An overview on the sustainability reporting landscape

What is ‘Sustainability Reporting’?

Sustainability reporting is a form of non-financial reporting that enables companies to communicate their sustainability goals and objectives. They cover a wide range of sustainability factors, such as greenhouse gas (GHG) emissions, human rights, board diversity, ESG (environmental, social, and governance) targets, as well as a company's progress towards these targets, and any current or future risks and impacts. This type of reporting provides companies an opportunity to be transparent about their challenges and opportunities, giving stakeholders a broader understanding of the company's performance beyond the bottom line.

There are various frameworks and standards in the sustainability reporting ecosystem, each with its own disclosure rules and requirements, and many are still being drafted and worked on as at this moment. The ecosystem is a growing and evolving place, with TNFD (Taskforce on Nature-related Financial Disclosures) being published in September 2023 and Taskforce on Inequality and Social-related Financial Disclosures (TISFD) in development, reporting on climate is just the first step. As these frameworks continue to evolve and gain wider use, they'll become an essential tool for companies to showcase their values, demonstrate transparency, accountability, and their commitment to sustainable growth and responsible business practices.

Despite the various frameworks and standards being developed in parallel across the world, there is one consensus, a push for global standardisation. With organisations like IFRS Foundation’s ISSB, Europe’s EFRAG, and GRI leading the way, we’re making strides to move the industry closer to a universal standard for sustainability reporting.

We’ll be touching on a few of the notable existing sustainability standards, largely focusing on the ‘E’ and climate-related side of things.

What about 'Sustainability Assurance'?

Most jurisdictions are starting with mandatory limited assurance over reported GHG emissions number as part of mandatory reporting requirements. At the international level, on September 20th 2024, the IAASB (International Auditing and Assurance Standards Board) has just made a significant move in corporate sustainability reporting by approving the first dedicated standard for sustainability disclosure audits. Learn more about the new International Standard on Sustainability Assurance (ISSA) 5000 here.

International Sustainability Standards Board (ISSB)

The International Sustainability Standards Board (ISSB) was established in September 2021 by the International Financial Reporting Standards Foundation (IFRS) to develop and publish a set of sustainability reporting standards that can be used globally.

On June 26, 2023 the ISSB release their inaugural sustainability standards, these comprise of two interrelated standards:

• ‍IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
• ‍IFRS S2 Climate-related Disclosures

What are the ISSB standards? We have a handy summary blog here.

The ISSB's standards are built upon the foundations of TCFD (Task Force on Climate-related Financial Disclosures), similarly, majority of mandatory climate-related disclosures across the world have also been built upon the foundations of TCFD (which we’ll touch on in a bit).

What is the TCFD?

Established in 2017, the Task Force on Climate-related Financial Disclosures (TCFD) introduced a voluntary framework for climate-related disclosures. This framework offers a consistent, comparable, and reliable method for companies to report on their climate risks and impacts, focusing on four main pillars - governance, strategy, risk management, and metrics and targets. Learn more from A summary: Task Force on Climate-related Financial Disclosures (TCFD)

As Emmanuel Faber, Chair of ISSB, comments,

‍"The TCFD has been a trailblazer in raising the practice and quality of climate-related disclosures, providing much-needed information to investors about climate-related risks and opportunities."

Over the past five years, the TCFD has been the leading voluntary framework for climate disclosures. As a result, many published reports on climate disclosure or climate change have used the TCFD's recommendations.

As at COP28 in December 2023, TCFD has officially concluded its work, passing their responsibilities to monitor the progress of companies' climate-related disclosures to ISSB. _(source)

Territory specific reporting

Prior to ISSB’s publication, many territories went ahead and began setting their own legislation that mandates sustainability reporting, and had their local accounting standard setting bodies work on developing standards to be released in 2024/2025, using the TCFD as the foundation and tailoring to suit their territory, or mandating certain large companies to report following TCFD.

For example, UK’s financial markets regulator, required UK-listed and large companies to have climate-related disclosures aligned with the TCFD in December 2021. New Zealand lead the way in mandating climate disclosures and published the “Aotearoa New Zealand Climate Standards” in December 2022.

