TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting

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TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting

Reading Time: Approximately 7-8 minutes

Key Takeaway: You've probably noticed that when people talk about ESG (Environmental, Social, Governance) reporting, a lot of acronyms get thrown around – TCFD, GRI, IFRS S2, and more. It can feel like you're trying to understand a secret code, especially when your company needs to start reporting on these crucial topics. Many businesses are struggling to figure out which framework applies to them, what the differences are, and how they all fit together. This article is all about TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting, cutting through the jargon to give you a clear, simple guide. We'll explain what each acronym means, why they matter, and how they're becoming increasingly important for companies in Malaysia and globally.

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Problem: For many businesses, the world of ESG (Environmental, Social, and Governance) reporting is a confusing maze of acronyms like TCFD, GRI, and IFRS S2. This "alphabet soup" creates a significant barrier, making it hard to understand what information needs to be collected, which standards to follow, and ultimately, how to comply with growing stakeholder and regulatory demands for sustainability disclosures.

Agitate: This confusion isn't just a headache; it's a real risk. Misunderstanding TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting can lead to inadequate reporting, missed deadlines, or even a lack of strategic action on critical ESG issues. This can result in investor skepticism, reputational damage, and a lost opportunity to showcase your company's commitment to sustainability and attract new capital.

Solve: This article aims to simplify TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting by clearly explaining each framework, its purpose, and how they relate to each other. By demystifying these key standards, we'll provide a straightforward guide to help you understand your reporting obligations, streamline your data collection, and confidently communicate your company's ESG performance to the world.

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Summary

When you hear about TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting, it’s about different ways companies tell their story on environmental, social, and governance issues.

• TCFD (Task Force on Climate-related Financial Disclosures):
• Focus: Climate change risks and opportunities that affect a company's money.
• Structure: Four main areas: How the company is governed (Governance), its plans (Strategy), how it handles risks (Risk Management), and its numbers/goals (Metrics & Targets).
• Status: The TCFD itself has officially disbanded, but its recommendations are now fully integrated into the IFRS S2 standard, making it a foundational piece for climate reporting globally.
• GRI (Global Reporting Initiative):
• Focus: A broad view of how a company impacts the economy, environment, and people. It's about a company's "impacts."
• Structure: A modular set of standards covering many ESG topics (e.g., energy, water, human rights, anti-corruption).
• Status: Widely used globally for comprehensive sustainability reports for many different stakeholders, not just investors. It complements IFRS S2 by providing detailed impact metrics.
• IFRS S2 (International Financial Reporting Standards S2 - Climate-related Disclosures):
• Focus: Specifically on climate-related risks and opportunities that affect a company's financial value. This is for investors.
• Structure: Built directly on the TCFD recommendations (Governance, Strategy, Risk Management, Metrics & Targets), but often with more specific requirements and metrics. It's part of a new set of global standards from the International Sustainability Standards Board (ISSB).
• Status: Becoming mandatory in many countries, including Malaysia (through Bursa Malaysia's requirements), as a baseline for climate-related financial disclosures. It works with IFRS S1 (general sustainability disclosures).

Key Takeaway: While TCFD set the stage for climate reporting, IFRS S2 is now the global standard for investor-focused climate disclosures. GRI remains vital for broader impact-focused reporting for all stakeholders. They are often used together to provide a complete picture.

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1. Why All These Acronyms? The Rise of ESG Reporting

Not long ago, companies mainly talked about their money – profits, sales, and costs. But now, people care about much more than just financial numbers. They want to know how companies affect the world:

• The Environment: Is the company polluting? Is it using too much energy? How is it dealing with climate change?
• Society: How does it treat its workers? Is it fair to its customers? Does it help the local community?
• Governance: Is the company run honestly? Are its leaders diverse? Is there a clear plan for the future?

This is what we call ESG – Environmental, Social, and Governance. Investors, customers, employees, and even governments are all asking for this information.

Because so many different groups wanted to know different things, various ways of reporting ESG information popped up around the world. This is why we have so many acronyms, like TCFD, GRI, IFRS S2. Each one started with a slightly different goal or focus.

Think of it like this: if you want to describe a car, you could talk about its speed (like financial numbers). But now, people also want to know about its fuel efficiency (environmental), how safe it is for passengers (social), and how reliable the company that made it is (governance). Different "reporting systems" came out to help describe these different aspects.

The good news is that these different reporting systems are now trying to work together more, like pieces of a puzzle forming a clearer picture. This article will help you understand TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting so you know what each one means and why it's important for companies, especially those in Malaysia.

 

2. TCFD: The Climate Change Storyteller

What does TCFD stand for?

TCFD stands for the Task Force on Climate-related Financial Disclosures. It was created in 2015 by a group called the Financial Stability Board (FSB), which advises the G20 countries (the biggest economies in the world) on global finance.

What was its main goal?

