Navigating the Reporting Maze
An overview of key global regulations shaping sustainability and ESG reporting, from CSRD to SEC and beyond.
Senior consultant in our London, UK team, Helen has a background in social and environmental impact, communications and stakeholder engagement.
CSRD, SEC, TCFD… it’s an alphabet soup of reporting standards, frameworks, and regulations, and it’s only growing! It’s enough for any business leader to feel overwhelmed. Businesses are increasingly required to disclose information regarding their environmental and social impacts.
Companies that used to be pushed toward transparency by stakeholders including investors, government bodies, and customers are now being required by regulators to meet rigorous new standards of disclosure.
We’ve broken down the key components of five key reporting regulations, laws, and standards that are impacting businesses around the world:
CSRD (Corporate Sustainability Reporting Directive)
CSSB (Canadian Sustainability Standards Board)
SEC (Securities and Exchange Commission) Final Rule
TCFD (Taskforce on Climate-related Financial Disclosures)
GRI (Global Reporting Initiative)
CSRD EU Reporting Standard
What is it?
The CSRD replaces the Non-Financial Reporting Directive (NFRD). It is wider in scope and aims to bring sustainability reporting to the same level as financial reporting for all publicly traded companies in the EU market. Companies must report against the European Sustainability Reporting Standards (ESRS) in order to comply with the directive.
Who does it cover?
The reporting obligation applies to all publicly traded companies in the EU market, specifically…
- all publicly traded companies on the EU-regulated market (including listed SMEs, but no micro-enterprises)
- all large companies exceeding two of the three following criteria (as per the Accounting Directive 2013/34/EU):
- 250 employees during the financial year
- balance sheet totalling EUR 20 million or more
- net turnover of EUR 40 million or more
- non-EU companies generating a net turnover of more than €150 million in the EU and that have at least one subsidiary or branch in the EU must follow the criteria applicable to EU companies
Companies covered by the NFRD must publish their first CSRD-compliant report in 2025 covering 2024 activity.
Key requirements
Sustainability-related data must be disclosed within the company’s annual report alongside financial performance. Third-party assurance of sustainability reporting will be mandatory.
What does this mean for you?
If you have a significant presence in the EU, your company, or part of your company, will likely be subject to this legislation. One of the key requirements is that companies show evidence of having carried out a double materiality assessment to identify their material topics that are then included within the report. If you haven’t carried out a materiality assessment before, it’s worth familiarising yourself with these requirements.
Note also that the standards require disclosure on all material environmental and social topics… i.e. more than just climate. Developing a strategy to manage and improve impact across all key material topics is therefore vital, and would need to be disclosed as part of the reporting requirements.
What is it?
Mandatory ESG Disclosures within two standards (CSDS1 and 2). These are aligned with the international sustainability reporting standards (IFRS 1 and 2), as developed by the International Sustainability Standards Board (ISSB), with several Canada-specific modifications. The CSDSs are currently out for consultation and should be implemented in 2025 (depending on feedback following consultation).
Who does it cover?
Canadian businesses, with size and scope to be confirmed following consultation. It is likely to be phased in, with the largest companies reporting earlier than small/medium-sized businesses.
CSSB Reporting Standards
Key requirements
Two standards, as per IFRS:
CSDS 1: General Requirements for Disclosure of Sustainability-related Financial Information.
CSDS 2: Climate-related Disclosures (aligned to TCFD).
What does this mean for you?
If you are a Canadian business or have a significant presence in Canada, you are likely to be impacted by this legislation. This impact would be either direct (required to report against these requirements) or indirect (requested to disclose certain information as a supplier, customer, or client of a reporting business). This legislation is focused on general and climate-related disclosures, so measuring, tracking and reporting on your greenhouse gas emissions will be required to align with the likely requirements of the CSSB.
SEC Final Rule
What is it?
Final ruling on climate-related disclosures required of all companies registered with the SEC.
Who does it cover?
