Sustainability

BSM Environmental Consultancy assists companies in sustainability studies and preparation of sustainability reports.
Sustainability
BSM Environmental Consultancy assists companies in sustainability studies and preparation of sustainability reports.


Sustainability Services;


Corporate Sustainability Reporting

EU rules require large companies and listed companies to publish regular reports on the social and environmental risks they face, and on how their activities impact people and the environment.

New rules on corporate sustainability reporting: The Corporate Sustainability Reporting Directive

On 5 January 2023, the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive modernises and strengthens the rules concerning the social and environmental information that companies have to report. A broader set of large companies, as well as listed SMEs, will now be required to report on sustainability.

The new rules will ensure that investors and other stakeholders have access to the information they need to assess the impact of companies on people and the environment and for investors to assess financial risks and opportunities arising from climate change and other sustainability issues. Finally, reporting costs will be reduced for companies over the medium to long term by harmonising the information to be provided.

The Corporate Sustainability Reporting Directive is published by The European Union to decribe rules for organizations to report sustainability disclosures across several topics pertaining to environmental and social issues. Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS).

The European Parliament’s Legal Affairs Committee has voted to delay key aspects of the Corporate Sustainability Reporting Directive (CSRD) by two years.

Planned implementation timeline:

  • 2027: EU companies with 1000+ employees.
  • 2028: EU companies with 500+ employees and net €150 million annual turnover.
  • 2029: EU companies with 250+ employees, net €40+ million annual turnover, operating in high-risk sectors.
  • Non-EU companies must comply if their annual turnover threshold is met by revenues in the EU.

Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS). The standards were developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various different stakeholders.

The ESRS were published in the Official Journal on 22 December 2023 under the form of a delegated regulation. They are tailored to EU policies, while building on and contributing to international standardisation initiatives.

The CSRD also requires assurance on the sustainability information that companies report and will provide for the digital taxonomy of sustainability information.


Rules introduced by the Non-Financial Reporting Directive

The rules introduced by the Non-Financial Reporting Directive (NFRD) remain in force until companies have to apply the new rules of the CSRD. Under the NFRD, large companies have to publish information related to

  • environmental matters
  • social matters and treatment of employees
  • respect for human rights
  • anti-corruption and bribery
  • diversity on company boards (in terms of age, gender, educational and professional background)

These reporting rules apply to large public-interest companies with more than 500 employees. This covers approximately 11 700 large companies and groups across the EU, including

  • listed companies
  • banks
  • insurance companies
  • other companies designated by national authorities as public-interest entities

Policy making timeline

8 February 2024 Legislation - European sustainability reporting standards

Political agreement between the European Parliament and the Council on postponing adoption deadlines for certain European Sustainability Reporting Standards (ESRS).

22 December 2023 Legislation - European sustainability reporting standards

Publication of the European Sustainability Reporting Standards (ESRS) in the Official Journal.

17 October 2023     Legislative proposal - European sustainability reporting standards

2024 Commission work programme: Proposal for a Decision as regards the time limits for the adoption of sustainability reporting standards for certain sectors and for certain third-country undertakings.

31 July 2023    Legislation - European sustainability reporting standards

Adoption of the European Sustainability Reporting Standards (ESRS), accompanied by questions and answers on the ESRS.

9 June 2023  Legislation - European sustainability reporting standards

Opening of feedback process of a first set of draft sustainability reporting standards for companies, opening a four-week public feedback period.

Following the feedback period, the Commission will consider the feedback received before finalising the standards as delegated acts and submitting them to the European Parliament and Council for scrutiny.

14 December 2022    Legislation - Corporate Sustainability Reporting

Publication of the Corporate Sustainability Reporting Directive (CSRD) in the Official Journal

23 November 2022   Standards - Corporate Sustainability Reporting

First set of draft EU sustainability reporting standards published by EFRAG

22 June 2022   Legislation - Corporate Sustainability Reporting

Political agreement by the European Parliament and the Council on the Corporate Sustainability Reporting Directive (CSRD)

21 April 2021Legislative proposal - Corporate Sustainability Reporting

Proposal for a Corporate Sustainability Reporting Directive (CSRD) to amend the reporting requirements of the NFRD.

8 March 2021   Reports - EU sustainability reporting standards

EFRAG reports on development of EU sustainability reporting standards

20 February 2020  Consultation - Non-financial reporting

Public consultation on the review of the non-financial reporting directive

https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en#legislation

 

Turkey: Sustainability Reporting Standard TSRS 1 and TSRS 2, Decision, December 2023

  1. January 1, 2024:

    Compliance deadline: regulated banks, investment institutions, and large companies above specified thresholds shall start making IFRS-aligned sustainability disclosures for the fiscal year beginning on or after this date.

  2. January 1, 2026:

    Compliance deadlines: regulated banks, investment institutions, and large companies above specified thresholds shall include scope 3 emissions in their annual sustainability reports.


ESG Standards

ESG reporting standards are agreed-upon quality requirements that reporting entities are expected to meet. These standards contain specific and detailed criteria or metrics for ‘what’ should be reported on each topic and will, in general, have the following features in common: 

  • A public interest focus 
  • Independence
  • Due process
  • Public consultation. 
  • GRI Standards: The Global Reporting Initiative (GRI) is the most widely used ESG reporting framework. GRI Standards are principles-based, meaning that they provide guidance on how to report on ESG issues, but they do not dictate specific metrics or data points.
  • SASB Standards: The Sustainability Accounting Standards Board (SASB) develops industry-specific ESG disclosure standards. SASB Standards are more detailed than GRI Standards, and they focus on the sustainability issues that are most likely to affect a company’s financial performance.
  • ISSB Standards: The International Sustainability Standards Board (ISSB) has developed a set of global ESG disclosure standards. The ISSB Standards are still under development, but they are expected to be more comprehensive and rigorous than existing standards.

