Action Guide

Understand Voluntary Disclosure Frameworks

Environmental Defense Fund

Sustainability reporting has become standard for most major global companies with over 90% of Fortune 500 companies publishing sustainability data. Voluntary reporting and disclosure play a critical role in your company’s sustainability strategy and is crucial to meet the growing expectations of investors, regulators, and other stakeholders. The challenge for companies is to navigate the diverse range of frameworks, standards, questionnaires, or ratings to calculate and report sustainability data.

Climate change poses significant risks to companies, investors, markets, and all those that depend upon a stable financial system. To incorporate climate-related financial risks into decision-making, investors must be able to identify and measure such risks, which means they need important climate information from companies. Existing voluntary climate disclosure frameworks help to obtain comparable, specific, and decision-useful climate risk information from U.S. companies. Although climate risk disclosure is designed to meet the needs of investors, reporting also has important benefits for businesses such as better benchmarking and greater ability to communicate your company’s net zero progress. 

Understand Voluntary Climate Disclosure Frameworks 

Currently, there are a variety of voluntary climate reporting standards and systems for companies, including the International Sustainability Standards Board (ISSB) and the International Financial Reporting Standards (IFRS), the Carbon Disclosure Project (CDP) and the Global Reporting Initiative (GRI). Each address different environmental and ESG issues and have applications for different sectors. 

  1. ISSB and TCFD: The Task Force on Climate Related Disclosures (TCFD) was created to develop a framework for companies to disclose climate-related financial risks. As of October 2023, TCFD has been disbanded and the ISSB has taken over monitoring the progress of companies’ climate-related disclosures through IFRS S1 and IFRS S2. This change marks convergence and consolidation rather than an endpoint.  
  2. IFRS S1 and S2: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures are entry points to meet international ISSB standards. IFRS S1 sets out the core content for a complete set of sustainability-related financial disclosures to meet the needs of global capital markets. IFRS S2 sets out the requirements for a company to disclose information about its climate-related risks and opportunities. Companies that previously used the TCFD recommendations are well positioned to start applying the ISSB standards.
  3. CDP: Nonprofit CDP runs a global disclosure system for companies and other non-state actors to measure environmental impact. CDP has a sector-specific climate questionnaire that covers the TCFD framework as well as carbon pricing, emission methodology, and verification.  
  4. Global Reporting Initiative (GRI): GRI is a cross-sectoral impact reporting framework covering a wide array of ESG topics, from emissions to workplace diversity to occupation health, and sets specific standards for oil, gas, and coal. ISSB works closely with GRI to ensure compatibility and interconnectedness between the ISSB’s investor-focused sustainability information, and GRI’s information intended to serve the needs of a broader range of stakeholders.   

Though these reporting frameworks allow companies to measure risks and opportunities, their non-standardized and voluntary nature limits utility for investors and the financial system more broadly in evaluating individual companies or comparing performance across an industry. That is why the Securities and Exchange Commission (SEC) has released new requirements to enhance climate risk information and provide more accurate and standardized information to investors. To learn more about the SEC rule, please visit our Understand U.S. Policies and Regulations action step guide.