Understanding your reporting requirements
Sustainability reporting and accountability is an important component of climate change mitigation strategy. The Intergovernmental Panel on Climate Change (IPCC) reported in 2018 that industry is globally responsible for 21% of direct greenhouse gas emissions, one of the largest contributors measured. As societies plan the journey to net zero, it is essential for governments, investors and consumers understand how business contributes to emissions so that they can make informed decisions about how to govern, invest and consume. For this to happen, sustainability reporting must be standardised and accurate.
The decade from 2010 saw a proliferation of reporting bodies and standards, many of which had a local focus. This narrow focus was understandable, since emissions legislation is often made at the local level. However, climate change is a global concern and it is necessary to coordinate globally climate change action, including sustainability reporting. As the decade progressed, focus began to widen as reporting bodies merged and standards became more international in scope.
Established in London in 2007 by UK Government's Department of Environment and Rural Affairs (DEFRA)
Formed in London in 2010 by Global Reporting Initiative, International Accounting Standards Board, U.S. Financial Accounting Standards Board, International Organization of Securities Commissions, and International Federation of Accountants
Formed in San Francisco in 2011 and was focused on disclosure for US publicly listed companies
Established in 2015 by the Group of 20 (G20) nations and the Financial Stability Board (FSB)
Formed in 2021 when the IIRC combined with the SASB
Current international reporting standards
This thicket of reporting standards bodies coalesced in November 2021 at the 2021 United Nations Climate Change Conference (COP26), held in Glasgow. At this conference, the International Financial Reporting Standards (IFRS) announced the creation of the International Sustainability Standards Board (ISSB), which combined the TCFD and the VRF into one body. In 2023, the ISSB published its IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 – Climate-related Disclosures documents, which unified global sustainability reporting standards and aligned them with global accounting standards implemented by the International Accounting Standards Board (IASB), itself also a part of the IFRS.
The decision of what reporting standards are required of course varies among jurisdictions and different rules have been implemented by various governments and securities exchanges. However, the ISSB has to that end provided a framework for reporting that has broad international support, including from the G7, the G20, the International Organization of Securities Commissions (IOSCO), the FSB, African finance ministers as well as finance ministers and central bank governors from more than 40 jurisdictions.
Reporting standards across the EU, US and SA
Far from being bureaucratically overshadowed, the EU has introduced its own suite of ESG reporting standards, known as the European Sustainability Reporting Standards (ESRS). Developed by the European Financial Reporting Advisory Group (EFRAG), the ESRS suite of documents spans 17 documents and six appendices, which were officially adopted into EU practice via the Corporate Sustainability Reporting Directive (CSRD) during an announcement made on 31st July 2023. These include five environmental reporting standards, four social reporting standards and one governance reporting standard.
In March 2022, the US Securities and Exchange Commission (SEC) suggested a new reporting criteria for all publicly listed companies in the US. A flurry of articles were put out by consultancy businesses about what this would entail but there has been no further statement issued since then. The statement initially suggested that reporting would commence in 2024 but, in the absence of further guidance, perhaps it is reasonable to assume that this date will slip.
In June 2022, the Johannesburg Stock Exchange (JSE) published a reporting guidance document. This document does not seek to replace existing guidance but to present the framework established by the TCFD (now part of the ISSB) in a way that is meaningful for South African companies and investors. The JSE guidance attempts to make a case in favour of ESG reporting but does not require action on the part of companies.
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TT Club and BSI have partnered for a number of years, particularly around the topic of supply chain security. BSI deliver world-class environmental, health and safety, security and sustainability services to the industry, and have become a key partner for TT Club in the context of the ESG toolkit.
How can carbon credits help you?
Carbon credits are seen by several organisations as a crucial element towards achieving global net zero emissions by 2050, but despite earning a billion-dollar valuation from global companies, carbon credits have long struggled to inspire confidence. Some environmental groups approach carbon markets with scepticism, claiming that they allow companies to appear as though they are leading on climate action, when in fact they are not. In fact, the Science Based Targets initiative (SBTi) does not allow achieving short-term carbon reduction targets using carbon credits and by 2050 only up to 10% is allowed to be achieved through removal credits. Recently, the European Union also banned advertising of products and services as “carbon neutral” if the neutrality was achieved using carbon credits.
TT Club longtime Member PD Ports are a UK ports and logistics business with 12 sites across England ranging from Hartlepool in the North to the Isle of Wight in the South, and is part of the Canadian company Brookfield Asset Management Inc. $600 billion portfolio, which extends to over 30 countries across the globe.