Regulatory compliance
An emerging trend is organisations looking to weave their sustainability strategy into their corporate strategy, to both satisfy disclosure requirements, but also provide investors with more insightful data to inform their decision making.
Aside from compliance with regulatory disclosure requirements, developing this capability to create a data-informed narrative could facilitate better access to sustainable finance products from investors.
This confers a potentially significant competitive advantage and will help the sustainability flywheel spin faster.
We are helping our clients develop both their reporting capability as well as their access to the supporting data.
We can help clients create their narrative and develop the required processes, practices and governance to be able to confidently articulate this strategy to their various stakeholders - critically, using data to support the narrative.
Organisations may want to invest in new software, such as carbon accounting software (organisational emissions) or life cycle analysis software (more granular, product level emissions), along with the processes & systems required to collect, collate, report and inform decision making (potentially for internal carbon pricing schemes etc)..
To help companies standardise and automate parts of their reporting process, we can advise on reporting software which can facilitate both financial & non-financial disclosure, such as from vendors like Workiva.
We can also help clients with their supply chain strategy, as this is often the most complex sustainability challenge for organisations.
For those interested in the various regulations in force (or coming into force), ChatGPT has provided a handy summary!
SECR (UK)
NFDR (EU)
EU Taxonomy (EU)
CSRD (EU - coming soon)
SEC enhanced reporting (US - coming soon)
TCFD (Global - mandatory depending on entity & location)
SFDR (EU - mandatory)
GRI & CDP (Global - voluntary reporting)
SBTi (Global - Science Based Targets)
UK: The Companies Act 2006 requires large companies to report on their social and environmental impacts. The UK government has also introduced the Streamlined Energy and Carbon Reporting (SECR) regulations, which require large companies to report on their energy consumption and greenhouse gas emissions.
EU: The EU Non-Financial Reporting Directive (NFDR) requires large companies to report on their policies, risks, and outcomes relating to environmental, social, and governance issues.
The EU Taxonomy Regulation provides a framework for sustainable finance by defining environmentally sustainable economic activities.
US: The Securities and Exchange Commission (SEC) requires public companies to disclose material information about risks and opportunities relating to climate change and other sustainability factors.
The Environmental Protection Agency (EPA) regulates emissions from industrial sources and sets standards for air and water quality.
In addition to these regulations, there are also a number of voluntary reporting frameworks that companies may choose to follow, such as the Global Reporting Initiative (GRI) Standards, the Carbon Disclosure Project (CDP) or the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. These frameworks provide guidance on how to report on sustainability issues in a standardised and transparent way.
The Sustainable Finance Disclosure Regulation (SFDR) is an EU regulation that requires financial market participants and advisers to disclose information on the integration of sustainability risks and factors in their investment decision-making processes.
The EU Corporate Sustainability Reporting Directive (CSRD) is a proposed new reporting standard that will replace the existing Non-Financial Reporting Directive (NFRD). The CSRD aims to improve the quality, consistency, and comparability of sustainability reporting across the EU.
The main difference between the two directives is that the CSRD will extend the scope of reporting to all large companies, regardless of whether they are listed or not, whereas the NFRD only applies to listed companies.
This means that the CSRD will cover a much wider range of companies, including SMEs, and will require them to report on a broader range of sustainability issues.
The CSRD will also introduce more prescriptive reporting requirements, including the use of digital reporting formats and the adoption of international sustainability reporting standards, such as the Global Reporting Initiative (GRI) Standards or the Sustainability Accounting Standards Board (SASB) Standards.
The CSRD will also require companies to report on a wider range of sustainability issues, such as human rights, gender equality, and biodiversity.
Overall, the CSRD represents a significant step towards harmonising sustainability reporting across the EU and promoting sustainable business practices.
