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1. Background
Publication date: 06 Sep 2023
gx In depth INT2023-07
1.1 The three main sustainability reporting frameworks
Over recent years, there has been increasing demand from investors and other stakeholders for transparent, consistent and comparable disclosures on environmental, social and governance (ESG) matters in sustainability reporting. PwC’s 2022 Global Investor Survey suggests that sustainability reporting outcomes rank highly among investors’ priorities for business, and that a majority of investors want to place more trust in sustainability reporting. The survey also notes that common sustainability reporting frameworks, as well as external assurance, would boost investor confidence in sustainability reports. To address this need, regulators and standard setters in various jurisdictions issued proposals on sustainability-related disclosure requirements in 2022, looking to transform sustainability reporting.
This In depth focuses on the standards or proposals from the three major standard setters/regulators: the International Sustainability Standards Board (ISSB), the US Securities and Exchange Commission (SEC), and the European Commission (EC). Throughout this publication, the frameworks are collectively referred to as ‘the three main frameworks’. All three frameworks primarily focus on disclosure requirements (rather than measurement).
In June 2023, the ISSB released its first two standards, referred to as IFRS® Sustainability Disclosure Standards: IFRS S1, ‘General Requirements for Disclosure of Sustainability-related Financial Information’, and IFRS S2, ‘Climate-related Disclosures’ (refer to PwC In depth INT2023-05
). IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024, with early adoption permitted. This is subject to the endorsement of the standards by local jurisdictions.
In December 2022, against the background of the European Green Deal, the EC published the final Corporate Sustainability Reporting Directive (CSRD). The objective of the CSRD is to fundamentally revise and strengthen the non-financial reporting rules introduced by the 2014 Non-Financial Reporting Directive (NFRD). The CSRD came into force in early January 2023, and Member States have 18 months to transpose the CSRD provisions into their national law. To enact the directive, 12 European Sustainability Reporting Standards (ESRS) were developed by the European Financial Reporting Advisory Group (EFRAG) and issued by the EC. Whether entities will be within the scope of the CSRD depends on specific criteria, including size and listing status. Timing for first-time application depends on the reason why an entity is within its scope, with the earliest adoption being on 1 January 2024 for reporting in 2025
. The ESRS are expected to be applicable in all Member States of the European Union, once the European Commission has adopted them as delegated acts, provided that no objection is expressed by the European Parliament and Council.
The SEC issued a proposed rule, ‘The Enhancement and Standardisation of Climate-Related Disclosures for Investors’, in March 2022, designed to significantly enhance climate-related disclosures in nearly all SEC registrants’ annual filings and registration statements
.
1.2 The purpose of this document
The ISSBTM standards, IFRS S1 and IFRS S2, and the 12 ESRS were finalised in June and July 2023, respectively. The SEC framework remains a proposal, with timing of the final rule unclear. Many preparers are expected to be within the scope of multiple frameworks, which will result in practical challenges. This In depth is a collection of insights into issues which could arise as preparers implement the three main frameworks.
While the three main frameworks have much in common, there are also some fundamental differences. This In depth aims to reduce some of the potential complexity when having to comply with multiple frameworks by highlighting areas of convergence and areas of difference. We expect to update the In depth on a regular basis to reflect the progress of the three main frameworks along with any additional relevant considerations.
This In depth should be read in conjunction with the applicable standards and rules, and it is not intended to be a comprehensive guide to the disclosure requirements in the three main frameworks. The In depth should serve as a starting point as preparers consider the impact of the three main frameworks.
The SEC rule is still in the process of being developed, and so references and terms used in this In depth might be different from the content in the final version.
1 In depth INT2023-05 – IFRS Sustainability Disclosure Standards ‒ Guidance, insights and where to begin.
2 For more detailed information on adoption requirements for the CSRD, see In brief INT2022-21 ‘Finalisation of EU CSRD’.
3 For more detailed information on the SEC’s proposed rule, refer to US In the loop: The SEC wants me to disclose what? The SEC’s climate disclosure proposal.
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