Since the release of ISSB’s standards for jurisdictions to adopt, we’ve seen:

• UK announced its plans to create the UK Sustainability Disclosure Standards (SDS) based on ISSB’s by Q1 2025.
• Australia’s Accounting Standards Board released its draft Sustainability Reporting Standards that are based on ISSB’s. On 17th September 2024, Australia’s mandatory climate reporting bill has passed the Senate and House of Representatives and has officially become law.
• New Zealand’s XRB confirms there is a strong degree of alignment between the Aotearoa New Zealand Climate standards and ISSB’s _(Source)
• ISSB announced at their one year anniversary 20+ jurisdictions were adopting or taking steps to introduce the standards in their legal or regulatory frameworks. With Canada, Japan, and Singapore as the latest ones. Together, these 20+ jurisdictions account for nearly 55% of global gross domestic product (GDP) and more than 40% of global market capitalisation. You can follow IFRS - Jurisdictional sustainability consultations for the latest countries in consultation

Source: S&P Global’s interactive map as at June 2024 – Where does the world stand on ISSB adoption?

What’s happening in the US and Europe?

The US’s Securities and Exchange Commission finalised their Climate-related Disclosure Rules in March 2024. The climate-related disclosure rules draw on the TCFD framework, but unlike other jurisdictions, the rules have stated companies are required to disclose GHG emissions only “if deemed material” after facing significant backlash. Learn more on what the SEC Climate Rules require for GHG emissions here in A summary: SEC Climate Rules

Regardless of the ongoing backlash and debate in the US towards the SEC’s Climate Rules, some states have started to take matters into their own hands. 

California for example has taken a significant step towards addressing its greenhouse gas emissions with the passage of bills in September 2023 to mandate carbon disclosures for large private and public companies doing business in the state from 2026.

California isn’t the only state to do so. As at September 2024, four other states have either passed or are actively considering climate disclosure legislation. Find our summary here US State Level Reporting Requirements.

Over in Europe, CSRD (Corporate Sustainability Reporting Directive, the legislation) came into effect in January 2023, mandating around 50,000 companies in the EU to report according to ESRS (Environmental and Social Responsibility Standard). Europe’s ESRS is the most comprehensive mandatory sustainability reporting standard compared to the rest of the world, as it covers all three pillars across the E, S, and G, drawing upon the TCFD and GRI (Global Reporting Initiative) frameworks. ‍

What’s GRI? Check out our blog A summary: Global Reporting Initiative (GRI)

The EU Commission has emphasised the importance of aligning the ESRS with global standards like the IFRS sustainability disclosure standards and GRI. This is supported by the ISSB’s press release that confirmed that there is a high degree of alignment between its climate disclosures and the ESRS climate disclosures. 

With the recently announced Carbon Border Adjustment Mechanism, a tool to place fair prices on the carbon emitted when producing carbon intensive goods that are imported into the EU while also promoting cleaner industrial production in non-EU countries, the EU now has a consistent and comparable standard for businesses to follow in quantifying their emissions. Other jurisdictions will likely be looking at similar ‘Carbon Border Taxes’ to implement penalties and incentives in the coming year too. 

Keen to learn more about CSRD and ESRS? Have a read of our blog A summary: Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) and CSRD FAQs for GHG Accounting: What You Need to Know

‍So, how does carbon accounting fit into all of this?

Carbon accounting specifically refers to the greenhouse gas numbers within sustainability reports. And of all the standards and frameworks out there, most reference the GHG Protocol as the accounting standards guide for measuring a company’s greenhouse gas emissions. The GHG Protocol supplies the world’s most widely used Greenhouse Gas accounting standards (Need a recap? Visit What is the GHG protocol). And more specifically for Financial Institutions, Partnership for Carbon Accounting Financials (PCAF) provides the standard for accounting for emissions related to financial activities. Have a read of our Financed Emissions beginners guide to learn more.

At Sumday, we know there’s a lot to learn in this evolving ecosystem, we take an education first approach and are here to help you accelerate your learning and get upskilled! We have courses designed to take you through the GHG Protocol and PCAF standards, sign up for a free trial to access the Sumday Academy here.