ESG Reporting – future proofing your business

Managing and reporting ESG risk is already a significant challenge, and over the next three to four years, it’s going to become even more complex.

Two new European Directives focused on corporate sustainability will require unprecedented levels of disclosure on human rights and environmental risks, affecting every company with a substantive presence in the EU – and including UK, US and other non-EU based businesses with EU subsidiaries.

At the same time, a number of leading institutional investors are collaborating to create a new biodiversity reporting framework under the Taskforce on Nature-Related Financial Disclosures (TNFD). This “TCFD for biodiversity” would require companies to assess and disclose all material risks related to their impact on ecosystems (such as waste disposal, for example) and their dependency on natural systems (such as water resources) for value creation. The SEC has also proposed a new rule that would require US businesses to disclose details on their emissions, climate related risks, targets and transition plans in annual reports.

And over the same period, the new International Sustainability Standards Board (ISSB) will take shape in order to bring about a convergence between financial reporting and ESG reporting – and achieve much greater depth in (and scrutiny of) how companies report their most material ESG risks.

The net effect of all of the above: the biggest step change in ESG reporting in a generation, affecting thousands of companies, and full of hazards for the unprepared and unaware.