The implications of these requirements for reporting on sustainability-related matters will be different from one company to the next. Whether a company falls into scope will depend on a variety of factors including its size and location and will require disclosures to be made that relate not only to its own operations but also to those of its supply chain.
Nonetheless, one common theme applies across the piece - the direction of travel for all listed companies is towards broader and more complex obligations when reporting on sustainability.
“We are not feeling too fazed by the new regulation,” commented one client at the outset, continuing “We’re already doing most of the data collection and include it in our Annual Report.” This company publishes a separate ESG data book at the same time as its Annual Report and our client went on to explain that supporting data and detail on the basis for its preparation are located there to provide a fuller picture to meet the needs of investors and ESG rating agencies in particular.
Another client agreed that its existing disclosures against frameworks including GRI and SASB have provided a strong foundation for ISSB and CSRD disclosure but was interested to know where non-EU companies falling into scope early for CSRD (for financial years starting 1 January 2024) were likely to locate their disclosures: where the size and location (withing the EU) of subsidiary operations mean they will be in scope, would it be prudent, the client suggested, to begin by disclosing at a subsidiary level or to include the disclosures in the Group Annual Report, with the accompanying level of profile that entails? No clear consensus was reached on this point, but it was acknowledged that the perceived burden on companies to get new, complex and demanding disclosures right first time (including double materiality, assurance and electronic tagging to name but a few technical aspects relating to CSRD) was indeed significant and a challenge for companies both internally and externally.
When it comes to the detail of the reporting requirements, it was generally felt that a mapping exercise to see where new disclosures will be required was a good place to start – and that starting as soon as possible was a must for those in scope for the earliest CSRD and ISSB reporting obligations. It was also acknowledged that there would be some new complexities to deal with: “We are concerned about the sensitivity of the disclosures we will be required to make – for instance in relation to Climate,” stated one client, explaining that competitors could potentially stand to gain from the information demanded by the new ISSB requirements.
For those less well advanced on the reporting journey, the discussion later turned to reporting against the Taskforce for Climate-related Financial Disclosures (TCFD) framework, and the early set of ISSB reporting requirements which can be limited to climate-only related disclosures for the first year of reporting (potentially from 2025 onwards).
Where more preparatory work is needed, there was a general consensus that finding a Board champion was invaluable in moving sustainability data collection and disclosure quickly up the corporate agenda; it was also noted that the FRC’s guidance, including best practice examples, acts as a valuable reference point; and that simply identifying a company which can service as a guide and a basis for reporting possible reporting formats and approaches was also a very helpful place to start.
Finding early reporters to follow will of course provide a clearer direction of travel for those who fall into scope for later disclosure obligations. For ISSB that may be in 2026 for general disclosures and for CSRD as late as 2029.
The Black Sun Breakfast Club is an inspiring and informal get-together with like-minded Company Secretaries and Sustainability Directors, to discuss a range of topical issues facing businesses today. The discussion takes place under Chatham House Rules. If you’re interested in joining us for the next one, please do get in touch.
ISSB: International Sustainability Standards Board standards allow companies and investors to standardise on a single, global baseline of sustainability disclosures for the capital markets, with any additional jurisdictional requirements being built on top of this global baseline. These are not yet mandatory reporting requirements.
CSRD: The Corporate Sustainability Reporting Directive requires companies to report on the impact of corporate activities on the environment and society and applies to EU companies and certain other companies with operations or interests in the EU.
Black Sun is a global group of strategic advisors, consultants and stakeholder engagement specialists. We believe that brands and businesses can have a big impact on our society – they can shape more ethical practices, build more inclusive communities and deliver more sustainable performance. Ultimately, they can spark positive change in the world.
We partner with visionary companies to define and communicate their purpose, strategy and culture and bring to life their value creation story. Our services and solutions directly address the business-critical concerns of today; best-practice disclosure and accountability through reporting; protecting reputation and building trust with digital communications and helping businesses to effectively communicate their long-term responsibility and sustainability story.
Explore our thinking and learn from global thought leaders through
our blogs, podcasts, webinars, and events.
