Trialogue’s Tina Playne unpacks why an integrated sustainability approach is better than an ESG focus when it comes to reporting your company’s impact.
The world is facing resource depletion, poverty, climate change, unemployment, inequity, social displacement and more, putting more pressure on businesses to drive shared value and operate in a responsible, purpose-driven way.
Over the last 50 years, how we view and create value has changed. “In the 1970s, shareholder value was important. In the 1990s, shared value was important. In the 2020s, integrated value became important. This is where ESG comes in,” explained Trialogue divisional head of sustainability and ESG advisory Tina Playne at a Finance Indaba 2024 session on sustainability.
“As a result, finance teams have to incorporate ESG metrics into their reporting. But for many this is a daunting space, governed by complex standards and requirements,” Tina pointed out.
“There is an overwhelming number of options available in terms of disclosure standards and frameworks, making it hard to know where to begin and what your next step will be. Welcome to a whole new plethora of acronyms,” she said as she unpacked the alphabet soup that has come with ESG reporting.
She listed some of the most prominent ones currently, including:
- The Global Reporting Initiative (GRI) provides all organisations with standards for reporting environmental, social and economic performance, as well as governance and financial matters.
- The Carbon Disclosure Project (CDP) collects and analyses environmental data and information disclosed by companies and governments to help them measure, manage and reduce their carbon footprint.
- The Task Force on Climate-Related Financial Disclosures (TCFD) establishes the principles that underline the Sustainability Accounting Standards Board (SASB), derived from the Integrated Reporting Framework (IRC).
- Sustainable Development Goals (SDGs), which have been adopted by the UN as part of the 2030 Agenda for Sustainable Development.
“These provide a global blueprint to improve the lives and prospects of all people, but they are not mutually exclusive,” Tina noted. “When you’re selecting frameworks, you should consider sustainable goals in the context of your industry, regulations and stakeholder expectations.”
IFRS for sustainability
Tina said that we’re also seeing a convergence of standards. “ESG standards were slow to develop and disjointed at first, but IFRS has been on a massive conversion initiative and has come up with IFRS S2, which provides guidance on climate-related disclosures.”
IFRS S1 outlines the comprehensive disclosure requirements for sustainability risks and opportunities, whereas IFRS S2 (which complements IFRS S1) provides specific guidance on climate-related disclosures.
She explained that the IRC is a useful approach to reporting in terms of guiding principles and content elements for reporting sustainability and ESG. “It’s recognised as the go-to standard and forms the basis of a variety of reporting standards. It is also absorbed within IFRS S1 on general reporting requirements.”
Because many South African organisations are already using IFRS S1 in their organisation, Tina expects they will also adopt IFRS S2. “We’re likely to see these mandated by January 2026, so it’s time for organisations to start preparing for it now.”
Tina then offered attendees some advice ahead of the 2026 deadline:
- Start planning for ISSB adoption now
- Set up multidisciplinary working groups, because it can’t sit in the sustainability office. You need input from finance, risk, HR and operations.
- Decide what your sustainability risks and opportunities are and create a policy around them.
- Initiate a serious non-financial data drive in your organisation and try to find some of your ESG data that’s already in the system. And remember to put good data governance in place.
- Apply transitional relief and proportionality
- These new requirements and standards will place immense pressure on your reporting teams, so it’s important to use proportionality. “From a timing point of view, year one will require S2 compliance and year two will require S1,” Tina said. “You are also allowed to report half-year and not with your financial reporting cycle for year one. You’re also exempt from providing comparative information.”
She added that organisations need to prioritise information that is available without undue costs or resources. “The effort you put in needs to be proportional to the benefits, so you need to use your judgement when deciding what is reasonable and reliable information. Take the journey slowly, because while you can always go back on a commitment made, you rather want to be sure that your commitments are quantifiable and that you can stick to them.”
Use an integrated approach instead of an ESG approach
When it comes to sustainability, Tina explained that an integrated approach is much better than an ESG focus. “A narrow ESG view will not enable you to report the broad standards which will be required. Shareholders and stakeholders want to see how you actually set up and execute your sustainability ambitions. An integrated model enables leadership to measure the maturity and embedment of sustainability,”
She listed the five pillars where sustainability has to be embedded in every organisation, which includes:
- Sustainability ambition
- Leadership and governance
- Systems and processes
- Performance metrics, management and assurance
- Communication and messaging
“Ultimately, it’s up to an organisation’s leaders and executives to embed sustainability across the organisation, and only when it’s fully integrated will you produce the robust, ever-improving disclosures and reports that your stakeholders wish to see,” she concluded.
