The latest ESG regulations to be brought into effect globally
24 January, 2023
Our recent poll found multiple ESG frameworks and evolving ESG regulations are among the biggest challenges when it comes to producing ESG reports.
Written by Rio ESG
How well a company is performing on ESG aspects is becoming more important for investors, consumers, employees and business partners and, therefore, management. In a recent poll, we found that a majority of people found the multiple ESG frameworks and evolving ESG regulations among the biggest challenges when it comes to producing ESG reports.
Government authorities worldwide have published a broad variety of ESG-related regulations that pertain to factors such as climate change, human rights, and diversity. While in recent years, various frameworks have been developed to create standardisation in ESG data reporting. Keeping up with legislations and reporting can be a job in itself. Here’s a round-up of the latest ESG regulations to be brought into effect globally:
COP15 reaches international agreement to take action on biodiversity.
Participating governments adopted the Kunming-Montreal Global Biodiversity Framework which seeks to achieve long-term biodiversity goals for 2050. The framework includes a wide-ranging package of 23 action-oriented global targets to be achieved by 2030. A flagship feature of the framework, supported by over 150 financial institutions, is the “30x30” pledge to effectively conserve and manage 30% of global terrestrial, inland water, and coastal and marine areas by 2030.
Amongst other pledges, the framework includes targets to reduce risks posed by pesticides and hazardous chemicals by half by 2030, raise international finance flows from developed to developing countries to $30 billion by 2030, and require large and transnational companies and financial institutions to regularly monitor, assess and transparently disclose their risks, dependencies, and impacts on biodiversity throughout their operations, supply and value chains and portfolios.
Also at COP15, the International Sustainability Standards Board (“ISSB”) announced that “sustainability” will be described in the forthcoming ISSB General Sustainability-related Disclosures Standard as “the ability for a company to sustainably maintain resources and relationships with and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term”.
ISSB seeks to reduce the burden of disclosing data on Scope 3 greenhouse gas emissions.
The ISSB has announced measures to facilitate the disclosure of Scope 3 GHG emissions under the sustainability disclosure standard, being developed by the ISSB. Disclosure of Scope 3 emissions, which refers to emissions generated throughout a reporting company’s value chain, will be required by the ISSB’s Climate-related Disclosures Standard. However, the ISSB has agreed to set out a framework for the measurement of Scope 3 GHG emissions that would allow for estimation and require the use of reasonable and supportable information that is available without undue cost or effort. To further support companies, the ISSB also agreed to additional transitional measures, including allowances for a company to include information not aligned with its reporting period when that information comes from companies in its value chain with a different reporting cycle.
TCFD status report shows dramatic increase in provision of climate-related disclosures.
The Task Force on Climate-related Financial Disclosures (“TCFD”) released its 2022 TCFD Status Report, marking five years since it first provided its widely used framework for corporate climate disclosures. The status report noted that in 2021 over 80% of the public companies it surveyed provided information in accordance with at least one of the 11 recommended disclosures, although only 4% of reporting companies provided all the recommended disclosures. The report also indicated that over three-fourths of companies that are implementing TCFD disclosure requirements are doing so due to investor requests for information, while only one-fourth of companies implementing disclosures are doing so due to a legal obligation to provide such information.
IFRS Chair: Global Sustainability and Climate Reporting Standards to be Released in June.
The IFRS Foundation’s International Sustainability Standards Board (ISSB) will be releasing the finalised versions for the first global standards for sustainability and climate-related reporting in June of this year. Following adoption, the board will consult on a series of issues, including reporting on biodiversity, human capital and human rights, as well on the connectivity of financial reporting with sustainability reporting.
While more and more corporations have made their net zero commitments in recent years, the divergent, complex and constantly evolving ESG-related regulations are bringing extensive compliance challenges. These challenges could result in existing practices being degraded into regulatory gaps and non-compliance.
Some common challenges include:
Confusion regarding the ESG standards due to the confounding flood of information
Lack of ESG expertise who have technical knowledge on ESG risks and compliance skill sets to apply the compliance framework into ESG risks
Lack of a comprehensive and consistent approach to ESG issues
Difficulty to identify the applicable and suitable standard setters, ratings and data providers
Data quality issues
How Can Rio Help With ESG Reporting?
As the burden of evidence to substantiate all reported ESG metrics increases, Rio is here to help navigate your business through the evolving landscape.
Rio is a technology company that provides organisations and individuals with the tools they need to make informed, impactful, sustainable decisions.
We combine inputs like your data on waste, utility usage, and transportation; external data like current market pricing and international VAT rates; and industry expertise.
Our award-winning platform processes this information to offer trustworthy, tailored, transparent advice, at scale and on demand.
ESG reporting is a starting point, not the finish line. That’s why Rio makes it easier and more affordable than ever to get from disclosure to meaningful action.
Learn more about our technology, or contact us to find out how Rio can help with your ESG initiatives.