In the past few years, environmental, social, and governance (ESG) regulations have increased significantly. In order to achieve net zero targets by 2050, regulators around the world are creating country-specific and regional legislation that aims to standardize how climate-related disclosures are reported and what information needs to go into them.
In this article, we review ESG, sustainability, and climate-related disclosure requirements from:
- Australia
- Canada
- European Union
- India
- USA
For each region, we ask: What is the disclosure requirement? Who does it apply to? What are the major requirements? And, where can you look for more information?
Of course, with legislation evolving practically every day, it’s important to treat the information below as a starting point. Look to individual organizations for the latest updates to best shape your company’s sustainability program and think carefully about the information you’ll need to gather in order to make an accurate disclosure.
Australia
1. What Is Australia’s Proposed Climate-Related Financial Disclosure?
In June 2023, the Australian Treasury released a Climate-Related Financial Disclosure Consultation Paper outlining the requirements that certain Australian companies may have to follow related to climate disclosures.
The proposed requirements align closely with the Task Force on Climate-related Financial Disclosures (TCFD) framework, meaning companies who already follow this framework should be well positioned to meet the new requirements.
2. Who Will Australia’s Proposed Climate-Related Financial Disclosure Apply To?
The Australian Treasury is proposing a phased approach to implementation. Large listed and unlisted businesses and financial institutions will start reporting in the 2024-2025 financial year and, by the 2027-2028 financial year, the requirements will be expanded to all other proposed parties. Small and medium entities (e.g., under 100 employees) would not be required to report.
3. What Are the Main Requirements of Australia’s Proposed Climate-Related Financial Disclosure?
The Australian Climate-Related Financial Disclosure is still under development, but some of the items expected to be included are:
- Governance: Companies would be required to disclose information about governance processes, controls and procedures used to monitor and manage climate-related financial risks and opportunities.
- Strategy: Scenario Analysis: Reporting entities would be required to use qualitative scenario analysis to inform their disclosures, moving to quantitative scenario analysis by end state. Additionally, companies would be required to disclose climate resilience assessments against at least two possible future states, one of which must be consistent with the global temperature goal set out in the Climate Change Act 2022. Transition Planning & Climate-Related Targets: Transition plans would need to be disclosed, including information about offsets, target setting and mitigation strategies. Further, all entities would be required to disclose information about any climate-related targets (if they have them) and progress towards these targets.
- Risks and Opportunities: Companies would be required to disclose information about material climate-related risks and opportunities to their business, as well as how they identify, assess and manage risk and opportunities.
- Metrics and Targets: Scope 1 and 2 emissions for the reporting period would be required to be disclosed. Disclosure of material scope 3 emissions would be required for all reporting entities from their second reporting year onwards. Scope 3 emissions disclosures could be made in relation to any one-year period that ended up to 12 months prior to the current reporting period.
Where Can I Learn More About Australia’s Proposed Climate-Related Financial Disclosure?
To stay informed about Australia’s climate-related disclosure proposal, visit The Treasury’s website.
Canada
1. What is Canada’s Proposed Disclosure of Climate-Related Matters?
In 2021, the Canadian Securities Administrators (CSA), which regulates securities and publicly-traded companies in Canada, proposed a climate-related disclosure requirement for financial institutions and ESG-related requirements for large and listed entities. The proposed legislation is called 51-107 Disclosure of Climate-related Matters.
The climate-related disclosure requirement for financial institutions follows the Task Force on Climate-related Financial Disclosures (TCFD) framework, which, as of 2023, falls under the International Sustainability Standards Board (ISSB) standards.
The requirements are expected to come into force in 2024, however they are, as of April 2024, still in the proposal stage. The CSA are currently awaiting the completion of the Canadian Sustainability Standards Board’s (CSSB) consultation on Canadian Sustainability Disclosure Standards 1 and 2 to potentially incorporate modifications appropriate for the Canadian capital markets into their proposed rules.
2. Who Will Canada’s Proposed Disclosure of Climate-Related Matters Apply To?
Potentially beginning in 2024, large Canadian banks, insurance companies and federally-regulated financial institutions will have to provide ESG reporting and climate-related disclosures.
Additionally, listed Canadian companies will have to comply with ESG reporting requirements.
3. What Are the Main Requirements of Canada’s Proposed Disclosure of Climate-Related Matters?
The CSA’s proposed requirements outline four core areas of disclosure, in line with the TCFD recommendations. These include, as stated by the CSA:
- Governance: Companies would need to disclose their board’s oversight of and management’s role in assessing and managing climate-related risks and opportunities.
