As sustainability becomes central to business strategy and investor decisions, companies face a critical question: Which sustainability reporting standard should we follow? Among the most prominent frameworks are the European Sustainability Reporting Standards (ESRS), the Global Reporting Initiative (GRI), and the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards. Each serves unique purposes and audiences, making it crucial for businesses to understand their differences and choose the best fit.
What is ESRS?
The European Sustainability Reporting Standards (ESRS) are developed by the European Financial Reporting Advisory Group (EFRAG) under the EU’s Corporate Sustainability Reporting Directive (CSRD). The ESRS provides a mandatory and comprehensive framework for reporting environmental, social, and governance (ESG) metrics. Key features of ESRS include:
- Double materiality: Reporting both the company’s impact on the environment/society and how sustainability issues affect the company.
- Mandatory assurance: Reports must be audited.
- Alignment with EU regulations: Tailored for businesses operating in or trading with the European Union.
What is GRI?
The Global Reporting Initiative (GRI) is the most widely used voluntary sustainability reporting standard globally. Established in 1997, GRI focuses on impact materiality — the company’s impact on the environment and society — and is popular among multinational corporations. Key highlights of GRI include:
- Impact-driven disclosure: Emphasizes environmental, social, and economic impacts.
- Sector-specific standards: Customizable reporting guidelines for different industries.
- Voluntary but globally recognized: Used by companies aiming to communicate transparency to a broad audience.
What is IFRS Sustainability Disclosure Standards?
The IFRS Sustainability Disclosure Standards, developed by the International Sustainability Standards Board (ISSB), focus on providing sustainability-related financial disclosures to investors. IFRS standards are investor-centric and designed for global comparability. Key elements include:
- Financial materiality: Focus on how sustainability risks and opportunities affect enterprise value.
- Consistency and integration with financial reporting: Ideal for investors and financial market participants.
- Global alignment: Designed to work alongside other frameworks and recognized worldwide.
ESRS vs. GRI vs. IFRS: Key Differences
| Criteria | ESRS | GRI | IFRS Sustainability Standards |
|---|---|---|---|
| Applicability | Mandatory for EU large companies under CSRD | Voluntary, used globally | Voluntary, investor-focused, gaining momentum |
| Materiality Approach | Double materiality | Impact materiality | Financial materiality |
| Focus | EU regulatory compliance, comprehensive ESG | Transparency on environmental and social impact | Investor-focused, financial relevance |
| Audit Requirement | Mandatory assurance | Not mandatory | Strong emphasis on reliability and integration |
| Audience | Regulators, investors, stakeholders in the EU | Global stakeholders, public accountability | Investors, financial market participants |
How to Choose the Right Sustainability Standard
- Location and Regulatory Requirements: If you operate in the EU or plan to do business there, ESRS compliance is non-negotiable.
- Audience and Objectives:
- Want to communicate impact transparently? GRI is ideal.
- Need to focus on financial implications of ESG risks and opportunities? IFRS Sustainability Standards are a better fit.
- Require broad, comprehensive ESG reporting with regulatory assurance? Go with ESRS.
- Industry Practice: Some industries have established norms, with certain sectors leaning heavily on GRI or aligning with IFRS frameworks.
- Company Size and Structure: Large, publicly traded firms with EU ties should prioritize ESRS. Smaller companies or those focusing on corporate social responsibility might find GRI more practical.
- Integration with Financial Reporting: Companies looking to integrate ESG disclosures directly into financial reporting for investor use may lean toward IFRS.
The Role of Technology in Multi-Framework Reporting
For companies navigating multiple frameworks, digital solutions and AI platforms like SALI (Sustainability Assessment, Reporting, and Learning Intelligence) are game-changers. SALI helps organizations:
- Map and align disclosures across ESRS, GRI, and IFRS.
- Automate data collection and reporting processes.
- Conduct materiality assessments.
- Generate customizable reports for different audiences.
Conclusion
In the evolving world of sustainability reporting, there’s no one-size-fits-all answer. Choosing between ESRS, GRI, and IFRS standards depends on your company’s regulatory obligations, goals, audience, and strategic direction. Often, companies will use a combination of these standards to meet the expectations of regulators, investors, and the public.
Not sure which standard to adopt? SALI’s AI-powered tools and expert guidance can help your business comply with global sustainability frameworks and stay ahead. Contact us today to learn more.
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