Sustainability reporting standards are a critical tool for companies to communicate their environmental, social, and governance (ESG) performance to stakeholders. But, the landscape of sustainability reporting standards can be confusing. In this article, we will provide an overview of the most critical standards to keep in mind in 2023.
The rise of sustainability reporting laws and regulations is making it essential for businesses to consider sustainability. Companies that fail to do so may face penalties or lose out on opportunities.
Understanding the landscape of existing and upcoming ESG standards can be intimidating, especially with the ‘alphabet soup’ of acronyms to keep track of. To help you stay informed, here are some key ESG standards that you should take note of in 2023 and 2024. This page will be continually updated, so be sure to check back for the latest information.
Also, be sure to also see our comprehensive 2023 guide to ESG disclosure regulations, to learn how your business may be required to report in the future.
The European Sustainability Reporting Standards (ESRS)
Origin
European Financial Reporting Advisory Group (EFRAG)
Who is it for
Companies within the scope of the Corporate Sustainability Reporting Directive (CSRD)
Important dates to know
31 July – Final rules were published
Purpose
To help investors, consumers, policymakers, and other stakeholders evaluate large companies’ non-financial performance
Background:
The European Sustainability Reporting Standards (ESRS) require companies to report on their environmental and social impacts, as well as how sustainability issues impact their financial performance.
There are 11 topic standards that fall under the three ESG areas:
- Environmental: Climate change, pollution, water and marine sources, biodiversity and ecosystems, resource and circular economy.
- Social: Workforce, workers in the value chain, affected communities, consumers and end users.
- Governance: Governance, risk management, and internal control; business conduct.
Companies within the scope of the CSRD will need to begin reporting to these standards for the first time in the financial year 2024 for reports that will be published in 2025.
The final rules have been met with some criticism for weakening some of the stricter sections. One notable adjustment is that all companies will now have more flexibility to determine what information is “material” and should be included in their reports. This is a departure from the previous rules, which were more prescriptive. Some have argued that this could lead to less transparency, while others believe that it will give companies more control over their reporting.
The International Sustainability Standards Board (ISSB)
Origin
International Financial Reporting Standards (IFRS)
Who is it for
Voluntary for capital market participants
Important dates to know
June 27, 2023 – The two (S1 & S2) finalised standards were announced
Purpose
To create a global baseline of consistent and detailed sustainability disclosures
Background
The S1 and S2 standards were created by the ISSB, an offshoot body of the non-profit the IFRS Foundation. The foundation had a single guiding mission, “to develop a high-quality, understandable, enforceable and globally accepted” set of sustainability reporting standards, making the reporting landscape much more accessible – the S1 and S2 standards look to do just that.
These standards offer a comprehensive global baseline of sustainability disclosures and have been embraced by investors, companies, governments, and regulators, providing a global baseline for understanding sustainability risks and opportunities.
- IFRS S1 is a more general standard that applies to all sustainability-related risks and opportunities
- IFRS S2 is a more specific standard that focuses on climate-related risks and opportunities.
Companies can voluntarily apply the S1 and S2 standards. But, in the future, individual countries may decide to make reporting to these standards mandatory for large businesses, such as the UK, who has recently announced its endorsement of them in its own Sustainability Disclosure Standards.
UK Sustainability Disclosure Standards (UK SDS)
Origin
UK Government
Who is it for
UK-registered entities
Important dates to know
- August 2, 2023 – First announced by the UK Government
- July 2024 – The UK Government looks to make a final decision on endorsement
Purpose
To provide a globally consistent approach to disclosing environmental risks faced by companies, enabling investors and other stakeholders to make better-informed decisions
Background
The UK Sustainability Disclosure Standards (SDS) will look to establish a framework for companies to disclose information about the sustainability-related risks and opportunities they face. The SDS standards will form the basis of any future legislation or regulation in the UK requiring companies to report on sustainability matters, including climate change.
The standards will be based on those from the ISSB and will only divert from the global baseline if absolutely necessary for UK-specific matters.
In its mobilising green investment: 2023 green finance strategy, the UK government laid plans to establish a framework to assess the suitability of IFRS S1 and IFRS S2 for endorsement in the UK, and the creation of the first 2 UK SDS. The UK government aims to make endorsement decisions on the first 2 standards by July 2024.
International Standard on Sustainability Assurance (ISSA)
Origin
The International Auditing and Assurance Standards Board (IAASB)
Who is it for
Professional accountant and non-accountant assurance practitioners
Important dates to know
- July 2, 2023 – Proposal of standards was announced
- December 1, 2023 – Stakeholders have until this time to provide feedback and insights
Purpose
To provide confidence over sustainability information disclosed in sustainability reports
Background
The ISSA 5000 standard proposal directly responds to the International Organisation of Securities Commissions (IOSCO) recommendations and complements the work of other standard setters. It is a principles-based, overarching standard that can be used for both limited and reasonable assurance engagements on sustainability information reported across any sustainability topic.
The standard is designed to work with sustainability information prepared under any suitable reporting framework, including those issued by the European Union, the International Sustainability Standards Board (ISSB), the Global Reporting Initiative (GRI), the International Organisation for Standardisation, and others. ISSA 5000 is profession-agnostic, meaning that it can be used by both professional accountants and non-accountant assurance practitioners.
Global Reporting Initiative (GRI) standard
Origin
Global Reporting Initiative (GRI)
Who is it for
Any organisation – large or small, private or public
Dates to know
October 2021, and came into effect for reporting in January 2023
Purpose
To help companies report on their impacts on the economy, environment, and people in a comparable and credible way
Background
The GRI Standards are a tool that organisations can use to report their impacts in a way that is transparent to stakeholders and other interested parties. The standards are structured, so they provide a consistent framework for reporting. This makes it easier for stakeholders to compare the performance of different organisations.
The system consists of three series: the GRI Topic Standards, the GRI Sector Standards, and the GRI Universal Standards.
- The topic standards list disclosures relevant to a particular topic, such as environmental impacts, labour practices, or human rights.
- The sector standards are tailored to specific sectors, such as the food and beverage industry or the financial services industry.
- The universal standards apply to all organisations, regardless of their size or sector.
By using the GRI Standards, organisations can identify the topics that are material to their operations and report on their positive and negative contributions to sustainable development.
Anything we missed?
Do you have any questions about the standards that weren’t covered in this article? Please don’t hesitate to reach out to us using our contact form, and we can look to fill those knowledge gaps.