The TCFD's main goal was to help companies tell a clear story about how climate change could affect their money, both now and in the future. They wanted investors to have good, consistent information so they could make smart decisions. For example, if a company makes money from oil, how will stricter environmental laws affect its future profits? Or if a company has factories in areas prone to floods, how will more extreme weather affect its operations?

How did TCFD ask companies to report?

TCFD suggested that companies talk about climate change in four main areas, like chapters in a book:

• 1. Governance: Who at the top (like the company's board of directors or senior management) is in charge of climate-related risks and opportunities? How do they oversee these issues?
• 2. Strategy: How does climate change fit into the company's long-term business plans? What are the possible risks (like new carbon taxes) and opportunities (like developing green products)? How would different future climate scenarios (e.g., warming of 1.5°C vs. 2°C) affect the business?
• 3. Risk Management: How does the company find, assess, and manage climate-related risks? Are these risks included in the company's overall risk management plans?
• 4. Metrics and Targets: What numbers does the company use to measure its climate performance? What goals has it set to reduce its impact? This includes things like:
• Greenhouse gas (GHG) emissions (Scope 1, 2, and 3 - we'll explain these later!)
• Amount of energy used
• Targets for reducing emissions or increasing renewable energy

What's important to know now about TCFD?

The TCFD itself officially completed its work and disbanded in July 2024. But here's the really important part: its recommendations have been fully taken over and built into the new global standards from the International Sustainability Standards Board (ISSB), especially IFRS S2.

So, while you won't report to TCFD anymore, its ideas are living on and are now a core part of the new mandatory climate reporting rules. If a company reports using IFRS S2 (which we'll discuss next), it will automatically be meeting the TCFD recommendations.

 

3. IFRS S2: The New Global Climate Rulebook for Investors

What does IFRS S2 stand for?

IFRS S2 stands for International Financial Reporting Standards S2 – Climate-related Disclosures. It's one of the first two big standards released by a new group called the International Sustainability Standards Board (ISSB), which is part of the IFRS Foundation (the same group that makes the rules for how companies report their financial numbers globally).

What is its main goal?

IFRS S2's main goal is to create a single, global set of rules for companies to report on climate-related risks and opportunities that are important for investors. It wants to make sure investors get consistent, comparable, and reliable information to help them make investment decisions.

How does it relate to TCFD?

This is where it gets less like "alphabet soup" and more like a clear path! IFRS S2 is built directly on the TCFD recommendations. It uses the same four pillars: Governance, Strategy, Risk Management, and Metrics & Targets. However, IFRS S2 often goes into more detail and has more specific requirements for what companies need to disclose, especially for the "Metrics & Targets" section.

For example, IFRS S2 specifically requires companies to measure their greenhouse gas (GHG) emissions using the GHG Protocol (another standard for measuring carbon emissions). It requires disclosure of Scope 1 (direct emissions from a company's own operations) and Scope 2 (indirect emissions from electricity/heat purchased by the company) emissions. It also asks for Scope 3 emissions (other indirect emissions in the value chain, like from suppliers or customers) but often with some flexibility or "transition relief" for a few years, depending on the country.

Why is IFRS S2 important for Malaysian companies?

Malaysia is adopting IFRS S1 and IFRS S2! Bursa Malaysia (our stock exchange) now requires public listed companies to use IFRS S1 and IFRS S2 as the baseline for their sustainability reporting. This is a big deal!

• Phased adoption: Like we mentioned in the previous blog post, it's happening in phases:
• Large Main Market companies (RM2 billion market value or more) started preparing data from January 1, 2025 (for annual reports ending on or after December 31, 2025).
• Other Main Market companies start a year later.
• ACE Market companies start even later.
• Climate-first approach: During the initial years, Malaysian companies are allowed to focus mainly on climate-related disclosures (IFRS S2) and apply IFRS S1 only for climate-related aspects. This is called a "climate-first" approach.
• No double reporting for TCFD: If you follow IFRS S2, you automatically meet TCFD recommendations, so you don't need to report separately for TCFD.

 

4. GRI: The Broad Sustainability Reporter for Everyone

What does GRI stand for?

GRI stands for the Global Reporting Initiative. It was established way back in 1997, making it one of the oldest and most widely used sets of sustainability reporting standards in the world.

What is its main goal?

Unlike TCFD and IFRS S2, which focus heavily on financial impacts for investors, GRI's main goal is much broader. GRI helps companies report on their impacts on the economy, environment, and people for all stakeholders – not just investors. This includes employees, customers, local communities, governments, and NGOs.

Think of it this way:

• IFRS S2/TCFD: How climate change affects our company's finances? (Outside-in view, for investors)
• GRI: How our company affects the planet and people? (Inside-out view, for a wide range of stakeholders)

How does GRI ask companies to report?

