Sustainability reporting and its laws, regulations, and frameworks

Currently, the timeline is set for 1 January 2024. This means all companies in scope need to comply with CSRD for FY 2023.

However, multiple advisory bodies have proposed to move the timeline of the CSRD. There are several options:

• Postponing the timeline by 1 or 2 years
• Starting with the bigger companies and letting smaller companies join later
• A combination of the options mentioned above

The implications of CSRD are expected to be of great magnitude for organizations. Whatever the timeline will be, we recommend companies to start preparing for CSRD already.

The EU taxonomy focuses on six environmental objectives:

• climate change mitigation;
• climate change adaptation;
• sustainable use and protection of water and marine resources;
• transition to a circular economy;
• pollution prevention and control;
• protection and restoration of biodiversity and ecosystems.

For listed companies with more than 500 employees, the first two objectives were already in scope for this year’s reporting. The Regulatory Technical Standards (RTS) drafts from the other four objectives have been published recently.

Note that we will publish a study on EU Taxonomy reporting in a couple of weeks. In this report, we analyzed this year’s reporting from large, listed companies on eligibility for Climate Change Mitigation and Climate Change Adaptation.

The Taskforce on Nature-related Financial Disclosures (TNFD) develops a risk management and disclosure framework for organizations to report and act on nature-related risks. Building on the TCFD, the TNFD aims to support a shift in global financial flows from nature-negative outcomes toward nature-positive outcomes. It is a voluntary, global and market-led initiative.

Beta versions of the TNFD framework, which market participants can test, will be published in March, June, and October 2022 and in February and September 2023. The TNFD aims to publish its final recommendations in late 2023.

From 1 January 2023, the revised GRI standards need to be implemented. Therefore, to report in accordance with GRI 2021, we recommend looking into the revised standards already.

In November 2021, the International Sustainability Standards Board was formed (ISSB). The ISSB will develop a global baseline of sustainability disclosure standards that provides companies with standardized rules for reporting on ESG data.

The ISSB will build on all the global integrated reporting initiatives. It will merge the Climate Disclosure Standards Board (CDSB) and Value Reporting Foundation (VRF), including the SASB Standards and the Integrated Reporting Framework.

The ISSB standards integrate recommendations of Sustainability reporting entities, such as the Task Force on Climate-Related Financial Disclosures (TCFD). In addition, they collaborate with the European Sustainability Reporting Standards (ESRS) and the Global Reporting Initiative (GRI).

Recently, two exposure drafts have been published:

1. General Requirements for Disclosure of Sustainability related Financial Information
2. Climate-related Disclosures

The exposure draft for general reporting requirements will require entities to:

• Disclose material information about all the significant sustainability-related risks and opportunities to which it is exposed.
• Include proposed requirements and guidance to support the disclosure of material information about significant sustainability-related risks and opportunities.
• Explain the connections between different pieces of information, including the links between various sustainability-related risks and opportunities and knowledge in the entity’s financial statements.
• Disclose sustainability-related financial information as part of, i.e., at the same time as, the entity’s financial reporting.

The exposure draft on climate disclosure will require an entity to provide information on the following topics:

• Governance: governance processes, controls, and procedures an entity uses to monitor and manage climate-related risks and opportunities.
• Strategy: the climate-related risks and opportunities that could enhance, threaten, or change an entity’s business model and strategy over the short, medium, and long term.
• Risk management: how climate-related risks and opportunities are identified, assessed, managed, and mitigated by an entity.
• Metrics and targets: the metrics and targets used to manage and monitor an entity’s performance regarding climate-related risks and opportunities.

Any organization can use the ISSB Standards – regardless of size, type, geographic location or reporting experience. The ISSB standards allow existing and potential investors, lenders, and other creditors to compare and value companies based on their financial and sustainability performance data.

Next steps and timeline of ISSB