can help companies gradually improve their reporting practices over time. The SASB does not have distinct reporting levels; instead, it requires organisations to report on all financially material ESG factors identified by the respective industry-specific standards.

Strengths and Weaknesses: GRI vs. SASB

GRI Strengths:

• Broad stakeholder focus: Addresses the information needs of a wide range of stakeholders, fostering transparency and stakeholder engagement.
• Flexibility: Allows organisations to customise their reporting based on their unique context, materiality assessment, and stakeholder needs.
• Encourages comprehensive reporting: The GRI’s principle-based approach encourages companies to report on a wide range of ESG factors, providing a holistic view of their sustainability performance.

GRI Weaknesses:

• Limited comparability: The flexibility of the GRI Standards may lead to inconsistencies in reporting across companies, making it challenging for stakeholders to compare ESG performance.
• Less industry-specific guidance: Although the GRI offers sector disclosures, they are not as comprehensive or detailed as the SASB’s industry-specific standards.

SASB Strengths:

• Investor focus: Provides investors with standardised, comparable, and decision-useful ESG information that is directly tied to financial performance.
• Industry-specific standards: Ensures comparability across companies within the same industry, enabling more accurate benchmarking and analysis.
• Materiality-driven approach: Helps companies prioritise the ESG factors that are most likely to impact their financial performance, leading to more focused and relevant reporting.

SASB Weaknesses:

• Narrower stakeholder focus: Primarily aimed at investors, the SASB Standards may not address the information needs of other stakeholder groups.
• Limited flexibility: The standardised, industry-specific approach may constrain organisations’ ability to tailor their disclosures to their specific context and stakeholder needs.

Summary

Both the GRI and the SASB have distinct advantages and disadvantages, with each framework catering to different stakeholder needs and reporting objectives. Companies should carefully consider their target audience, materiality assessments, and industry-specific risks and opportunities when selecting the most appropriate framework for their ESG reporting.

It is important to note that the GRI and the SASB are not mutually exclusive, and many organisations choose to adopt elements of both frameworks to create a comprehensive and tailored ESG reporting strategy. By understanding the key differences between the GRI and the SASB, companies can make informed decisions about which framework, or combination of frameworks, best aligns with their ESG reporting goals and stakeholder expectations.