2024 is being billed by many as “the year of ESG reporting” and looks set to usher in what ISSB Chair Emmanuel Faber has referred to as a “tipping point” on corporate accountability on environmental and social sustainability issues.
The entry into force of the EU’s Corporate Sustainability Reporting Directive (CSRD) means that almost 50,000 companies will be subject to mandatory reporting in the 2024 financial year around topics such as climate and human rights. Similarly, on the other side of the Atlantic, the SEC in the US is also set to release its own set of rules later in the year. California meanwhile has decided not to wait for the SEC and has forged ahead with its own California Climate Corporate Data Accountability Act.
The establishment of the first global standard for sustainability reporting by the International Sustainability Standards Board (ISSB) has also been hailed as a watershed moment and has been accompanied by multiple jurisdictions announcing plans to implement ISSB aligned reporting rules in the next 12-24 months.
Amid this proliferation of regulations and standards, divergence and eventual convergence of financial and double materiality standards is also expected to play out throughout the year.
New reporting requirements will foster collaboration between corporate sustainability and financial functions and drive demand for improved tools for data collection, measurement and reporting.
Some commentators have warned of unintended consequences when it comes to this boom in regulatory requirements – highlighting the dangers of compliance potentially overshadowing performance and innovation in particular.
It will be important for businesses to ensure that they are not just reporting for the sake of it, but rather that they are using reporting to aid better decision-making as they work to enhance performance. WBCSD’s efforts to provide the missing link between the financial system and business transformation to tackle climate change through the Climate-related Corporate Performance and Accountability System (CPAS) will be key to supporting these efforts.
At the same time, WBCSD’s work on the Preparer Forum for Sustainability Disclosures will also support member companies in navigating the increasingly complex reporting landscape.
Escalating emphasis on accountability looks set to spell the beginning of the end for greenwashing, with companies increasingly having to back up sustainability ambitions with data.
Regulators are also fixing greenwashing in their sights. The Financial Conduct Authority in the UK has published strict new rules on green claims, while the Federal Trade Commission in the US is likely to follow suit later this year. The European Parliament meanwhile has also proposed a new Green Claims Directive which suggests fines of up to 4% of total revenue for any company found to be engaging in greenwashing and sets out much more stringent control on environmental claims and product labelling. Member states look set to sign off the Directive later this year.
As a result, many companies will be making moves to significantly evolve their sustainability marketing strategies.
