ESG standards are organized frameworks that companies can use to report on and manage their environmental, social, and governance responsibilities. These include recognized ESG reporting standards such as ESG GRI Standards and ESG GRI Standards, both of which provide comprehensive guidance on sustainability disclosures. Organizations like Standard Chartered adhere to these frameworks, as seen in the Standard Chartered ESG report, to create transparency and trust. Regulators and entities such as the GRI, ISSB, and the EU all play a role in addressing the question of who sets the standards for ESG. The ESG European standards and guidelines and ESG rating standards guarantee consistency in global ESG assessment. ESG standards and guidelines help companies harmonize their reporting with stakeholders’ demands and responsible investing targets.
ESG Standards: What They Are And Why They Matter?
ESG standards are a way for businesses to think about more than profit. This is guiding how a company should behave when it comes to environmental, social and corporate governance. The terms for these areas of focus are E (environment), S (social), and G (governance). When the companies someone does business with follow these rules, they become more responsible, fairer, and more transparent.
- Environment: These standards allow firms to track their carbon emissions, energy use, water use, and waste. They prod companies to adopt clean energy and cut pollution.
- Social: These rules shape how a company treats workers, respects human rights, and operates in the communities in which it is based. This includes wages, safety, and health.
- Governance: It’s a measure of how well companies are managed. It includes decision-making, board structure, and ethical considerations in business.
Why Do ESG Standards Matter?
Enterprises need to comply with ESG reporting standards to display their ESG work. It makes them more open. It also allows others to compare firms and monitor their progress. Standard Service and Standard Chartered are some companies that exhibit it well via the Standard Chartered ESG report.
Now, investors check ESG scores before investing money.
- Firms whose decisions are guided by ESG considerations perform better and remain safe in the long run.
- It enables them to steer around risks like climate change and social unrest.
- It also establishes a good public image and builds the stakeholders’ trust.
Top Company ESG Reporting Standards
Most large companies are using ESG reporting standards to display what they’re doing for the environment and people. The standards provide an off-the-shelf way to measure and communicate ESG performance.
Common ESG Reporting Frameworks
The GRI standards ESGs are so popular because they offer utility to both small and large companies. They provide thematically oriented standards. These are waste, water, energy, labor, and anti-corruption. Here are some of the leading frameworks that companies adopt:
- GRI Standards ESG: The most widely used is the Global Reporting Initiative (GRI) instrument. It provides clear guidelines for how to report on social and environmental impact.
- SASB: The Sustainability Accounting Standards Board is concentrating on what matters to investors.
- TCFD: Task Force on Climate-related Financial Disclosures to aid firms in reporting their climate risks.
- CDP: The Carbon Disclosure Project monitors companies’ climate, water, and forestry activities.
Example: ESG Standard Chartered
The Standard Chartered ESG report employs GRI, SASB, and TCFD. It looks at its climate goals, diversity, and community programs. This also includes its own board practices and code of conduct. It’s a good example of strong ESG reporting.
ESG GRI standards for companies wanting global trust. These norms further an ethos of fair trade. They also push companies to keep promises and be transparent.
Who Makes ESG Standards and How They Work on a Global Scale?
Many people ask, “Who sets ESG standards?” There is no one single group. Instead, the rules are created and guided by many global groups known as ESG. These organizations have smart people who look at real-world issues and come up with clear things companies can do.
Major ESG Standard Setters
Some focus on climate, some on workers, and others on financial risks. Between them, they establish the ESG rules the world abides by.
- GRI (Global Reporting Initiative): Produces the most widely used ESG GRI standards in the world.
- IFRS and ISSB (International Sustainability Standards Board): Establishes a foundation of global ESG reporting.
- SASB (Sustainability Accounting Standards Board): Guides companies on how to disclose useful ESG info to investors.
- TCFD (Task Force on Climate-related Financial Disclosures): Centers on risks and objectives related to the climate.
- European Commission: Develops ESG European standards and guidelines to help EU companies.
ESG Standards and Guidelines for the Global Use
The ESG standards guidelines make it possible for companies to know where to begin. The standards then guide the rating of these efforts. This score gives investors the ability to pick strong companies. Firms like Standard Chartered are guided by both global and local regulations. The ESG standard chartered approach combines global themes with their business strategies. There are different rules in different countries. But most include:
- Climate impact tracking
- Gender and labor data
- Waste and water use
- Ethics and corruption checks
ESG Rating Standards and Global Benchmarks
Once companies comply with the ESG reporting requirements, they receive an ESG rating. These scores are based on ESG rating standards that verify whether firms actually do what they say they do.
What ESG Ratings Show?
- E: The company’s treatment of emissions, pollution, and energy.
- S: And how fair they are to workers, to customers, and to local people.
- G: Do they run well — honestly, fairly, legally?
Top ESG Rating Agencies
- MSCI ESG Ratings: Rates ESG risks and actions.
- Sustainalytics: The return focuses on ESG risk and business ethics.
- S&P Global ESG Scores: Blends ESG and financial returns.
- Refinitiv ESG: Provides rich ESG analytics and comparisons.
Each agency has its own scoring method. But all of them adhere to ESG rating standards that verify ESG work.
These ratings help:
- Favorable green and clean companies are the beneficiaries of this flight to green and clean.
- Consumers prefer ethical brands.
- The government both monitors and responds to business pledges.
For instance, the Standard Chartered ESG report earns a strong ESG rating. It highlights their work in green bonds, equal pay, and climate plans.
