Why Prepare for the New Wave of ESG Reporting

The Corporate Sustainability Reporting Directive (CSRD) of the European Union is reshaping Environmental, Social, and Governance (ESG) reporting. Starting in 2024, nearly 50 thousand companies are subject to mandatory sustainability reporting, including companies from other countries that have subsidiaries operating or listed in regulated markets within this region. This is a significant development for hundreds of companies in Brazil.

The first set of European Sustainability Reporting Standards (ESRS) projects under CSRD has been published. These standards are much more stringent in terms of scope and depth of disclosure requirements than the current Non-Financial Reporting Directive. Affected companies must now report according to ESRS and provide metrics and goals for numerous indicators.

In the same vein, the International Financial Reporting Standards Foundation (IFRS) has recently announced a new set of requirements designed to provide investors with clear and transparent information about a company’s sustainability and climate-related risks and opportunities.

The publication of the first two IFRS Sustainability Disclosure Standards marks a significant milestone in the vision of the International Sustainability Standards Board (ISSB).

Over the past two decades, ESG reporting has expanded in scope and importance, with increasing integration of this information with conventional financial data. This aligns with the trend we have observed, where financial outcomes are impacted by environmental and social aspects and need to be considered when evaluating a company’s financial performance.

Companies and professionals involved in preparing both financial and non-financial corporate reports need to engage with this agenda more intensely than in the past. Changes will become more frequent, and integration will become clearer. This will require companies and professionals to possess knowledge and management systems that are much more advanced than those generally employed by organizations.

Despite often being treated as a “secondary” exercise in ESG management and integration with a company’s business strategy, corporate reports are the documents prepared by companies and subject to verification and assurance. They are analyzed by numerous market professionals, experts, and opinion leaders.

Thus, on the environmental front, in addition to tracking performance in terms of climate impacts, circular economy practices, and greenhouse gas emissions, organizations must be transparent about how they address biodiversity loss and the increasingly critical management of water resources.

Social challenges, such as ensuring quality of life for employees and third parties, implementing inclusion policies, maintaining diversity in governance, and assessing working conditions within the supply chain, are also part of the new CSR and the EU’s new guidelines.

Furthermore, disclosures related to business conduct policies, including corruption and anti-bribery measures, lobbying activities, and payment practices, are addressed in various forms within corporate reporting standards.

In the case of CSR, since some organizations have only one year before the start of the first reference period, it is vital to be prepared. This involves key steps such as establishing a task force, defining a governance structure led by the board to oversee and integrate ESG into data management and corporate risk analysis.

As companies’ ESG performance faces increasing scrutiny, reporting is becoming a priority. Even advanced companies will be required to make significant improvements in how they collect, process, and report data on environmental, social, and governance topics across the value chain. Keeping pace with and adapting to evolving sustainability regulations has become a strategic demand for both organizations and society as a whole.


SOURCE: https://exame.com/esg/por-que-se-preparar-para-a-nova-onda-de-relatorios-esg/

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