3 Things To Know About ESG Reporting

Environmental, Social and Governance (ESG) reporting is not required for companies doing business in the United States — yet. You may need to produce an ESG report sooner than you think. Are you prepared?

There are three things to know about ESG requirements in the U.S.

#1 – Climate change disclosures as soon as 2023

The U.S. Securities and Exchange Commission proposed a climate change disclosure rule for public comment which ended on June 17, 2022. Not all companies will be impacted by the SEC requirement but it is worth noting the shift toward climate-related financial metrics in audited financial statements. Climate change disclosure could be required in registration statements and periodic reports in 2023. Litigation around the materiality of greenhouse gas emissions may also be on the horizon for 2023.

#2 – Global sustainability standards

The International Financial Reporting Standards Foundation (IFRS) is the accounting standard for domestic organizations in 120 countries. In 2021, the IFRS tasked the International Sustainability Standards Board (ISSB) with creating mandatory corporate ESG disclosures. In January 2022, the ISSB announced that the SASB guidelines would become the starting point for the ISSB's ESG reporting requirements. Currently, there are 77 industry-specific standards requiring organizations to gather significant amounts of information and a demonstration of the proper controls for each standard.

It's worth noting that the S.E.C. follows the Generally Accepted Accounting Principles or GAAP. However, discussion around changing the standard to the IFRS could come up again in the future.

#3 – International infrastructure standards

The Blue Dot Network encompasses public, private and civil society sectors in support of infrastructure projects that are environmentally, socially and financially sustainable. The founding member countries, the U.S., Japan and Australia, seek to develop and mobilize a common standard of project excellence. The Blue Dot network is working with the OECD on an infrastructure project certification based on sustainability principles. The expectation is that with the wider acceptance of a certification like this, investors will be assured of the sustainability and quality of projects, and want to invest.

Public companies, startups and growing enterprises cannot risk missing developments of sustainability standards and reporting. ESG reporting involves company resources to plan, compile information, create and distribute reports and update stakeholders of any changes.

Here are a few helpful resources for staying current with the three sustainability developments discussed in this article:

• https://www.sec.gov/news/pressreleases
• https://www.ifrs.org/news-and-events/news/
• https://www.oecd.org/corporate/oecd-and-the-blue-dot-network.htm

Reach out if you need assistance with creating compliance materials to reduce the risk of noncompliance.

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