In part I of this article we presented in detail all the different standrads, metric tools, legislations and directives that are available and all sustainability professionals must be skilled in.
How can C-level executives navigate this “brave new world” and not get mired in the maze of acronyms that surrounds the term corporate sustainability?
As a general rule we could say that a company, depending on its needs, can choose which tools and standards to follow, or simultaneously a combination of frameworks to base its report upon.
Some factors that should be considered in order to determine which frameworks to choose, are:
- If the report is mandated by government regulation you might want to check which frameworks the regulation accepts and/or if there is a particular submission format.
- If you belong to a particular industry segment, you might want to choose the framework that is more favored for disclosures over others. For example, GRESB (Global Real Estate Sustainability Benchmark) for the real estate sector.
- What disclosures the standards are used for, for e.g., GHG Protocol for greenhouse gas emissions.
It is also imperative to be up to speed with all the new disclosure laws the U.S. and the EU are adopting in the past two years. In April 2021, the EU released a Corporate Sustainability Reporting Directive (CSRD) that, coming into effect in 2023, aims to improve upon the existing nonfinancial disclosure law by providing clearer and more streamlined reporting standards.
The U.S. Securities and Exchange Commission (SEC) in March 2022, took a major step by proposing a new set of rules on climate-related disclosures to provide greater transparency for investors. The SEC’s proposal will have a phase-in date that varies by company size, the first of which will be the 2023 fiscal year. Keep in mind that there is also a third-party standard for sustainability reporting that is emerging. In November 2021, the International Financial Reporting Standards (IFRS) Foundation, which administers the IFRS accounting standards, established the International Sustainability Standards Board (ISSB) aiming to create a unified set of sustainability disclosure standards. ISSB appears to be closer in spirit to the SEC’s investor-focused regulations and was endorsed by the G-7 and the G-20.
It is evident that due to the lack of direct comparability between the disclosure standards of the U.S. and the EU, frictions might be created in transatlantic flow of trade and investment, making the whole situation even more challenging for sustainability professionals.
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