GRI provides a modular set of Standards that cover a huge range of ESG topics. They are structured like this:

• Universal Standards (GRI 1, 2, 3): These are like the foundation that all companies use. They cover things like how a company reports (GRI 1), general disclosures about the company (GRI 2), and how it identifies its most important sustainability topics (called "material topics" - GRI 3).
• Topic-Specific Standards (GRI 200, 300, 400 series): These are like individual chapters for specific ESG issues.
• GRI 200 series: Economic topics (e.g., economic performance, anti-corruption).
• GRI 300 series: Environmental topics (e.g., energy, water, waste, biodiversity, emissions).
• GRI 400 series: Social topics (e.g., employment, health & safety, training, human rights, community relations).

Companies select the topic-specific standards that are "material" (most important) to their business and then report on the specific metrics and disclosures listed in those standards.

Is GRI mandatory in Malaysia?

While Bursa Malaysia is mandating IFRS S1 and S2, GRI Standards are generally not mandatory by law in Malaysia. However, many Malaysian companies still use GRI because:

• Global Best Practice: It's a globally recognized standard, making their reports understood by international audiences.
• Comprehensive Reporting: It allows companies to tell a much more complete sustainability story, beyond just climate financial risks, which is what many stakeholders want to see.
• Complements IFRS S2: While IFRS S2 focuses on financial impacts of climate, GRI can provide the broader impact data (e.g., detailed energy consumption across all operations, specific waste reduction initiatives, social programs). The ISSB and GRI have even released guidance on how to use IFRS S2 and GRI Standards together for comprehensive reporting.

 

5. How Do They All Fit Together? (The Puzzle Solved)

So, instead of seeing TCFD, GRI, IFRS S2 as an "alphabet soup" of competing rules, think of them as complementary tools that serve different but related purposes, and increasingly, they are designed to work together.

Here's the simplified picture:

• TCFD laid the groundwork for climate-related financial disclosures. It showed companies what to report in terms of governance, strategy, risk management, and metrics.
• IFRS S2 is the evolution and concretization of TCFD. It takes the TCFD framework and adds specific, mandatory requirements and metrics for climate-related financial disclosures, making it the global baseline for investors. If you're using IFRS S2, you're automatically TCFD-aligned.
• GRI provides a broader picture of a company's sustainability impacts. It's about how your company affects the world, not just how the world (especially climate change) affects your company's money. GRI covers a much wider range of environmental and social issues in detail.

Think of it like this:

• IFRS S2: This is your company's financial health check regarding climate change. It tells investors how climate risks and opportunities might impact your bottom line and future value. It's often mandatory for listed companies in Malaysia now.
• GRI: This is your company's overall sustainability report card. It tells everyone (investors, customers, employees, community) about your company's wider environmental and social efforts, how you manage waste, treat employees, engage with communities, and contribute to sustainable development. It's often done voluntarily but is highly expected by many stakeholders.

Many companies will actually use both IFRS S2 and GRI.

• They'll use IFRS S2 to meet their mandatory reporting requirements for investors, specifically for climate-related financial risks and opportunities.
• They'll use GRI to prepare a more comprehensive sustainability report for a wider group of stakeholders, detailing their broader impacts on the environment and society.

The good news is that the ISSB (who developed IFRS S1 and S2) and GRI are working together to make sure their standards can be used side-by-side without too much extra work. For example, the emissions data you collect for IFRS S2 can often be used for your GRI report too. This means less "double counting" and more efficient reporting for companies.

In Summary understanding TCFD, GRI, IFRS S2: Decoding the Alphabet Soup of ESG Reporting is no longer a niche concern; it's a fundamental requirement for modern businesses, especially for public listed companies in Malaysia. We've seen how TCFD pioneered the framework for climate-related financial disclosures, which has now been seamlessly integrated and made more prescriptive by IFRS S2 as the global standard for investor-focused climate reporting. Simultaneously, GRI continues to be the world's most widely adopted framework for comprehensive, impact-focused sustainability reporting, catering to a broader range of stakeholders beyond just investors. While IFRS S2 addresses the financial implications of climate, GRI provides granular detail on your company's wider impacts on the environment and society. By grasping these distinct yet increasingly complementary roles, your company can navigate the complexities of ESG reporting, meet regulatory mandates from Bursa Malaysia, enhance transparency, and ultimately build trust with all your stakeholders.

Are you ready to streamline your ESG reporting and transform complex acronyms into clear, actionable insights? Don't let the "alphabet soup" deter you from effective sustainability disclosure. Our experienced team specializes in demystifying ESG frameworks like TCFD, GRI, and IFRS S2, helping companies in Malaysia understand their obligations, gather the right data, and craft compelling, compliant sustainability reports. Whether you need assistance with IFRS S2 adoption for Bursa Malaysia's requirements or want to enhance your broader GRI-aligned reporting, we're here to guide you every step of the way. Unlock the strategic value of robust ESG reporting for your business! WhatsApp or call us today at 0133006284 for a detailed consultation.