ESG CSRD SEC Sustainability Reporting ISSB Climate Disclosure

Introduction

The regulatory landscape for ESG reporting is rapidly evolving, with mandatory requirements expanding across jurisdictions. This article examines the major frameworks and their implications for global companies.

European Union: CSRD and ESRS

The Corporate Sustainability Reporting Directive (CSRD) represents the most comprehensive ESG reporting regime globally.

Key Features of CSRD

  • Scope: All large companies (exceeding 2 of 3 criteria: 250+ employees, €40M+ turnover, €20M+ assets) and all listed SMEs; approximately 50,000 entities
  • Timeline: Phased implementation from 2024-2028; large public-interest entities first (2024 reports for 2025), followed by large companies (2026), and listed SMEs (2028)
  • Standards: European Sustainability Reporting Standards (ESRS) covering environmental, social, and governance matters with sector-specific standards developing
  • Assurance: Limited assurance initially, moving to reasonable assurance by 2028
  • Digital Reporting: Mandatory XBRL tagging for EU Single Access Point (ESAP)
  • Double Materiality: Companies must report both impact materiality (impact on environment/society) and financial materiality (impact on company)

United States: SEC Climate Disclosure Rules

The SEC finalized climate disclosure rules in March 2024 (currently stayed pending litigation in 8th Circuit).

Key Requirements

  • Scope 1 and Scope 2 Emissions: Disclosure for large accelerated filers and accelerated filers; phased implementation based on filer status
  • Climate Risk Management: Disclosure of climate-related risks and risk management processes
  • Board and Management Oversight: Governance of climate risks
  • Financial Statement Impacts: Material impacts of severe weather events and transition activities
  • Attestation: Limited assurance for Scope 1 and 2 emissions for large accelerated filers

Global Standards: ISSB

The International Sustainability Standards Board (ISSB), established by IFRS Foundation, has issued:

  • IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
  • IFRS S2: Climate-related Disclosures (incorporating TCFD recommendations)

Adoption Status

  • Adopted/Committed: United Kingdom, Japan, Australia, Brazil, Canada, Singapore, Hong Kong, Nigeria, Kenya, and others
  • Under Consideration: European Union (assessing interoperability with ESRS), United States (SEC evaluating), China, India, and many other jurisdictions

Other Jurisdictions

United Kingdom

TCFD-aligned disclosure requirements for listed companies, large private companies, and LLPs (over 500 employees and £500M+ turnover). Transition to ISSB-based framework expected.

Canada

Proposed mandatory climate disclosure for certain reporting issuers; CSA proposals align with ISSB.

Japan

Mandatory climate disclosure for TSE Prime Market companies; ISSB adoption planned.

Singapore

Mandatory climate reporting for listed companies from FY2025; phased implementation for non-listed companies.

India

BRSR (Business Responsibility and Sustainability Report) mandatory for top 1000 listed companies; BRSR Core with assurance for top 150 listed companies from FY2024.

Practical Compliance Strategies

  1. Conduct double materiality assessment (for EU) or climate risk assessment (for other jurisdictions)
  2. Establish internal controls over ESG data collection and reporting
  3. Develop board and management oversight structures for ESG matters
  4. Implement data management systems for emissions and other ESG metrics
  5. Engage external assurance providers early
  6. Monitor regulatory developments across all operating jurisdictions
  7. Consider integrated reporting to connect ESG and financial performance