This was supposed to be the year we saw corporate sustainability reporting requirements come into force in a big way. Instead, 2025 is kicking off with lots of questions still unanswered about the future of sustainability reporting regulation. What will the new administration in the U.S. mean for climate disclosure requirements? When will the Corporate Sustainability Reporting Directive (CSRD) officially be implemented right across Europe? What will the final reporting requirements look like under the potential Omnibus Simplification Package? And what will come of the one-year delay in the European Deforestation Regulation (EUDR)? All in all, at the start of 2025, we have far more questions than answers.
After several years spent gearing up for compliance with these and other major regulatory changes, many business leaders are rightly annoyed at the hurry-up-and-wait pace of reform and confused about what to do next. However, even though no one likes to live in a world of uncertainty, there are some silver linings to this period of sustainability reporting limbo in which we currently find ourselves. Chief among them is the luxury of time to reassess what we believe to be the facts of the new regulations coming down the pike. Business leaders should use this momentary break in the action to hone the structures, policies, objectives and metrics they’ll need to really get organized around sustainability reporting.
Putting the Pieces Together
The fact is even those businesses that are most prepared to flip the switch to full sustainability transparency in 2025 are still a little unclear about how, exactly, they will meet these new standards. The worry is that the final requirements will have dramatically changed from what is currently expected. However, notwithstanding the uncertainty surrounding the eventual shape of the different regulations, for many, the biggest challenges they are still facing are internal. Through the course of hundreds of meetings over the past few years with Chief Sustainability Officers, Chief Compliance Officers, Chief Risk Officers, and more and more with Legal Counsel and other business leaders charged with making sustainability reporting a reality, I’ve consistently found that the biggest source of debate, conflict and concern has been the lack of internal coordination. Several companies that I speak with are still a little unclear about who’s responsible for what, where and when and how all of the data needed for reporting would be centralized, managed and delivered.
For example, it is exceedingly common in a multinational corporation facing myriad reporting requirements across a dozen or more regulatory regimes to still struggle with accessing the necessary data required for reporting. Too often, this data is still housed in multiple, distinct departments and managed by multiple different stakeholders. Things like water management, air emissions, chemical hazards and health and safety would traditionally be covered by the Environmental Health and Safety (EHS) team, while human capital, wellness, and diversity, equity, and inclusion (DEI) would be the domain of Human Resources (HR), and other aspects of environmental, social, and governance (ESG) are overseen by a varied group of sustainability, compliance, finance, legal, procurement and senior leadership positions. Getting all of those people to sync around a common set of standard reporting metrics and the processes required to drive consistent improvement is no small feat.
Establishing Best Practices Based on What We Know Today
While few companies will ever talk about this publicly, in the real world, with the threat of January2025 deadlines for sustainability-related risks reporting breathing down their necks, many were scrambling to cobble together all the disparate pieces of information they’d need for compliance. Surprisingly few had those reporting structures fully streamlined and fewer still had fully standardized the process of continually tracking and reporting key information. Now is the time to build those structures.
That process starts with the facts. While many of the major reforms that we were anticipating this year, like the CSRD, the EUDR, and potentially the Corporate Sustainability Due Diligence Directive (CS3D) have been delayed, they are still coming in some form or other. Likewise, the sustainability reporting standards developed by the International Financial Reporting Standards Foundation’s (IFRS) International Sustainability Standards Board (ISSB), have started to take effect this year in some jurisdictions, requiring many companies to start reporting their financials in line with their climate disclosure standards. In addition, in December, the European Financial Reporting Advisory Group (EFRAG) published guidance documents on the European Sustainability Reporting Standards (ESRS), which detail many of the granular details companies will be required to deliver.
A Corporate Sustainability Playbook
Together, these existing standards and pending regulations give business leaders a clear sense of the baseline sustainability data they will need to share and a roadmap for how they will need to disclose it. Now is the time to start building some companywide systems and processes that make compliance easier when new mandates are finally introduced. While some of the details may change, the framework is now very much in place to give companies what they need to build a playbook. Importantly, they also need to ensure they have the right coach and quarterback on the field ready to make critical gameday decisions.
It’s easy to look at the current state of global sustainability regulation and focus on the uncertainty, but that’s really just a distraction. The fact is that significant sustainability reporting requirements are already here and many more are on the way. Those who use this current pause in the action to get themselves in shape for what’s to come will be in a far better position to adjust and course correct when those final rules do come through than those who gamble on a wait-and-see approach.
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