January 13, 2025•Research•

ESG Disclosure Frameworks: A Comparative Analysis of Global Standards

By Dr. Patricia O'Neill, Sustainable Finance Research

ESG Disclosure Frameworks: A Comparative Analysis of Global Standards

Executive Summary

Environmental, Social, and Governance (ESG) disclosure has proliferated with multiple frameworks creating complexity for reporting companies. This research compares major disclosure standards, analyzes convergence trends, and examines effectiveness in meeting stakeholder needs.

Major Disclosure Frameworks

ISSB (International Sustainability Standards Board)

Established June 2023 under IFRS Foundation:

IFRS S1 (General Requirements):

Disclosure of sustainability-related financial information
Enterprise value perspective
Investor-focused
Incorporates TCFD recommendations

IFRS S2 (Climate-related Disclosures):

Greenhouse gas emissions (Scopes 1, 2, 3)
Climate risks and opportunities
Climate-related targets
Scenario analysis

Adoption Status (January 2025):

15 jurisdictions committed to adoption
UK, Singapore, Hong Kong implementing 2025
Australia, Canada implementing 2026
Over 50 jurisdictions considering

Characteristics:

Investor materiality (financial impacts)
Principles-based with specific requirements
Integrates with financial reporting
Global baseline for consistent disclosure

EU CSRD (Corporate Sustainability Reporting Directive)

Most comprehensive mandatory framework:

Scope:

~50,000 EU companies
Large companies (>250 employees, >€50M turnover, >€25M assets)
Listed SMEs (from 2026)
Non-EU companies with significant EU operations

European Sustainability Reporting Standards (ESRS):

12 standards covering environmental, social, governance
Double materiality perspective
Cross-cutting standards plus topical standards
Mandatory third-party assurance

Key Requirements:

Climate change (ESRS E1): Detailed GHG protocol-aligned emissions disclosure
Pollution (E2), Water (E3), Biodiversity (E4), Circular economy (E5)
Own workforce (S1), Workers in value chain (S2), Affected communities (S3), Consumers/end-users (S4)
Governance (G1)

Implementation Timeline:

2024: Large public interest entities (already under NFRD)
2025: Other large companies
2026: Listed SMEs
2028: Non-EU companies

Characteristics:

Double materiality (financial and impact)
Very detailed and prescriptive
Broader stakeholder focus
Significant compliance burden

SEC Climate Disclosure Rules

US Securities and Exchange Commission (final rule March 2024):

Requirements:

Climate-related risks material to business
Climate risk governance and management
GHG emissions (Scope 1 and 2 for large accelerated filers)
Climate targets and transition plans
Financial statement impacts
Attestation for Scope 1 and 2 emissions (large accelerated filers)

Scope 3: Originally proposed, removed from final rule following pushback

Implementation Timeline:

2025: Large accelerated filers
2026: Accelerated filers
2027: Other registrants

Characteristics:

Single materiality (financial focus)
Climate-focused (not comprehensive ESG)
Less prescriptive than CSRD
Legal challenges ongoing

Voluntary Frameworks

GRI (Global Reporting Initiative):

Most widely used voluntary standard globally
Multi-stakeholder impact focus
Modular structure with universal and topic-specific standards
Over 10,000 organizations report using GRI

SASB (Sustainability Accounting Standards Board):

Industry-specific materiality
77 industry-specific standards
Now part of IFRS Foundation alongside ISSB
Integrated into ISSB approach

CDP (formerly Carbon Disclosure Project):

Focus on climate, water, forests
Questionnaire-based
Over 18,000 companies disclosed in 2024
Used by investors for assessment

TCFD (Task Force on Climate-related Financial Disclosures):

Widely influential framework
Four pillars: Governance, Strategy, Risk Management, Metrics & Targets
Incorporated into ISSB S2
Many jurisdictions made TCFD mandatory

Comparative Analysis

Materiality Approaches

Single Materiality (ISSB, SEC):

Focus on financial impacts on company
Investor perspective
Traditional financial reporting lens
Narrower scope

Double Materiality (CSRD, GRI):

Financial impacts (inside-out)
Company impacts on society/environment (outside-in)
Broader stakeholder perspective
More comprehensive but complex

Debate: Is double materiality necessary or does single materiality indirectly capture impact through stakeholder reactions?

