The Common Language: Disclosure, Materiality, and Measurement

This chapter focuses on the “Common Language” layer of the Sustainable Finance Operating System, examining the principles and practices of sustainability disclosure, materiality, and measurement. It underscores the imperative of reliable ESG disclosure as the foundation for transparency and accountability, emphasizing the need to ground reported data in the real-world context of a company. The chapter also explores the significant role of materiality in filtering relevant information, detailing the distinctions between financial, impact and double materiality perspectives and their implications under different regulatory regimes. Furthermore, the chapter outlines the key measurement frameworks and standards that provide rules for quantifying performance through specific environmental, social, and governance indicators. It addresses the persistent challenges of ESG data gaps and reliability, highlighting the importance of robust data collection and verification processes. The discussion then shifts to the practical application layer, detailing the software tools and platforms companies use for ESG data management, carbon accounting, scenario analysis, and supply chain monitoring.