ESG Catalyst

Sustainability reporting is an activity in which organisations publicly communicate their sustainability practices, environmental risks, and opportunities to its stakeholders. Several frameworks and standards have been established to make such reporting more common and standardised. The latest standard came from the IFRS Foundation in June 2023 that may pave the way to universal universal standards for sustainability reporting

Fyi, IFRS is the org that established IFRS Accounting which act as the global language of financial statements. Practically every accounting practice worldwide is based on this standard

🧬Notable Standards

🔵**Global Reporting Initiative (GRI)** developed the first and one of the most widely used global framework for sustainability reporting in 1997. Today, it’s used by more than 10K org in over 100 countries

🔴Carbon Disclosure Project (CDP) established in 2000. Today, over 23K companies representing 2/3 of global market cap reported through CDP

🟢GHG Protocol was formed by World Resources Institute and WBCSD and released its first edition of Corporate Standard in 2001. It’s the world’s most widely used GHG accounting standard. They coined the term scope 1, 2, 3 emission

⚪ In 2015, FSB Task Force on Climate-related Financial Disclosures (TCFD) was established and released its disclosure recommendations in 2017. The TCFD disbanded in Oct 2023 after concluding it had achieved its main goal and the monitoring activity has been handed over to the IFRS

🇪🇺 At the regional level, the EU developed the European Sustainability Reporting Standard (ESRS) in 2023 as part of Corporate Sustainability Reporting Directive (CSRD). CSRD reporting is mandatory for companies that met the criteria beginning in 2025 for fiscal year 2024

⭕ IFRS released the ‘IFRS Sustainability’ standards in June 2023 through a new working group, the International Sustainability Standards Board (ISSB). The first set of standards are IFRS S1 (general sustainability) and IFRS S2 (climate). The ISSB builds on and consolidates existing standards such as TCFD, SASB, The Value Reporting Foundation, the Integrated Reporting Framework, and CDSB

Given the IFRS’s influence in financial reporting, these standards should help connect sustainability reporting information with a company’s financial accounting and move the industry closer to universal standards for sustainability reporting

🚀 The Future of Sustainability Reporting

The consolidation of several standards into IFRS is a testament to the importance of sustainability in today’s corporate world. It’s as though sustainability is as important as financial activities and needs to be treated and reported the way companies treat and report financial activities. We can also see the shift from voluntary reporting to mandatory, as can be seen in Indonesia (for emiten with asset >Rp50 B and all emiten by 2024) and soon in the EU, the US, and Japan.

#sustainabilityreporting