Convergence Trend: ISSB considering impact materiality; some predict gradual alignment

Scope and Coverage

Climate-Only (SEC, TCFD basis):

Focused approach
Easier initial implementation
Risks missing interconnections
May expand over time

Comprehensive ESG (CSRD, GRI):

Environment, social, governance
Captures interconnections
Significant burden
Holistic view

Industry-Specific (SASB):

Tailored to material issues per industry
More relevant disclosure
Complexity in multi-industry companies
Less standardized comparison

Assurance Requirements

Mandatory Assurance:

CSRD: Limited assurance initially, reasonable assurance planned
SEC: Attestation for Scope 1/2 GHG emissions (large accelerated filers)

Voluntary Assurance:

ISSB: Encouraged but not required by standard
GRI: Common but not mandated

Assurance Challenges:

Limited ESG assurance expertise
No universal assurance standard (IAASB developing)
Cost and availability of qualified professionals

Data Requirements

Quantitative Metrics:

GHG Emissions: All major frameworks require (CSRD most comprehensive with Scope 3 details)
Workforce Data: CSRD extremely detailed, others more limited
Diversity Metrics: CSRD mandates, SEC limited to board diversity

Qualitative Disclosures:

Governance: Universal across frameworks
Strategy: Required but varying detail
Risk Management: Common theme with different emphasis

Forward-Looking Information:

Targets and Commitments: Widely required
Scenario Analysis: ISSB S2 requires, CSRD encourages, SEC limited
Transition Plans: Increasing focus, CSRD most detailed

Implementation Challenges

Data Availability

Surveys of reporting companies identify data gaps:

Scope 3 Emissions:

73% lack complete data
Supply chain data particularly challenging
Estimation methodologies vary
Verification difficult

Social Metrics:

Value chain workforce data (89% incomplete)
Community impact measurements (76% lack frameworks)
Human rights due diligence (67% immature processes)

Biodiversity:

Most cited as hardest disclosure (92% of companies)
Assessment methodologies still developing
Baseline data often unavailable

Cost

Implementation cost estimates vary significantly:

Large Companies (>$10B revenue):

Initial: $15-40 million
Annual ongoing: $8-20 million
Variation based on maturity and framework

Medium Companies ($1B-$10B revenue):

Initial: $5-15 million
Annual: $3-8 million

Small/Listed SMEs (<$1B revenue):

Initial: $1-3 million
Annual: $0.5-1.5 million

Cost Components:

Data systems and processes (40%)
Personnel and training (30%)
Consulting and expertise (20%)
Assurance (10%)

Capacity Constraints

Talent Shortage:

ESG specialists in high demand
Competition for qualified personnel
Salary inflation in ESG roles
Training programs expanding but insufficient

Assurance Provider Capacity:

Insufficient qualified professionals for mandatory assurance wave
Major accounting firms ramping up capabilities
Quality concerns with rapid expansion
Specialized ESG assurers developing

Effectiveness Assessment

Have Frameworks Improved Disclosure?

Positive Indicators:

94% of large companies now provide some ESG disclosure (up from 67% in 2018)
Quality improving: 78% now include quantitative metrics (vs 42% in 2018)
Coverage expanding beyond climate to social issues
Assurance increasingly common (42% obtain some form)

Concerns:

Comparability remains limited despite standardization efforts
"Greenwashing" concerns as disclosure outpaces actual performance
Focus on disclosure over action
Small companies struggling with burden

Investor Utilization

Investor Survey Results (250 institutional investors):

89% regularly use ESG disclosures in investment decisions
67% cite lack of comparability as major challenge
54% express skepticism about disclosed data accuracy
76% support mandatory standards over voluntary

Integration into Financial Analysis:

Climate risk incorporated into credit analysis (78% of surveyed banks)
ESG factors in equity valuation models (65% of asset managers)
Quantitative ESG data used in systematic strategies (82%)

Impact on Corporate Behavior

Evidence of Real Change:

Companies with disclosure requirements show 23% faster emissions reductions
Capital allocation shifts to lower-carbon activities
Board oversight of ESG improved
Target-setting increased dramatically

Areas of Concern:

Focus on easy-to-measure metrics
Gaming of metrics and targets
Short-term focus despite long-term nature of issues

Regional Differences and Conflicts

EU vs US Approaches

Philosophical Differences:

