We recently published this overview table listing standards, frameworks, and regulations on environmental, social, and governance issues (ESG). Thankfully, based on the feedback so far, it seems like the table is proving useful for many of you. And our invitation to continue adding and updating entries obviously still stands.
Since a few people indicated that they would appreciate a more visual breakdown of the existing rules, here is our high-level take on comparing standards, frameworks, and regulation.
In addressing the first round of feedback, we are separating ESG standards, frameworks, and regulations. We highlight three elements for each: are they mandatory, is reporting on value chain emissions (scope 3) required, and how many companies report into it, which appears to be a helpful indicator for relevance.
The most noteworthy development on the Standards front is the EU’s Corporate Sustainability Reporting Directive (CSRD), which, once adopted, will be the most far reaching mandatory instrument yet. In the proposed timeline, the CSRD will enter into force in 2023 with first reports due in 2024 (covering financial year 2023).
Looking at Frameworks, it’s worth drawing attention to the Task Force on Climate-related Financial Disclosures (TCFD). While the TCFD itself is not mandatory, it is the most common framework referred to in regulatory efforts across jurisdictions. This is an interesting trend, in particular because TCFD reporting on value chain emissions focuses on carbon intensity only. In short, that means that emissions are reported relative to a specific unit, e.g. x kilograms of CO2e per 1,000€ spend. This way, neither absolute numbers of emissions nor the exact amount of expenses have to be disclosed.
There are regulatory efforts in place or under development across all continents. So far, we’ve captured the ones most frequently referenced in our conversations, listing when they are expected to enter into force. In most cases, where scope 3 is partly required, the bill references the TCFD framework and hence only requires disclosure of carbon intensity.