Interoperability Unveiled: How ESRS, ISSB, and GRI Align to Simplify Reporting

In recent times, the landscape of sustainability reporting has been marked by confusion as organizations wrestled with a myriad of frameworks and standards. This complexity resulted in a host of challenges, ranging from internal fatigue among report preparers to the formidable task faced by investors in extracting relevant information. However, the advent of a new era introduced three pivotal global baseline standards: ESRS, ISSB, and GRI. Each standard brought with it a distinct set of metrics and requirements that companies were obligated to report. As a consequence, this not only added to the confusion within companies but also posed a challenge for readers trying to make sense of the reports. In this blog post, we will delve into the realm of interoperability, unveiling how ESRS, ISSB, and GRI strategically align to streamline and simplify the complexities of sustainability reporting. 

Diverse Standards and Stakeholder Challenges

For example, a company might opt to adhere to the standards of the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and utilize the Integrated Reporting (IR) framework, all while aligning with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations to meet the expectations of diverse stakeholders. 

This approach, however, resulted in fatigue among report preparers who had to gather numerous data points from GRI and SASB. Simultaneously, they had to ensure the overall report conformed to the IR and TCFD frameworks and recommendations. The report’s key stakeholders, such as investors, faced challenges in extracting pertinent information from the extensive data reported by the company.  

Moreover, comparing information between companies using different standards proved difficult. Recognizing the need for standardized global baselines, three primary global standards have emerged: the International Sustainability Standards Board (ISSB), European Sustainability Reporting Standards (ESRS), and GRI. 

Global Standards and Their Objectives

Part of the IFRS Foundation, the ISSB’s primary goal is to develop globally comparable and investor-friendly standards. To achieve this, the ISSB has incorporated SASB, TCFD, and the IIRC within its scope, all of which were widely acclaimed by the investor community. The ISSB has released a set of standards, S1 and S2, and is actively working on additional topical standards. 

Developed by the EFRAG and stemming from the Corporate Sustainability Reporting Directive (CSRD), the ESRS was adopted by the European Commission on July 31, 2023, and subsequently passed into law by the European Parliament in October. 

Established in 1997, the Global Reporting Initiative (GRI) was the first initiative to focus on sustainability reporting by companies. After the term ESG gained prominence in the mid-2000s, the GRI began to concentrate on ESG matters. The GRI’s Global Sustainability Standards Board (GSSB) undertakes a new work program every three years to review existing GRI standards and develop new ones. Currently, GRI is in the process of releasing a new taxonomy to facilitate digital reporting. 

Addressing the Challenge: Interoperability and Collaboration

To grasp the scope of these three standards: the ESRS will apply to approximately 50,000 companies operating in the EU, GRI is presently utilized by around 10,000 companies, and the ISSB is gaining adoption across multiple jurisdictions, expected to impact tens of thousands of companies. 

The recurring question arises: if a company presently employs GRI and operates in jurisdictions requiring adherence to ESRS and ISSB, will they need to collect distinct sets of data points and apply different frameworks and principles when preparing their reports? Recognizing this challenge, the ISSB, ESRS, and GRI have been closely collaborating to ensure a high degree of interoperability between the standards. 

ISSB – ESRS interoperability

The EFRAG, EU Commission and ISSB have been working in tandem to align the two standards as much as possible. There are a few fundamental differences between the two standards, considering that the ISSB is more targeted towards investors whereas ESRS is for a wider set of stakeholders.  

The financial materiality used in the double materiality concept of ESRS aligns with the definition of financial materiality, as used by ISSB. With the ISSB having released 2 standards currently, S1 focusing on Sustainability in general, while S2 focuses on Climate change, the alignment with ESRS has focused on this. Both the climate change standards in particular, S2 in ISSB, and E1 in ESRS, have a similar conceptual foundation and rely heavily on the recommendations of the TCFD, thus achieving a fair degree of alignment.  

As mentioned by ESRS, “The very high degree of interoperability between ESRS and the two ISSB standards significantly reduces the risk that companies required to report in accordance with ESRS will also be expected to report separately under ISSB standards.” 

A mapping table has been released, which maps the IFRS and ESRS requirements, particularly on Climate Change. Through these efforts, the ISSB as well as EFRAG and the European Commission have tried to ensure a high degree of alignment and reduced duplication for companies which need to use both the standards. 

Further guidance is expected to be released on the interoperability between the two standards, as both the standards preparers realize the importance of alignment between the two standards. 

ESRS – GRI Interoperability

Due to the fact that both the ESRS and GRI address a much wider group of stakeholders, there is a high degree of alignment between the two. GRI has worked closely with EFRAG in the development of the ESRS standards.  

When the ESRS was passed into law by the European Parliament, GRI released an official statement, welcoming the same. Prior to this, in September, GRI and ESRS had released a joint statement of interoperability. As per the statement, “Following the requirement of the CSRD to adopt a double materiality approach and to take account of existing standards, ESRS and GRI definitions, concepts and disclosures regarding impacts are fully or, when full alignment was not possible due to the content of the CSRD mandate, closely aligned. 

Existing GRI reporters will be well prepared to report under the ESRS. Entities reporting under ESRS are considered as reporting with reference to the GRI Standards and will therefore avoid the burden of multiple reporting.” 

Starting with the double materiality assessment concept in the ESRS, the impact materiality matches the requirements of the materiality assessment prescribed by GRI. Further, a draft “GRI-ESRS Interoperability Index” has been released, which serves to map the requirements of the GRI and ESRS. 

This goes to show how closely aligned the two standards are, and any reporter using either of the standards can conveniently report using both without much additional effort. 

ISSB-GRI Interoperability

The ISSB and GRI have a MoU, committing the two standard setters to coordinate and work on achieving interoperability between the two standards. As a part of this MoU, the two bodies hold regular scheduled meetings to discuss the same.  

The two bodies are working on guidance documents for report preparers who will be using both standards to align the disclosures, concepts and definitions used. A comparison of the requirements would also feature in the guidance documents.  

The GRI and ISSB have also established a Sustainability Innovation Lab (SIL) in Singapore, which would enable training, research and innovation in the field of sustainability. 

Conclusion

While there is still no one uniform global standard, the key difference from earlier is that the three standard providers who have come to the fore to establish a global baseline are working closely together to achieve a high level of interoperability. Thus, preparers of ESG Reports can utilize any or all of the 3 standards, knowing that there is a high degree of alignment between the three, and hence there is no need for separate processes to collect the data and prepare the report. 

Further, many software solutions such as IRIS CARBON® can help companies to prepare reports using any of these standards, thus streamlining the entire process.