Catch up on the latest developments in sustainability reporting
Things continue to move fast in sustainability reporting. This blog post describes the most important developments within the IFRS Foundation, the European Union, GRI, and ESG ratings.
Further consolidation around the IFRS Sustainability Disclosure Standards
As announced in our first version of the cheat sheet, the Value Reporting Foundation (VRF) and Climate Disclosure Standards Board (CDSB) have now consolidated into the International Sustainability Standards Board (ISSB.)
And given that the IFRS Foundation now governs financial and non-financial—i.e., sustainability or ESG—reporting standards, you will increasingly see the original full name, the 'International Financial Reporting Standards Foundation,' replaced by simply the 'IFRS Foundation.' Governing the 'IFRS Accounting Standards—for financial reporting—and the 'IFRS Sustainability Disclosure Standards.' (But expect many more name tweaks in the next year.)
The final first set of standards is about to be released (Q3 2023).
The EU is charging ahead—but has also had to lower its ambition.
In the last year, the European Union (EU) has charged ahead with setting up the 'EFRAG Sustainability Reporting Board' tasked with developing the 'EU Sustainability Reporting Standards'—initially called the 'EU Non-Financial Reporting Standards.'
Note the striking similarities between the ISSB, setting the IFRS Sustainability Disclosure Standards, and the EFRAG Sustainability Reporting Board, setting the EU Sustainability Reporting Standards. And the European Financial Reporting Advisory Group, now tasked with financial and non-financial reporting, being renamed EFRAG, similar to the IFRS Foundation.
The first set of EU standards is also about to be released. It is shoved through the final legislative committees and procedures to meet the deadlines set in the recent Corporate Sustainability Reporting Directive (CSRD) and earlier in the European Green Deal.
However, along the way, what to disclose and what data points to report was watered down considerably because of concerns about the reporting burden on the nearly 50,000 companies to which CSRD applies, especially for small and medium-sized businesses, first by EFRAG and very recently by the European Commission itself.
GRI is still going strong
A question that often buzzes is, 'Has GRI become redundant?' The answer is 'No'; GRI is still going strong. As the first and complete set of sustainability guidelines and standards, it is globally the most widely adopted framework. It has now dubbed itself 'the global leader for impact reporting.' GRI's focus has always been on double-materiality, not only considering financially material ESG risks and opportunities but any (material) impact an organization has on ESG topics.
With the IFRS Sustainability Disclosure Standards focussing on financial materiality, global companies will still use GRI to communicate and demonstrate accountability for their impacts on the environment, economy, and people. A good example is CLP out of Hong Kong, which publishes a sustainability report based on GRI. It is supplemental to its integrated annual report that—as a recognized front-runner on sustainability reporting— uses an early draft of the IFRS Sustainability Disclosure Standards.
GRI sees it as its mission to ensure the emerging sustainability reporting standards also consider impact materiality instead of only financial materiality.
Although this mission seemed accomplished in the EU, the recent watering down of the standards by the European Commission—which also includes a different approach to assessing what topics are material—will undoubtedly have GRI's attention.
For the next couple of years, the GRI will still have its (supplemental) place in a landscape of evolving, converging, and overlapping standards, and the 'GRI content index'—as a crossreference from an impact reporting perspective—will still be an essential reporting deliverable.
The EU has adopted yet another directive, the Corporate Sustainability Due Diligence Directive, with the snappy abbreviation "CS3D" that requires both EU and non-EU companies operating within the EU to take responsibility for their environmental and social impact as well as the impact of their suppliers.
And finally, we have seen some rebranding in the ESG ratings (agencies) space with 'Sustainalytics' now 'Morningstar Sustainalytics,' 'Vigeo Eiris (V.E)' renamed 'Moody's ESG Solutions', and ‘ISS-oekom’ now ‘ISS ESG.’
ESG Reporting Cheat Sheet
We have updated one of our most popular downloadable items, the 'ESG Reporting Cheat Sheet.' After its first publication in March 2022, many developments in sustainability reporting have occurred, and these are all incorporated in this updated version. Download our updated 'ESG Reporting Cheat Sheet' here.