‘ESG reporting’ has become an incredibly complex topic to navigate, with an assortment of acronyms to keep on top of.
The below images help us understand why.
Now, if you’re one of the many businesses who are struggling to unpack the confusion about what you need to report and how – we get it – but fear not, this guide will help.
In this blog, we’re going to look at:
What ESG regulations are out there?
Which do I need to report on?
How do I report on them?
Note: This article will be updated to ensure latest ESG reporting information.
1. What ESG Regulations Are Out There?
Understanding the landscape of ESG (Environmental, Social, and Governance) regulations is crucial for any business aiming to maintain compliance and enhance its sustainability efforts.
If you don’t comply, you’ll be exposed to a number of legal, financial and reputational risks which could significantly damage your business.
Without further adieu, here’s a list of the most important ESG regulations that you need to be aware of in 2024:
European Union
The EU has been at the forefront of ESG regulations, implementing several key directives that businesses must adhere to:
Corporate Sustainability Reporting Directive (CSRD) Started: 2022 This directive expands the scope of companies required to report on sustainability, covering both large companies and listed SMEs. It mandates detailed ESG disclosures, including governance practices and environmental impacts.
Taxonomy Regulation Started: 2020 This regulation establishes a classification system for environmentally sustainable economic activities. Companies need to disclose how their operations align with these criteria.
Non-Financial Reporting Directive (NFRD) Started: 2014 Applicable to large public-interest entities with over 500 employees, NFRD requires disclosures on how companies operate and manage social and environmental challenges.
United States
In the US, the Securities and Exchange Commission (SEC) is intensifying its focus on ESG disclosures:
SEC Proposed Rules on Climate Disclosure Started: 2022 These proposed rules require publicly traded companies to disclose climate-related risks, including greenhouse gas emissions and their impact on the company's operations and financial performance.
Task Force on Climate-related Financial Disclosures (TCFD) Started: 2017, Disbanded: 2023 Established by the Financial Stability Board (FSB) in 2015, the TCFD aims to improve the reporting of climate-related financial information. As of October 2023, the TCFD’s monitoring responsibilities have been transferred to the IFRS Foundation (see IFRS below).
Dodd-Frank Wall Street Reform and Consumer Protection Act Started: 2010 Includes provisions that require companies to disclose information on conflict minerals and the payments they make to governments for the commercial development of oil, natural gas, and minerals.
United Kingdom
The UK has introduced several regulations to enhance ESG reporting:
UK Corporate Governance Code Started: 1992, Revised: 2018 Requires premium listed companies to disclose their governance practices, including board diversity and executive remuneration.
UK Sustainability Disclosure Standards (SDS) Effective: 2025 The UK will introduce the Sustainability Disclosure Standards (SDS) in January 2025. These standards require companies to disclose sustainability-related risks and opportunities, including climate impacts. Based on the IFRS Sustainability Disclosure Standards by the ISSB, the SDS aims to provide consistent, high-quality ESG information for investors and regulators, supporting the UK's Net Zero by 2050 commitment.
Global
Several international standards are gaining prominence and can guide your ESG reporting efforts:
Global Reporting Initiative (GRI) Started: 1997 GRI standards are widely used for sustainability reporting, providing a comprehensive framework for disclosing environmental, social, and governance impacts.
Sustainability Accounting Standards Board (SASB) Started: 2011 SASB standards focus on financially material sustainability information, helping companies report ESG factors that are most relevant to investors.
International Financial Reporting Standards (IFRS) Started: 2001 Overseen by the IFRS Foundation, the IFRS standards are a global framework for financial reporting that now includes sustainability-related disclosures through the International Sustainability Standards Board (ISSB). These standards help ensure consistent, high-quality reporting of ESG information across jurisdictions.
International Sustainability Standards Board (ISSB) Started: 2021 Developing global standards for sustainability-related disclosures to meet investor needs. The ISSB now oversees the TCFD’s monitoring responsibilities.
2. Which Do I Need to Report On?
Determining which ESG regulations apply to your business depends on several factors, including your location, industry, and company size.
Below is a simplified approach to help you figure out what you need to report to.
EU-based Companies: If your company operates within the EU or has significant business there, compliance with CSRD, NFRD, and the Taxonomy Regulation is mandatory.
US-based Companies: Public companies in the US should prepare to comply with the SEC’s climate disclosure rules and Dodd-Frank provisions. Adopting TCFD recommendations can also enhance your reporting.
UK-based Companies: Compliance with SECR and the UK Corporate Governance Code is essential for large and premium listed companies, whilst also preparing for SDS in 2025.
Your Industry
Certain industries, such as energy, finance, and manufacturing, face stricter ESG reporting requirements due to their significant environmental and social impacts. Check if there are any industry-specific regulations that you need to comply with.
Size and Public Status
Large Corporations and Publicly Listed Companies: These entities often have more extensive reporting obligations under various ESG regulations, including mandatory disclosures and adherence to international standards like GRI and SASB.
Small and Medium-sized Enterprises (SMEs): While smaller companies may have fewer mandatory requirements, many choose to voluntarily adopt ESG reporting standards to meet stakeholder expectations and enhance their market position.
3. How Do I Report on Them?
Reporting on ESG regulations can often feel overwhelming, but the process is largely the same for each regulation.
In involves the 5 steps below:
Identify your Required Regulation/Framework Determine what framework or regulation you need to report on. Follow the guidance on the section above to help, use our free ESG Regulation Checker Tool or Speak to our team.
Conduct a Materiality Assessment A materiality assessment identifies the most relevant ESG issues for your business and stakeholders. This assessment will help you focus on the areas that matter most for your company. Learn more about materiality assessments
Collect Data Collect data on your company’s ESG performance, including environmental impacts (e.g., carbon emissions, energy use), social factors (e.g., employee diversity, community engagement), and governance practices (e.g., board diversity, anti-corruption measures). Learn more about different metrics to track here
Prepare for Submission With your metrics collected, package them up into the standardised report (each body gives a template for submission). In some cases (like CSRD), you will have to have this report audited by a 3rd party before submission.
Publish your Report Publish your ESG report in an accessible format (many require electronic formatting like iXBRL). Once published, share the report on your company’s website or as part of your annual report.
That's it! We hope the above guide helps.
Keep an eye on this article to stay up to date with the ever-evolving landscape of ESG reporting.
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