ESG-Sustainability

ESG Sustainability Reporting Regulations

It has been a long journey, spanning about 30 years, but the efforts to help address the global challenges are yet to deliver the expected results. In 2021, the earth was 1.9 degrees Fahrenheit warmer compared to the levels recorded in the late 19th Century. This is only one. Pollution from industrial facilities, loss of biodiversity, unending conflicts, and child labor all spilled over into the 21st Century. In Afghanistan, reports of people yearning to run away from home if only to get away from the new regime keeps hitting the headlines. Other countries in turmoil include Ethiopia, Syria, North Korea, and Ukraine. So, let’s put forward the big question: is there a way out for our planet? 

Efforts, such as the Kyoto Protocol and corporate social responsibility, have helped to some extent, but we are still far off the mark in helping to restore the glory of the planet. The latest effort, which the planet is holding onto, is ESG sustainability reporting. Although voluntary, it has proved so effective, and experts agree that this might be the best solution to address the issues at hand. 

The benefits of ESG reporting, the ability to get everyone involved, and the focus on transparency have made governments to finally consider making the process a mandatory undertaking. If you have a company that is yet to start ESG sustainability reporting, the best idea is to adopt ESG reporting right away as opposed to waiting for mandatory regulation. Already, there are regulations setting the stage or requiring all companies to be involved. Here is a closer look at some of them:  

Will ESG Reporting Work Where Other Efforts have Failed?

Yes, it will. We answer this question in the affirmative because it is stakeholders who are driving the process. Today, investors want only to buy stocks of companies that are responsible. They demand to see ESG reports to establish if they are causing harm to the environment or using bad production practices. This is why more stock exchanges, from London Stock Exchange (LSE) to Hong Kong Stock Exchange (HKEX), have all set high standards for ESG reporting. Your company must produce regular, correct, and verifiable ESG reports to be able to list in the exchanges. Other reasons why ESG sustainability reporting is succeeding include: 

  • There are so many benefits for companies that adopt ESG reporting. 
  • It helps to draw stakeholders close to their companies. 
  • You are able to cut down operating costs and rapidly build a positive brand.

ESG Reporting Rules 

Today, the EU leads the pack with the most comprehensive regulations. They are mainly targeted at promoting sustainable investing. Indeed, the EU regulations have become like a pacesetter, with other countries following closely to develop similar rules. Some of the main areas of focus for most regulations on ESG reporting include: 

  • Cutting down emissions
  • Promoting good labor practices.
  • Reducing the risks that come from industrial pollution.
  • Bringing everyone on board in the supply chain. 
  • Helping address the challenge of greenwashing.

Now, let’s look at the main regulations governing ESG in different countries on the globe

The  EU Taxonomy

This is a system of classification that stakeholders can look at to determine if an activity is sustainable. The law targets to provide customers, investors, and companies with definitions of what is considered sustainable. 

The Sustainable Financial Disclosure Regulation 

Simply known as SFDR, this law is used to define the obligations that companies need to show the best way to factor sustainability risks in company strategy formulation. It also helps in setting the stage for strategy formulation, crafting the right goals, and impacts for investors. It is based on the Principal Adverse Sustainability Impacts Statement (PAIS).

New Corporate Sustainability Reporting Directive (CSRD)

CSRD is the latest version of the European Union regulation, the Non-Financial Reporting Directive (NFRD), and is expected to take effect in 2022/2023. It sets out stricter rules for large companies, requiring them to provide information such as the description of their operations and non-financial key performance indicators on sustainability. 

These are only a few regulations setting the pace on the globe. Each country has specific laws that individually or collectively touch on sustainability. For example, you will find local laws on pollution, labor, and minimum wages. No matter your country, industry, or business targets, you need to have the right ESG sustainability reporting software. Visit Diginex.com now to talk to a professional on ESG reporting and get the best programs.  

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