- Strategy: The short-, medium- and long-term climate-related risks and opportunities the company has identified and the impact on its business, strategy, and financial planning, where such information is material. As a modification from the TCFD recommendations, the proposed disclosure would not include the requirement to disclose “scenario analysis”, which is an entity’s description of the resilience of its strategy within different climate-related scenarios, including a 2°C or lower scenario.
- Risk Management: How a company identifies, assesses and manages climate-related risks and how these processes are integrated into its overall risk management.
- Metrics and Targets: The metrics and targets used to assess and manage climate-related risks and opportunities where the information is material.
Where Can I Learn More About Canada’s Proposed Disclosure of Climate-Related Matters?
To stay informed about these evolving disclosure requirements, visit the Canadian Securities Administrators (CSA) website.
European Union
1. What Is the EU Corporate Sustainability Reporting Directive (CSRD)?
The European Union’s (EU) new Corporate Sustainability Reporting Directive (CSRD) came into force in January 2023. It takes over from its predecessor, the Non-Financial Reporting Directive (NFRD), as the latest in ESG reporting for European businesses.
Unlike the NFRD, which only applied to large public-interest entities with over 500 employees, the CSRD is much broader and will phase in smaller and non-EU companies over the next three years.
By the time the CSRD is fully phased in, more than 50,000 organizations will be required to report under the program. By expanding participation in the program, it is anticipated that the CSRD will deliver significant steps in reaching Europe’s carbon neutral goals by 2050.
The CSRD will also help consumers, investors, organizations, and other stakeholders evaluate the sustainability performance of companies and make decisions based on standardized data.
2. Who Does the CSRD Apply To?
The CSRD applies to a wide range of businesses. It requires all large companies, SMEs and listed companies, with the exception of listed micro-enterprises, to disclose information on risks and opportunities arising from social and environmental issues, as well as their impact on people and the environment.
The first companies required to report using the new rules will have to do so in the 2024 fiscal year, with their reports published in 2025. These companies will be required to report using the European Sustainability Reporting Standards (ESRS).
The requirement to report will be phased in, with longer phase-in periods for companies with fewer than 750 employees.
3. What Are the Main Requirements of the CSRD?
The ESRS have been finalized by the European Commission as of July 2023. The final version of the ESRS is made up of two cross-cutting standards and includes disclosures in the following areas:
- General disclosures
- Environmental disclosures
- Climate change (e.g., disclosing the release of greenhouse gas emissions including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3) to report Scopes 1, 2 and 3 with data gathered from up and down the supply chain)
- Pollution (e.g., disclosing pollution of air, land and water, including the emissions of air pollutants, inorganic pollutants, ozone-depleting substances, microplastics, etc.)
- Water and marine resources (e.g., disclosing annual water consumption, the amount of water recycled and stored, etc.)
- Biodiversity and ecosystems
- Resource use and circular economy
- Social disclosures
- Own workforce (e.g., disclosing information about collective bargaining, diversity, wages, social protection, persons with disabilities, etc.)
- Workers in the value chain
- Affected communities
- Consumers and end users
- Governance disclosures
- Business conduct (e.g., disclosing policies related to corporate culture, management of relationships with suppliers, avoiding corruption and bribery, protection of whistle-blowers, animal welfare, payment practices, etc.)
The reporting requirements are highly aligned with the standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).
4. Where Can I Learn More About the CSRD?
Learn more about the CSRD in our CSRD Reporting Guide eBook or visit the European Commission’s website.
India
1. What Is the Business Responsibility and Sustainability Report (BRSR)?
The Business Responsibility and Sustainability Report (BRSR) came into effect in 2023 and is the first framework in India that requires eligible Indian companies to report metrics on sustainability-related factors.
Although the BRSR is India’s first ESG reporting framework, it is an evolution from the earlier voluntary guidelines that were first issued in 2009 and later released as the Business Responsibility Report (BRR) in 2012.
The BRSR was initiated by the Securities Exchange Board of India (SEBI), which is India’s regulatory body for its securities market. The SEBI created the BRSR in a way that would align with other international reporting frameworks including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures (TCFD).
2. Who Does the BRSR Apply To?
As of the 2022-2023 fiscal year, all eligible Indian companies must prepare a BRSR-compliant report. Eligible companies are defined as those listed by the SEBI as one of the top 1,000 companies by market capitalization. These companies must file a BRSR-compliant report to the SEBI as part of their annual report.
Other listed companies wishing to report under the BRSR framework are welcome to do so though, as of late 2023, they are not required to report.