These features help to ensure that the information being reported is relevant and comparable to stakeholders.

There are a number of different ESG disclosure standards in use today, each with its own strengths and weaknesses – some of the most widely used standards include:

In July, the European Financial Reporting Advisory Group (EFRAG) released the ESRS, the new European Sustainability Reporting Standards. The ESRS underpins the EU’s sustainability disclosure regulation, the CSRD, which will apply to over 50,000 companies once they start reporting for the first time in the 2024 financial year.

ESG Frameworks

Frameworks offer a way to organize and structure information. They provide a flexible ‘frame’ for thinking about a problem but don’t dictate a specific solution. Frameworks can be thought of as a set of guiding principles that help people make sense of the complex information in an ESG report.

Unlike standards, there are plenty of frameworks available for companies to use in their reporting. Some of the most widely used ESG reporting frameworks include:

 1.Carbon Disclosure Project (CDP)

CDP (formerly the ‘Carbon Disclosure Project’) is a non-profit founded in 2000. It operates the largest disclosure system globally for companies and cities.

Their role is to collect and analyze data on environmental performance and provide insights to improve sustainability practices. Companies submit information to CDP by filling out the CDP Questionnaire on one or more of several topic platforms: climate, water, supply chain, and forests.

The Climate Score produced by CDP can be fed into EcoVadis, a sustainability ratings provider, to categorize companies into various levels: bronze, silver, gold, or platinum.

In collaboration with the SME Climate Hub, CDP launched a new climate disclosure framework in 2021. The framework helps businesses track and report their progress towards commitments, as well as demonstrate  climate leadership in their respective industries.

 2. The Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is an independent organization headquartered in Amsterdam with regional offices around the world that helps businesses, governments, and other organizations understand and communicate their sustainability impacts.
The standards provide a comprehensive framework for reporting on an organization’s ESG performance and cover a range of topics, including greenhouse gas emissions, water use, labor practices, human rights, anti- corruption, and community engagement. The standards provide specific guidance on how to disclose information about each topic, including what information to include, how to measure and report on performance, and how to ensure transparency and accuracy.
Data reported under the GRI feeds into Sustainalytics, which provides research, ratings, and data to institutional investors and companies.

The GRI Standards are widely recognized as a global benchmark for sustainability reporting and are used by thousands of companies, governments, and organizations worldwide.

3. The Sustainability Accounting Standards Board (SASB)

Another non-profit, the SASB standards are designed to help companies identify and report on financially material sustainability issues that are relevant to their industry.

By using the SASB, companies can provide investors with more useful and comparable information about their sustainability performance, which can help them make better-informed investment decisions.

Together with the Global Reporting Initiative (GRI), the SASB is one of the most widely used frameworks for sustainability reporting.
At the end of 2020, SASB and GRI announced a collaboration, aiming to create better transparency and trust among reporting companies.

It effectively connects businesses and investors to the financial impacts of sustainability.

As of August 2022, the International Sustainability Standards Board (ISSB) of the IFRS Foundation assumed responsibility for the SASB Standards. The ISSB has committed to building on the industry-based SASB Standards and leveraging SASB’s industry-based approach to standards development.

4. International Sustainability Standards Board (ISSB)


The International Sustainability Standards Board (ISSB) is an independent, private-sector body founded by the International Financial Reporting Standards Foundation (IFRS) that is looking to develop “high-quality, understandable, enforceable, and globally accepted accounting and sustainability disclosure standards.”

The objective of the ISSB is to provide investors and other market participants with consistent information about companies’ sustainability-related risks and opportunities in order to help them make informed decisions across a range of industries. 

To date, the ISSB has not released any standards; however, it has confirmed that it will issue its first two finalized frameworks by the end of June, with an expectation that the first corporate reports aligned with these frameworks will be issued in 2025.

Once these standards are established, it is expected that investors and other stakeholders will demand comparable and transparent ESG data, which will require companies to provide information in line with these standards.

5. The Science-Based Targets Initiative

The SBTi’s reporting framework provides guidelines for how organizations should report their progress, including what data they should collect and how they should measure their emissions. The framework also includes specific requirements for reporting on different types of emissions, such as Scope 1 (direct) and Scope 2 (indirect) emissions, as well as Scope 3 (indirect) emissions related to the organization’s value chain.

The SBTi reporting framework also requires organizations to report on their progress towards achieving their science-based targets, including any challenges or barriers they have encountered along the way. This information is used by the SBTi to assess the effectiveness of its program and to identify areas where additional support or guidance may be needed.

6. UN Sustainable Development Goals

While not a reporting framework in the traditional sense, the United Nations Sustainable Development Goals (SDGs) are a set of 17 global objectives that aim to address the world’s most pressing environmental, social, and economic challenges.

The SDGs provide a common language and framework for organizations to align their strategies and to report on their contributions to achieving the goals.

Several reporting frameworks, such as the CDP, GRI, and SASB, collaborate with these goals, and organizations can disclose their progress towards them using these frameworks. Governments can leverage this data to track national progress and develop related policies.

Contact to work together from all over the world.
elif.nezir@bsmcevre.com
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