ESG European Standards and Guidelines in Global Business
Standards and guidelines are consistent with the international GRI ESG standards. Many companies based outside the E.U. now adhere to E.U. standards. This helps them enter green finance and supply chains. So do companies such as Standard Chartered. Their standard chartered ESG report is aligned with both EU and global reporting requirements. Europe leads in ESG actions. The EU has developed strict ESG European standards and guidelines. These are green, fair and open.
Main EU ESG Rules:
- CSRD (Corporate Sustainability Reporting Directive): All EU large companies must report ESG.
- EU Taxonomy: Defines what is “green” or “sustainable.
- SFDR (Sustainable Finance Disclosure Regulation): Dictates how investors disclose ESG information.
The EU ESG laws require companies to disclose:
- Energy use and carbon data
- Worker pay and diversity
- Board and decision policies
- Anti-bribery steps
Relevance to ACCA Syllabus
ESG features appear in SBL, APM, and SBR. ACCA students need to comprehend sustainability, governance, stakeholder engagement, and nonfinancial reporting, which are at the heart of ESG.
ESG Standards ACCA Questions
Q1: What is the most widely used ESG reporting framework?
A. COSO Framework
B. IFRS 9
C. GRI Standards ESG
D. GAAP
Answer: C
Q2: Integrated reporting is directly influenced by which one of the following due to ESG performance?
A. Assets
B. Equity
C. Social and Relationship Capital
D. Deferred tax
Answer: C
Q3: What is the primary purpose of ESG standards in the case of the SBL of the ACCA paper?
A. Minimizing tax liabilities
B. Ensuring product quality
C. Creating Long-Term Value and Sustainability.
D. Maximizing short-run profits
Answer: C
Q4: Global ESG standards are most frequently referred to by ACCA qualified professionals emanate from which of the following entities?
A. SEC
B. IASB
C. GRI
D. GAAS
Answer: C
Q5: Performance management ESG KPIs may be applied in performance management to:
A. Financial liquidity
B. Environmental and Social Non-Financial Results
C. Loan repayment capacity
D. Exchange rate movement
Answer: B
Relevance to US CMA Syllabus
CMA Part 2 (Strategic Financial Management) gives you risk management, internal control, and sustainability with regard to ESG. CMAs assist organizations in embedding ESG into strategy and performance monitoring.
ESG Standards US CMA Questions
Q1: ESG-related reports are necessary for assessing the companies:
A. Operational costing
B. Tax compliance
C. Sustainable performance
D. Dividend policy
Answer: C
Q2: Which of the following ESG factors relates to the issue of employee health and labor practices?
A. Environmental
B. Social
C. Governance
D. Financial
Answer: B
Q3: Why are ESG criteria being incorporated into performance measurement systems?
A. They help avoid audits
B. They reduce cash outflow
C. These are long-term strategies.
D. They take the budgeting out of it
Answer: C
Q4: What ESG measure is best to assess carbon emissions data?
A. SASB
B. GRI Standards ESG
C. IFRS 16
D. Basel III
Answer: B
Q5: ESG risks are increasingly incorporated in:
A. Cost accounting reports
B. Budget variance analysis
C. ERM Frameworks
D. Internal audit sampling
Answer: C
Relevance to US CPA Syllabus
US CPAs must address requirements on ESG in Business Environment and Concepts (BEC) and Regulation (REG). These leaders will need to speak the language of assurance for ESG reports, ethical reporting and sustainability compliance.
ESG Standards US CPA Questions
Q1: What standard-setter is creating a global minimum standard for ESG disclosure?
A. SEC
B. ISSB under IFRS
C. IRS
D. FASB
Answer: B
Q2: A CPA conducting an audit of an ESG report should focus on:
A. Depreciation rates
B. A guide to following ESG standards principles
C. Inventory valuation
D. Tax refund estimation
Answer: B
Q3: What does the “G” in ESG concentrate on?
A. Green energy
B. General reserves
C. Governance, suggestions for boards and ethics
D. Growth in revenue
Answer: C
Q4: What is the US ESG framework that links ESG to investors?
A. GRI
B. TCFD
C. SASB
D. COSO
Answer: C
Q5: The ESG reporting criteria applied by the EU are:
A. GAAS
B. Basel Accords
C. European standards and guidelines
D. PCAOB guidelines
Answer: C
Relevance to CFA Syllabus
The CFA Program (Level II & III in particular) focuses on ESG integration in investment analysis, asset management, and portfolio construction. Importantly, ESG is integral to ethical investing, long-term valuation, and risk control.
ESG Standards CFA Questions
Q1: What is the one ESG element that directly impacts valuation in carbon-sensitive sectors?
A. Governance
B. Currency hedging
C. Environmental risks
D. Economic cycle
Answer: C
Q2: ESG integration into investment decision-making supports analysts:
A. Eliminate all risks of investing in the venture
B. Ignore dividend trends
C. Assess the long-term viability of a business
D. Predict inflation
Answer: C
Q3: When the ESG GRI standards are applied, they are intended for the following:
A. Equity research
B. Derivatives pricing
C. Update non-financial ESG data currently disclosed in reports
D. Market timing
Answer: C
Q4: What is the main difference between ESG integration and negative screening?
A. ESG avoids all risk
B. ESG integration involves the use of ESG data to add value
C. Returns on the portfolio are only increased by negative screening
D. ESG focuses on financial measures exclusively
Answer: B
Q5: Which of the following is the ESG rating standards provider with a focus on financial materiality in the capital markets?
A. Moody’s
B. Fitch
C. SASB
D. ISO
Answer: C
