COVID-19 pandemic is finally getting wrestled down, and itis time to get businesses back on track. This effort to get back is coming with new demands and pressure for businesses fromdifferent stakeholders. It is truet hatwe are all yearning to get businesses, local and global economies back to full operations, but this has to bedone more responsibly.
ESG sustainabilityreporting has become an important driver of the new business world, helping to definebothinternal and externalprocesses. Keepreading as we look at the developmentsthat are likely to impact companies, including the most important things to watch for.
Europe and the UK
Today, the most advancedpolicies on ESG disclosures are in Europe, and itappearsthey are about to raise the bar evenhigher. As the EU targets a total overhaul of financiallegislation, the effects are expected in the financialsector and the entirecorporatearena. The new requirements are targeted at improvingtransparency, channel more capital to climate-related solutions, and sweep out greenwashing. Let’sdigdeeperintosome of theserequirements:
- The EU’sTaxonomyRegulationis setting a wideframeworkreferred to as Taxonomythatshareholders and investors can use to determinewhether an activityissustainable. Initially, itwasintended to targetclimate-relatedactivitiesonly but has been extended to social and governanceconsiderations.
- EU Taxonomyisexpected tounderpinotherlegislations on the bloc. As a result, companies are expected to disclosetheir information against the Taxonomy in line with the CorporateSustainabilityReporting Directive (CSRD). CSRD stretches the previousrequirements, especially for large companiesthatwereoutlined in the Non-Financial Reporting Directive (NFRD). Enterprisesthat are coveredunder CSRD includelistedSMEs, non-EU businesses, EU subsidiarycompanies, and large companies.
- The EU Commission isalsolooking at the proposal put forward for regulations on Green Bond Standard. The proposalisbeingconsideredalongside communication on a renewedsustainable finance strategythatcovers a number of areas, from capital bankrequirements to progressive workon EU Taxonomy.
The United States
In the US, one of the most notable developmentsis the recent directive to the Financial StabilityOversight Council to improve on ESG disclosures. The Biden’s administration ismovingwith speed to install a regulatoryframeworkthatwill set the guidelines for new disclosures.
Like the EU, the US federal administration wants to see more capital and efforts directedtowardsfightingclimate change and the promotion of green industries. The ultimate goal is to use ESG sustainabilityreporting to achieve net-zeroemission goals by 2050. Notably, thisis the same goal set by the Paris Climate Agreement.
- SEC targets to accelerateinvestoraccess to crucial ESG drivers, measurements and intensify pressure on listedcompanies to step up commitment to sustainability.
- Already, the US House of Representatives has passedlegislationthat mandates new ESG reporting for all listedcompanies. Althoughsomeresistancewasreportedfrom the Senate, SEC has indicatedthatit has the authority to push through the new requirementseven if congressdoes not approvethem.
- SEC ismoving a stepfurther and is planning to require all public companies to provideenough capital disclosures. Theseincludehiringpolicies, compensations, diversity, inclusion, turnover rates, and workmetrics on gender.
In this post, weonlyhighlighted the EU and the US efforts on ESG disclosures, but almosteveryregional block and country isadrifttowards building a betterplanet. If you have a company or are planning to open one, itis important to start preparing for comprehensiveESG sustainabilityreportingbecauseitis about to become the new norm.
Rememberthat ESG reporting can becomplexbecause of the different components that are involved, multiple frameworks, and stakeholder requirements. However, you can simplify the process by workingwithappropriatesustainabilityreporting software. VisitDiginextoday to get the best programs for ESG reporting.