Sustainability Disclosures
Earlier this summer there was big news on the sustainability front with the long-awaited release of the International Financial Reporting Standards (IFRS) S1 General Requirements for Disclosure of Sustainability-related Financial Information and S2 Climate-related Disclosures. This is on the heels of the January release of the Corporate Sustainability Reporting Directive (CSRD), the EU’s mandated disclosures on environmental and social impacts that will require 50,000 companies around the world to respond, of which 1,000 of those companies are Canadian. Also on the horizon are the Securities Exchange Committee (SEC) climate disclosure requirements for US companies. In Canada, the Canadian Securities Administrators (CSA) is responding cautiously, working alongside the Canadian Sustainability Standards Board on the adoption of these standards presumed to be in 2025.
What’s a Sustainability disclosure?
Sustainability or ESG disclosures are completed by companies to communicate their sustainability initiatives and performance in response to the environmental and social risks they face. They are intended to build trust and confidence for stakeholders to make informed decisions about investing in and working with your company. Up until now, these disclosures were voluntary, but that is no longer the case. The EU’s CSRD is mandatory if a company is at certain size or profit threshold. Gradually that threshold will lower, increasing the numbers of reporting entities every year. For the 1,000 companies in Canada who are to comply, the ESG reporting stakes have been raised. For those watching this unfold, take note, it’s not a matter of if you need to report, it’s when.
The Rise of Sustainability Reporting and Communications
Sustainability or ESG reporting, as little as five years ago, was a best practice for sectors whose awareness of environmental and social impacts were growing as a concern for investors, suppliers, employees and customers. Reports typically included glossy photos and light commentary with an appendix that provided metrics presented in dense grids making the understanding of progress on climate and inequality a challenge.
Today, the credibility and authenticity of reporting is transitioning as fast as EV’s did for car makers. Not only are multiple choices for standards adding complexity, but sustainability reports are also consistently screened for greenwashing. This pitfall is a strain to corporate reputation, as more resources and efforts are required for ESG transparency, it may result in losing sight of the business realities of mitigating climate risk, DE+I or sustainable procurement. Sustainability reporting should not be a trade-off.
Communicating ESG results shows an organization’s strengths in managing risks and provides powerful commentary for stakeholders to rally around. It provides depth on the report results, providing context that may be missing when interpreting number heavy metrics found within ESG.
Keeping pace with sustainability reporting is now a business imperative. Communicating on sustainability requires a constant focus to always respond and show your efforts are meaningful and credible. The addition of the IFRS standards is welcomed. They provide global baselines on ESG related disclosures and will force companies to improve their commitments on net-zero and DE+I targets. Communicating these results will ensure the right recognition comes in the way of greater trust and stronger business relationships.
H+K’s ESG practice can help you with developing your sustainability report and preparing your communications for the right audience. We offer ESG strategy development, ESG reporting and communications, materiality assessment + ESG topic prioritization, leadership communication, ESG training and development, and stakeholder mapping and engagement.