You are currently viewing ESG Glossary: ​​Editing for Indicators and Evaluation Mechanisms

By Danilo Maeda*

A while ago, I wrote here that sustainability is alphabet soup. There is a huge diversity of methodologies, tools and concepts that deal with this very relevant agenda. Each with its acronym. It’s even natural, after all the problems we need to solve are many and very big. In terms of concepts and methodologies alone, we can talk about ESG, TBL, CSV, RSC and EoM, among others. Not to mention institutions and indices, such as GRI, CDP, IFRS, ISSB, SASB, ISE, DJSI — and so on.

This complexity makes it difficult for people to understand and engage with the topic. That’s why I made available at the time a small glossary of ESG concepts. It’s not an academically valuable exercise in which I’ve sought maximum precision in definitions — other people might understand the concepts differently — but it can help make sense and organize thinking.

Today, I bring you the “second edition” of the glossary, this time focused on indicators and evaluation mechanisms. They are diverse and try measure different aspects of sustainability performance, with different goals. Some frameworks respond better to the demands of the financial market, others are focused on specific topics and there are also those that seek to consolidate everything as management mechanisms.

Knowing these tools will be essential to choose the most appropriate to your reality. Anyone who does home repairs knows that nailing a screw is not recommended. And that in case of doubt it is better to seek a specialist.

GRI (Global Reporting Initiative): Main reference for sustainability reports, which, in addition to being tools for transparency and stakeholder engagement, work as a management mechanism for sustainability. It consists of guides that provide guidance on the reporting process and recommended indicators for various topics relevant to organizations wishing to monitor their performance in environmental, social, economic and governance issues.

Global Compact: United Nations (UN) initiative aimed at the private sector. With a voluntary adhesion mechanism, the signatory companies undertake to comply with ten universal principles in the areas of Human Rights, Labor, Environment and Anti-corruption and to report annually on their evolution and performance in these aspects.

ISE, DJSI, FTSE4Good: Stock indices that bring together companies with good performance in specific evaluation mechanisms. O ISE (B3’s Corporate Sustainability Index), was recently reformulated and consists of questionnaires that assess performance in seven different dimensions (environmental, economic-financial, general, governance, climate change, nature of the product and social).

ISSB (International Sustainability Standards Board): Launched in November last year during COP26 by the IFRS Foundation (International Financial Reporting Standards). It has the challenge of establishing a global set of parameters for sustainability disclosures with a focus on financial markets.

The group will consolidate existing disclosure standards, such as those created by the Value Reporting Foundation (VRF), which houses the SASB (Sustainability Accounting Standards Board), integrated reporting and Climate Disclosure Standards Board (CDSB) standards. As can be seen, the result of this initiative should be a simplification of the alphabet soup (at least in the financial market), with greater comparability between the data reported by the companies.

SASB (Sustainability Accounting Standards Board): It offers standards with material themes listed by various economic sectors, as well as lists of recommended indicators to track performance on these themes. It is a great reference and can serve as a starting point for developing sustainability strategies and materiality assessments.

CDSB (Climate Disclosure Standards Board): Provides reporting template for impacts on natural capital and information on environmental aspects of business. It was incorporated into the IFRS Foundation to support the work of the ISSB.

TCFD (Task Force for Climate-related Financial Disclosures): Created by the Financial Stability Board (FSB) to improve and increase the disclosure of climate-related financial information. Offers guidance on metrics, goals and plans for transitioning to a low carbon economy.

(Integrated Reporting Framework): Report model that understands the value generation mechanism as an integrated process in which different capitals (financial, manufactured, intellectual, human, social and relationship and natural) interact. The principle behind the model is that an integrated thinking and reporting cycle leads to the efficient and productive allocation of capital and works as a force to bring financial stability and sustainability to organizations.

B Corp Certification: Seal awarded by B Lab to companies that pass a broad evaluation process, which considers performance in a series of social and environmental aspects. For this, it is necessary to answer the questionnaire, which is adapted to different sectors and sizes of companies. The analysis is carried out in five areas: Governance, Workers, Customers, Community and Environment.

CDP (Carbon Disclosure Project): It offers a disclosure system for investors, companies and public bodies to manage their environmental impacts, especially in climate change. It is the most widely used environmental reporting standard in the world and has a large database.

ISO 26000: Standard for certification in corporate social responsibility (CSR), with criteria and guidelines on concepts, trends, principles and practices on the subject, in addition to recommendations on stakeholder engagement and communication.

AA1000 Stakeholder Engagement Standard: Stakeholder management standard created by AccountAbility. It guides the mapping, classification and relationship work with stakeholders, with a focus on promoting engagement that empowers stakeholders as part of the decision-making process.

Did you miss any framework? Write to me and let’s complete this alphabet soup together!

*Danilo Maeda is head of Beon, the FSB Group’s ESG consultancy

This is content from Bússola, a partnership between FSB Comunicação and Exame. The text does not necessarily reflect the opinion of Exame.

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