ESG Reporting

Abstract

Environmental, Social and Governance (“ESG”) related topics are here to stay—it is of essence that legislators and regulators worldwide enforce their embedment within legal frameworks by setting mandatory milestones to be complied with, in order to define standards and promote a consistent transition into sustainable business models. In this article a comprehensive survey of the different forms ESG and sustainability reporting might take and of the latest regulatory developments in this field is provided. Mandatory reporting is expected to become a powerful tool to enhance the efficiency of capital markets and to promote a risk-based allocation of financing channeled towards economic activities contributing to environmental, social, climate and ethics-related objectives. This chapter will take the reader through the increasingly demanding calls for consistency, quality and reliability in reporting and provision of comparable information, which have been gaining momentum worldwide. With a view to enabling trust in sustainability reporting and disclosures, the basis of such reporting must be clearly defined, and the reported figures and information must be comparable across countries and industries. To this end, this chapter provides an overview of the extent to which the EU regulatory agenda is accelerating the move from voluntary approaches to mandatory regulatory regimes. The challenge for regulators, policy makers, companies and other stakeholders of finding the appropriate balance between a clear regulatory required formal reporting and the disclosure of rather qualitative ESG information will also be discussed. Finally, a reflection about the future of sustainability reporting will point out that regulation and standardisation will need to go beyond climate change and environmental issues and shall also consider fundamental aspects such as human rights, nature and/or biodiversity.