Knowledge > Regulations

December 9, 2023

ESG Framework Mapping:
SFDR & CSRD

The ESG Framework Mapping Project was recommissioned in November 2023 to independently assess the coverage of the EU Taxonomy’s Principal Adverse Impact (PAI) indicators provided by widely adopted ESG and sustainability reporting frameworks. Findings are compared to the ESG Framework Mapping Project (November 2021) to account for changes in the reporting frameworks, including Omnevue’s.

Research Brief

Compare widely adopted ESG and sustainability reporting frameworks to independently assess their alignment to the EU Taxonomy PAIs; required by Sustainable Finance Disclosure Regulation (SFDR) and the Corporate Sustainability Reporting Directive (CSRD).

Researchers

  • Bruno Bossano (Lead Researcher): MSc Entrepreneurship and Innovation, King’s Business School, King’s College London.
  • Alejandra Ramirez: MSc Anthropology and Development Management, London School of Economics.
  • Sijia Yin: PhD Banking & Finance, King’s Business School, King’s College London.

Methodology

  • Sample: Widely adopted ESG and sustainability reporting frameworks, EU Taxonomy (EUT).
  • Method: Frameworks are mapped metric-by-metric to assess their alignment with the EUT.
  • Alignment scoring: Each metric is assigned an alignment score (0-3) where: 0 = not aligned (<25%), 1 = partially aligned (>50%), 2 = significantly aligned (>75%), 3 = completely aligned (100%).
  • Validity: Alignment scoring is conducted independently by each scorer and cross-scored for consistency.

Results

The Omnevue Scorecard has the highest alignment (78.6%) with the EU Taxonomy of all reporting frameworks analysed. This includes an efficiency per metric of 3.4%; the degree of alignment relative to the number of metrics.

The B Corp and VentureESG frameworks have the second and third highest alignments with the EU Taxonomy; 64.3% and 61.9% respectively. These frameworks have two of the lowest efficiencies per metric in the sample however, owing to their greater number of metrics. B Corp has an efficiency per metric of 0.6%; VentureESG has an efficiency per metric of 0.8%.

The UN Global Compact (UNGC) framework has the highest efficiency per metric of 3.8%, but the third lowest alignment (38.1%) with the EUT.

These findings are broadly comparable to the 2021 Framework Mapping Project. Notably, the Omnevue Scorecard’s alignment with the EUT has increased from 71.4% to 78.6%; its efficiency per metric has increased from 2.3% to 3.4%. The Omnevue Scorecard was updated in October 2023 based on client feedback and to align with the incoming International Sustainability Standards Board (ISSB) S1 and S2 requirements.

The release of the ISSB requirements marked the culmination of the Task Force on Climate-Related Financial Disclosures (TCFD). As such, the TCFD framework was removed from analysis in the 2023 Project.

The reporting frameworks analysed:
A quick guide

B CORP

B CORP describes itself as a “social movement” in which companies pay to be certified as a B Corporation. To become a certified B Corp your organisation must complete and pay for the B Impact Assessment (BIA) which evaluates how the company’s operations and business model impacts its workers, community, environment and customers. A company doesn’t have to meet any specific criteria (for example, setting and meeting targets to reduce greenhouse gas emissions) to become a B Corp. Instead, companies must score a minimum of 80 on the B Corp impact assessment, which comprises 200 questions about the company’s operations and business model. Certification is done chiefly over the phone, with around 10% of companies selected for more in-depth review. Certificates can be renewed every three years.

ESG_VC

ESG_VC is a questionnaire that asks for a mix of company intention and impacts. Companies can select which measures they report on and are only scored on those measures. It is based on the National Social Value (TOMs) Measurement framework for measuring social value. The primary result of a submission is a numerical score for each E, S and G pillar. Any answer involving ‘Yes’ or submitting a numerical score provides 2 points, an answer of “No – but plan to in the next 12 months” or “We plan to report this metric in the next 12 months” provides 1 point and an answer of “No” provides 0 points. The initiative is promoted by Beringea (a Venture Capital Firm) as “an industry initiative”. Beringea are investors in Social Value Portal which provides the TOMs measurement framework.

ILPA

This framework is aimed towards private equity industry stakeholders working together to gather better, decision-useful ESG data in order to generate deeper insight into ESG factors and their relationship to financial outcomes, and, ultimately, to drive greater performance on critical ESG issues. The aim is to allow General Partners (GPs) and portfolio companies to benchmark their current position and accelerate progress toward ESG improvements, which the group believes drives better financial outcomes. This will also enable greater transparency and provide more comparable portfolio information for Limited Partners (LPs). There are seventeen metrics, focusing on environmental (CO2e emissions, energy usage) and social (employee diversity, turnover, health and safety) issues.

Omnevue

Omnevue is a platform for standardising the auditing and reporting of ESG metrics designed specifically for small and medium sized enterprises (SMEs). Omnevue claims to be “the first ESG accounting platform, purpose built for SMEs”. Chartered accountants (who have also been certified in ESG) test real data and documentation that’s already in the business and calculate ESG impacts to produce a Statement of ESG Performance (just like financial accounting). ESG impact is measured using a proprietary scorecard of 6 environmental, 9 social, and 8 governance metrics.

PRI

The Principles for Responsible Investment (PRI) framework directs investors to integrate environmental, social, and governance (ESG) factors into decision-making through six principles. This commitment promotes responsible and ethical investment practices, aligning strategies with societal goals. PRI facilitates transparency and collaboration among investors for sustainable finance and positive environmental and social outcomes.

UN SDGs

The SDGs were conceived by the United Nations in 2015 as a set of political ambitions to achieve the 2030 Agenda for Sustainable Development. The SDGs provide a blueprint for countries to achieve a more sustainable future, including ending poverty and hunger, improving health and education, combating climate change and protecting oceans and forests. While the SDGs were created for UN member states, the UN Global Compact and GRI have joined forces to help businesses report on the SDGs. There are 17 goals, 169 targets and 231 unique indicators. The SDGs have been described as a network of targets that are difficult to directly align with company objectives, strategy and responsibilities. Company claims to contribute to the SDGs are more likely to be on the basis of judgement rather than a verifiable measurement.

UNGC

The United Nations Global Compact (UNGC) is a sustainability initiative that calls on businesses to align with ten universally endorsed principles encompassing human rights, labour, environment, and anti-corruption. Participating organisations are required to report annually on their progress. The UNGC promotes global collaboration for sustainable development and responsible corporate citizenship, fostering continuous dialogue and action to drive ongoing improvement in corporate sustainability practices through a multi-stakeholder approach.

Venture ESG

VentureESG aims to equip VCs to build ESG into their due diligence and portfolio management processes. The framework is made up of 80 questions and 9 metrics to create a “universe of issues to promote engagement, education & learning and training” around ESG issues in VCs and their portfolio companies. To capture current trends around ESG adoption in the industry, VentureESG undertook a survey of VC firms in the respective communities to articulate how ESG performance is most likely to materially impact future financial performance and value creation.

WEF

The World Economic Forum’s (WEF) International Business Council, PwC and other services firms collaborated with the Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) to work towards identifying universal metrics for “long-term value creation” to enable more consistent and comparable reporting for their stakeholders, including investors. The resulting framework published in September 2020 is a non–mandatory set of recommendations containing 21 core metrics (well-established standards) and 34 expanded metrics (wider scope/ impact) across 4 pillars: people, planet, prosperity and governance.

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