Applies to all public companies registered with the SEC, including foreign companies. This includes…
- Large Accelerated Filers (LAFs)—a company with a public float of greater than USD $700m that has filed at least one annual report
- Accelerated Filers (AFs) (except SRCs and EDFs)—a company with a public float of between USD $75m and $700m that has filed at least one annual report
- Smaller Reporting Companies (SRCs), Emerging Growth Funds (EGFs) and Non-Accelerated Filers (NAFs)
Exact timings and the nature of requirements vary according to the company typology. LAFs, for example, will be required to disclose earlier and disclose more information than SRCs.
Key requirements
The ruling came into effect in early March 2024. Disclosures will be required starting with annual reports for the period ending December 31, 2025. Several disclosures are required, including…
- Governance and oversight of material climate-related risks
- The material impact of climate risks on the company’s strategy, business model, and outlook
- Risk management processes for material climate-related risks
- Material climate targets and goals
- Material Scope 1 and Scope 2 GHG emissions, (for LAFs only)
- Note this is less than European regulation and ISSB requirements, with disclosures focused specifically on climate-related risk management and no required disclosure of Scope 3 emissions
What does this mean for you?
A publicly listed business in the USA will have to report according to the requirements in the final rule. The requirements of this legislation are less stringent than other standards described in this article; however, businesses may still be required to disclose above and beyond the SEC Final Rule, due to the requirements of other, more ambitious reporting legislation such as the CSRD and California’s SB 253.
TCFD Reporting Standard
What is it?
The Taskforce on Climate-related Financial Disclosure is a list of relevant disclosures that companies should provide so that investors, lenders, and other key stakeholders can accurately understand how they are managing climate-related financial risks.
Who does it cover?
The TCFD has formed the basis for climate-related risk disclosure in multiple jurisdictions and forms the basis of climate-related disclosure in other international reporting standards (e.g. CSRD and ISSB). It is mandatory in the UK, where organizations with more than 500 employees (publicly listed and private) must report against the TCFD recommendations.
Key requirements
The TCFD requires 11 disclosures across four key pillars:
- Governance
- Strategy
- Risk management
- Metrics and targets
The metrics and targets pillar is seen as the ‘connective tissue’ between all other disclosure requirements, with measurement and disclosure of GHG emissions held as a critical component to understanding an organisation’s exposure to and management of climate-related risks.
What does this mean for you?
This reporting standard, and its incorporation into a lot of existing and new reporting standards and legislation, demonstrates that there is now general consensus that climate change represents a financial risk and opportunity to be managed alongside other factors as part of good business practice.
Identifying your governance approach to measuring, tracking, reporting and managing your business strategy to account for these risks and opportunities will be vital to remain in line with the requirements of this standard.
GRI Reporting Standards
What is it?
The Global Reporting Initiative is a suite of voluntary global reporting standards for disclosure of organizations’ impacts across key environmental, social, and governance topics. The GRI is the most widely used and trusted framework for voluntary reporting on sustainability and has served as the basis for many other frameworks and standards.
Who does it cover?
The standards are voluntary, and the latest Universal Standards are designed to be used by organizations of any size when disclosing their sustainability impacts.
Key requirements
Each GRI Standard contains disclosures that are either required or recommended. To report in accordance with the GRI standards, a company must…
- Apply the reporting principles
- Report the disclosures in GRI 2: General Disclosures 2021
- Determine material topics
- Report the disclosures in GRI 3: Material Topics 2021
- Report disclosures from the GRI Topic Standards for each material topic
- Provide reasons for the omission of disclosures and requirements that the company cannot comply with
- Publish a GRI content index
- Provide a statement of use
- Notify GRI
What does this mean for you?
The GRI is one of the most comprehensive, impact-focused frameworks and standards to use in your reporting, and is therefore recommended to ensure your reporting remains compliant and ahead of the curve. We recommend developing a roadmap that will ensure you’re reporting according to the requirements of this standard that will ensure you are addressing these topics comprehensively and with the appropriate level of ambition.
Ok, a lot to do….so what do you need to do to get ready?
It can seem daunting to begin this reporting journey, but like everything, aligning to these new standards can be tackled one step at a time. To begin, identify and prioritize your sustainability strategy by conducting a double materiality assessment. This will inform your areas of focus for your strategy and your report.
Stressed about incoming regulations? We can help set up your organization for success, ensuring you are ready for current and future sustainability legislation. Get in touch.
