The three main standards for corporate sustainable reporting are emerging as (1) the International Sustainability Standards Board (ISSB), (2) the European Sustainability Reporting Standards (ESRS), and (3) the Global Reporting Initiative (GRI). This article takes a deeper look at each of these initiatives.
International Sustainability Standards Board (ISSB)
We actually had a detailed look at the ISSB in an earlier blog, which we'd suggest you refer to so we will not spend too much time covering it here. But the quick summary is that the ISSB is a widely adopted framework that provides guidelines for assessing and reporting sustainability performance in organizations. It sets out four key objectives:
to develop standards for a global baseline of sustainability disclosures;
to meet the information needs of investors;
to enable companies to provide comprehensive sustainability information to global capital markets; and
to facilitate interoperability with disclosures that are jurisdiction-specific and/or aimed at broader stakeholder groups.
European Sustainability Reporting Standards (ESRS)
In April 2021, the European Commission adopted a legislative proposal for a Corporate Sustainability Reporting Directive (CSRD) that requires companies within its scope to report using a double materiality perspective in compliance with European Sustainability Reporting Standards (ESRS) adopted by the European Commission as delegated acts. If you want some background on the CSRD, you can read our earlier blog on the EU taxonomy.
Under the proposed CSRD, the European Financial Reporting Advisory Group (EFRAG) was appointed technical adviser to the European Commission developing draft ESRS. EFRAG is a private association designed to to ensure that International Financial Reporting Standards are responsive to European needs and concerns. EFRAG consults publicly with all stakeholders that have an interest in financial reporting to develop evidence-based understanding about specific European circumstances.
The standards cover the full range of environmental, social, and governance issues, including climate change, biodiversity and human rights. They provide information for investors to understand the sustainability impact of the companies in which they invest.
The reporting requirements will be phased in over time for different kinds of companies. The first companies will have to apply the standards in financial year 2024, for reports published in 2025. Listed SMEs are obliged to report as from 2026, with a further possibility of voluntary opt-out until 2028, and will be able to report according to separate, proportionate standards that EFRAG will develop next year.
Global Reporting Initiative (website)
The Global Reporting Initiative is an international independent standards organization that helps businesses, governments, and other organizations understand and communicate their impacts on issues such as climate change, human rights, and corruption. GRI was founded by Ceres (website), a non-for profit that advances leadership among investors, companies and capital market influencers to drive solutions and take action on the world's most pressing sustainability issues.
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