Trends in ESG and Sustainability reporting
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Trends in ESG and Sustainability reporting

Sustainability or ESG reporting serves as a mirror for businesses, reflecting their impact on the planet and people (even if this mirror can be tarnished). Reporting can be a powerful tool for driving real, measurable progress – after-all – when sustainability goals are publicly declared, there is more chance for the organisation to be held accountable.

Contrary to what many people might think sustainability reports are not just for investors and environmental watchdogs. They spark conversations with customers and employees, who are increasingly demanding more purpose driven businesses, besides the fact that transparency builds trust, promoting loyalty and attracting talent who value the planet as much as their work itself.

Trends in sustainability reporting

Regulatory imperatives for sustainability reporting are growing around the world and it is becoming mandatory for a growing number of companies globally – including smaller ones which would traditionally not have been within the remit. This is true in the UK (UK Sustainability Disclosure Standards) and EU context (Corporate Sustainability Reporting Directive) but also elsewhere such as Australia where climate reporting mandates adapted from the International Sustainability Standards Board (ISSB) are being implemented.

Three key trends:

  1. Convergence: A clear trend towards convergence of standards is emerging, with the International Sustainability Standards Board (ISSB) playing a central role in setting a global baseline. This reduces reporting burden for multinationals and promotes comparability across markets.
  2. Double materiality: The focus is shifting towards reporting on issues that are material to both the company, its stakeholders and wider environmental social interactions – ensuring the information disclosed is both relevant and actually reflects real-world impacts.
  3. Increased Scope and Rigour: Reporting requirements are expanding to cover a wider range of environmental, social, and governance (ESG) topics, and the demands for data quality and assurance are increasing. Avoiding greenwash in sustainability reporting is vital from both a regulatory and reputational viewpoint.

UK Sustainability Disclosure Standards

The UK has historically had a number of ESG disclosure requirements such as those set out in the Companies Act on mandatory greenhouse gas reporting and more recently on TCFD disclosures for larger companies as well as some wider environmental and social impact considerations for listed organisations.

A game changer will be the UK Sustainability Disclosure Standards – planned to be release by July 2024. 

These standards align closely with the International Sustainability Standards Board (ISSB) standards, with potential minor divergences for UK-specific matters. This harmonization is intended to streamline reporting for companies operating in multiple regions.

EU Corporate Sustainability Reporting Directive

Before the CSRD, the EU’s Non-Financial Reporting Directive (NFRD) was mandatory for larger companies and optional for some sectors and it only covered environmental and social matters.

The new CSRD, effective as of January 2023, have all large companies and listed SMEs (99% of all business in the EU) to report in a broader scope (adding governance matters), with mandatory third-party auditing.

The European Sustainability Reporting Standards (ESRS) was adopted in July 2023, these sector-specific standards provide detailed guidance on how companies should report their sustainability performance.

Outlook

The Global Reporting Initiative (GRI) provides a universal framework for measuring and comparing progress, allowing businesses from different sectors to learn from each other, accelerating and adding value to the sustainability revolution.

Every industry, from luxury brands to small-scale food producers can benefit from  sustainability reporting. Whether your business has already started your sustainability journey or if you are completely new, sustainability reporting will provide clarity on actions and simplify target setting and KPI monitoring. A robust report brings transparency for stakeholders, and that is why it is important to choose a specialist to help you.

Regardless of industry background or progress stage, reporting binds progress to profitability, attracting investors and reducing operational costs. Our Watts Sustainability team is committed to assisting you in every step of the way.

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