This In the loop was updated as of October 9, 2023 and October 31, 2023 to highlight current developments related to climate disclosure bills signed into law in California and the end of scrutiny period for the European Sustainability Reporting Standards.
After years of increasingly vocal demand for enhanced transparency about ESG matters from investors and other stakeholders, regulators and standard setters in various jurisdictions issued definitive proposals to transform ESG reporting in 2022. The year brought proposed ESG disclosures from the European Union (EU) as part of the Corporate Sustainability Reporting Directive (CSRD), internationally by the International Sustainability Standards Board (ISSB), and in the United States (US) by the Securities and Exchange Commission (SEC). These “big three” disclosure frameworks each detail expansive sustainability disclosure requirements — although their scopes and other details vary.
The sustainability disclosures required by the ISSB and in the EU were finalized in June and July 2023, respectively. And while the final SEC rule is still pending, three bills signed into law by the California Governor in October 2023 are poised to change the landscape of climate reporting in the US.
Given the geographic reach of these frameworks and their potential to encompass a broad spectrum of value chain contributors, most companies are expected to be impacted in some way. Proactive companies are in the process of assessing the applicability so that they are prepared to meet potentially short reporting deadlines.
An SEC registrant that has a subsidiary listed in the EU, and a subsidiary in a jurisdiction that requires ISSB™ reporting, for example, may be subject to all three requirements, plus the new California bills.
With equivalency — that is, whether disclosures for one reporting framework can satisfy some or all of the requirements of another — not yet determined, companies captured in multiple reporting regimes have a vested interest in understanding which reporting applies.
Further, understanding where the frameworks align and diverge will help companies develop the requisite reporting strategy, data gathering processes, and related controls, providing for a streamlined process and effective deployment of resources.
This publication compares and contrasts key provisions among the European Sustainability Reporting Standards (ESRS), the standards issued by the ISSB, and the SEC proposal, and includes select commentary on the California climate disclosure bills. By understanding the different requirements, preparers can develop the appropriate reporting strategy, one designed to capture the right data the first time.