3. What Are the Main Requirements of the BRSR?
The SEBI has prescribed the format the report should follow and provides additional guidance for reporting companies. As a general overview, here is some of the key information required:
Section A: General Disclosures asks for information such as:
- Key details about the company including its Corporate Identity Number (CIN), year of incorporation, name of the stock exchanges where shares are listed, contact details, etc.
- Details about its products/services and business activities.
- Information about its operations such as where plants/offices are located, markets and customers served, percentage of exports, etc.
- A breakdown of its employees and workers, including demographics, representation of women, turnover rates, etc.
- Disclosure of complaints and grievances under specific principles of the National Guidelines on Responsible Business Conduct.
- An overview of its business conduct and sustainability issues.
Section B: Management and Process Disclosures helps companies show how they’re adopting India’s National Guidelines on Responsible Business Conduct (NGRBC) Principles and Core Elements and asks for information such as:
- Specific commitments, goals, and targets set, as well as performance data.
- An ESG statement demonstrating things like the company’s vision, strategy, strategic priorities, etc.
- The name of the highest authority responsible for implementation and oversight.
- If the company has a committee responsible for decision-making on sustainability issues.
Section C: Principal Wise Performance Disclosure requires companies to show how they’re integrating the BRSR’s nine principles into their processes and decision-making. These principles are:
- Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable.
- Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.
- Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains.
- Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.
- Principle 5: Businesses should respect and promote human rights.
- Principle 6: Businesses should respect and make efforts to protect and restore the environment.
- Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.
- Principle 8: Businesses should promote inclusive growth and equitable development.
- Principle 9: Businesses should engage with and provide value to their consumers in a responsible manner.
Where Can I Learn More About the BRSR?
Learn more about the BRSR in our BRSR 101 Guide or visit SEBI’s website to read the regulations.
USA
1. What are the SEC Climate Disclosure Standards?
In March 2022, the US Securities and Exchange Commission (SEC) announced that it would be proposing rule changes to require registered companies to include specific climate-related disclosures in their registration statements and periodic reports.
Now finalized, these disclosures cover information about climate-related risks that could have a material impact on their business, along with key climate-related metrics to be included in their audited financial statements. This includes greenhouse gas emissions disclosures.
The SEC’s main objective is to create a standardized reporting format and method, allowing investors and other stakeholders to confidently interpret, compare, and use data for decision making.
On March 6, 2024, the Securities & Exchange Commission (SEC) finalized and adopted these rules to enhance and standardize climate-related disclosures by public companies and in public offerings. Known as The Enhancement and Standardization of Climate-Related Disclosures for Investors, this disclosure is one of a number globally put forward to formalize and harmonize climate disclosures for the business community.
2. Who Will the SEC Climate Disclosure Standards Apply To?
The SEC’s climate disclosure rules will apply to publicly traded companies operating in the US, including those in the retail, technology, oil, and gas sectors. Approximately 2,800 US businesses are expected to disclose the required information, while around 540 foreign companies with US operations will also need to report their climate disclosure data.
The final rules will be phased in for all US publicly traded companies with the compliance date dependent upon the status of the business as a large accelerated filer (LAF), accelerated filer (AF), non-accelerated filer (NAF), smaller reporting company (SRC), or emerging growth company (EGC).
3. What Are the Main Requirements of the SEC’s Climate Disclosure Standards?
With the standards now finalized, companies will have to include information about climate-related risks in their annual financial statements and annual reports, including Securities Act or Exchange Act registration statements and Exchange Act annual reports.
The SEC’s climate disclosure rules will require companies to disclose information on:
- The role and responsibility of corporate governance in relation to identifying and managing climate-related risks.
- Potential and actual impacts of climate-related risks on business operations or financial performance over the short-, medium- and long-term.
- How climate-related risks have, will, or might impact business strategy and outlook.
- Processes for identifying, assessing, and managing climate-related risk and a description of how these processes are integrated into wider risk management systems.
- The impact of climate-related events, like severe weather, or transition activities, like changing business operations to mitigate climate-related risk, on financial statements.
- Scopes 1 and 2 GHG emission metrics, with additional Scope 3 reporting where the organization has documented Scope 3 emissions reduction targets.
- Any climate-related targets, goals, or transition plans.
Where Can I Learn More About the SEC Climate Disclosure Standards?
To learn more about the proposed SEC Climate Disclosure Standards, check out our latest guide on the topic or visit the SEC’s website.
Impacted by a Disclosure Requirement? AMCS Can Help.
Whether your business needs to meet a disclosure requirement now, or in the future, AMCS can help make the process easier.
With the AMCS Sustainability Platform, we help companies automate and manage their entire ESG and sustainability reporting program no matter where in the world they are located. For carbon accounting, water disclosures, corporate social responsibility and more, we help you collect and report the data you need to disclose.