Introduction
The landscape of ESG regulations is rapidly evolving, with updates coming in on a monthly or sometimes even weekly basis from regulators around the globe. This makes it difficult to keep track of all the happenings, leading to corporates wondering whether they’ve missed any updates. It also makes it harder to prepare for the regulations accordingly. This blog serves as a reminder for the upcoming regulations this year in a few select geographies, and how corporates can prepare without knowing exactly what regulations would apply to them.
ESG Regulations around the World
The European Union (EU)
One of the most prominent regulations to come into effect this year is the implementation of CSRD(Corporate Sustainability Reporting Directive) through ESRS(European Sustainability Reporting Standards). Thousands of large companies are expected to publish their sustainability statements for the reporting year 2024.
EFRAG was directed to develop the ESRS based on the CSRD. Currently, the first set of standards has been released, which consists of two cross-cutting standards and ten topical standards – five environmental, four social and one governance standard.
Companies are expected to perform a Double Materiality assessment to determine which of the topical standards are applicable to them. The process used to determine the material topics needs to be clearly documented as well.
Currently, the priority for EFRAG is to release supporting guidance for the released standards. To this end, draft implementation guidance for materiality assessment as well as Value Chain implementation have been released. There is also a Q&A platform where a group of experts answer relevant questions asked through a form.
Apart from supporting guidance, another priority is the taxonomy. EFRAG has recently released a draft taxonomy for public consultation. Through this taxonomy, the sustainability statements will be digitized. Since the sustainability statement is expected to be released along with the financial statements, the taxonomy is also expected to be integrated with the financial taxonomy.
India
India introduced the BRSR Core based on the recommendations of the ESG Advisory Committee and public consultation. The BRSR Core comprises of a set of KPIs under 9 ESG attributes. It will also include disclosures and assurance for the value chain of applicable entities. A few select large, listed companies are expected to adhere to the BRSR Core.
United Kingdom (UK)
The release of the ISSB(International Sustainability Standards Board) standards, the UK in August 2023, announced its intention to develop the UK Sustainability Disclosure Standards(UK SDS) which would be based on the ISSB standards. The ISSB standards would be reviewed and modified only where there are contextual differences.
The UK SDS will be implemented as part of the Sustainability Disclosure Requirements(SDR) regime.
United States
The initial climate disclosure rules were proposed in March 2022. Post public feedback, it was expected to be adopted in 2023. However, there has been significant resistance to its adoption, thus leading to delays.
The proposed rules include disclosures on how climate change risks and opportunities are governed and managed, and any transition plans to mitigate the effects of climate change. The impact of climate change on financial statements is also expected to be disclosed. Along with this, emissions estimates for Scope 1 and 2 are to be reported, as well as Scope 3, if it is determined to be material or if there are targets for Scope 3.
California, on the other hand, has already adopted its own set of climate disclosure rules which are expected to affect around 10,000 companies.
Rest of the world
Apart from these, there are upcoming regulations in various countries such as Australia, Canada, New Zealand and Singapore. China’s stock exchanges also recently released a set of disclosure requirements which would be applicable to listed companies.
How to prepare?
The surge of regulations around the world has led to companies scrambling to prepare for the changes. Here’s what companies can do to prepare:
ESG Reporting – Things to consider
Conclusion
In conclusion, the ever-evolving landscape of ESG regulations presents both challenges and opportunities for businesses worldwide. With governments and regulatory bodies emphasizing sustainability and transparency, it is crucial for businesses to prepare for forthcoming regulations through thorough planning. This preparation will facilitate easier implementation of any ESG reporting requirements. By staying informed and proactive, companies can ensure compliance and secure long-term success.
Moreover, by anticipating and adjusting to these evolving regulations, businesses can not only mitigate risks but also utilize ESG initiatives as catalysts for innovation and expansion. Through continuous monitoring, cooperation, and strategic foresight, businesses can successfully navigate the complexities of ESG compliance while making positive contributions to environmental, social, and governance objectives.
Ready to learn how ESG reporting requirements impact corporate sustainability?
With extensive experience in molding the ESG journeys of organizations across multiple sectors and geographies, Shambo Mitra brings a wealth of knowledge to IRIS CARBON®. His blogs distills this expertise, offering practical, actionable insights for businesses mastering ESG reporting. Recognized for transforming complex ESG concepts into strategic assets, Shambo guides industry leaders to drive sustainable change. His seasoned perspective ensures that each initiative is more than informative—it’s a roadmap for impactful ESG integration in the corporate world.