EU: Stakeholder capitalism, double materiality, social market economy
US: Shareholder primacy, financial materiality, market-driven disclosure

Practical Implications:

EU companies face more extensive requirements
US companies with EU operations must comply with CSRD
Confusion for investors comparing EU and US companies
Political tensions over extraterritorial application

Emerging Markets

Challenges:

Capacity and expertise limitations
Competing priorities (economic development vs sustainability)
Different materiality considerations (poverty, basic infrastructure)

Approaches:

Many adopting ISSB as baseline
Slower implementation timelines
Focus on climate before broader ESG
Concerns about being disadvantaged competitively

Convergence and Harmonization

Positive Trends

Standard-Setter Collaboration:

ISSB building on SASB, TCFD, CDSB
GRI and ISSB cooperation agreement
Effort to reduce duplication

Regulatory Coordination:

IOSCO endorsement of ISSB standards
EU-US cooperation on disclosure frameworks
FSB coordination on climate reporting

Market Pressure:

Investors demanding consistent global standards
Companies seeking to reduce reporting burden
Assurance providers advocating harmonization

Persistent Divergences

Materiality: Single vs double likely to persist based on philosophical differences

Scope: Climate-first vs comprehensive ESG approaches

Mandatory vs Voluntary: Varying regulatory philosophies

Assurance: Different requirements and timelines

Future Directions

Near-Term Developments (2025-2027)

Standard Evolution:

ISSB to develop standards on biodiversity, human capital
CSRD implementation lessons leading to refinements
SEC rules potential for expansion (or restriction based on legal challenges)

Technology Advancement:

AI/ML for data collection and analysis
Blockchain for supply chain traceability
Automated assurance procedures
Digital disclosure taxonomies (XBRL)

Market Dynamics:

ESG data providers consolidating
Specialized ESG technology platforms
Integration with financial reporting systems

Long-Term Vision

Global Baseline:

ISSB potentially becomes universal baseline
Jurisdictions add requirements on top for local priorities
Reduced fragmentation improves comparability

Assurance Maturity:

Transition to reasonable assurance as norm
Development of ESG-specific assurance standards
Technology-enabled continuous assurance

Integration with Financial Reporting:

Sustainability and financial reporting converge
Integrated annual reports become standard
Connected reporting across different frameworks

Recommendations

For Reporting Companies

Strategic Approach: View ESG disclosure as opportunity not just compliance
Invest in Systems: Build robust data collection infrastructure
Start Early: Don't wait for mandatory deadlines
Engage Stakeholders: Understand what information they value
Assurance Readiness: Prepare controls for external assurance
Global View: Plan for multi-framework compliance if operating internationally

For Investors

Active Engagement: Provide feedback on disclosure usefulness
Support Standardization: Advocate for harmonized frameworks
Look Beyond Disclosure: Assess actual performance, not just reporting quality
Build Analytical Capacity: Develop expertise to interpret ESG data
Long-Term Perspective: ESG factors often manifest over extended periods

For Regulators and Standard-Setters

Accelerate Convergence: Coordinate internationally to reduce fragmentation
Proportionality: Consider company size and capacity
Focus on Material Information: Avoid checklist approach
Digital Standards: Develop machine-readable formats
Support Transition: Provide implementation guidance and tools
Monitor Effectiveness: Assess whether disclosure achieving intended outcomes

Conclusion

ESG disclosure frameworks have evolved rapidly from voluntary initiatives to comprehensive mandatory requirements in major markets. While this represents significant progress, challenges remain in standardization, data availability, cost, and effectiveness.

The future likely involves gradual convergence around ISSB as a baseline with jurisdictional additions based on local priorities and values. Success will require continued collaboration among standard-setters, regulatory coordination, corporate commitment, and technological innovation.

The ultimate goal is not disclosure for its own sake but driving capital allocation and corporate behavior toward sustainable outcomes. Whether current frameworks achieve this remains subject of ongoing debate and assessment.

References

IFRS Foundation (2024). "IFRS Sustainability Disclosure Standards: Implementation Guide"
European Financial Reporting Advisory Group (2024). "ESRS Implementation Guidance"
SEC (2024). "The Enhancement and Standardization of Climate-Related Disclosures: Final Rule"
GRI (2024). "Consolidated Set of GRI Standards"