Our compliance with requirements for measuring the environmental impact of our activities encapsulates several frameworks: The Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB) and the United Nations Sustainable Development Goals (SDGs). These parameters are in turn an integral part of the new Corporate Sustainability Reporting Directive (CSRD), which requires companies to report on their environmental footprint. This directive outlines a set of universally understood international standards that we can use to identify and quantify the impacts of our activities on the environment, people and society, in a way that is clear, unambiguous, uniform and comparable. It also sets out a series of sustainability goals that all stakeholders, businesses and states must strive to achieve, in order to reduce their footprint on the planet.
As part of the European Green Deal, the Corporate Sustainability Reporting Directive (EU) 2022/2464 (the CSRD) was approved and published in the Official Journal of the European Union on December 16th, 2022. The CSRD thus amends Directive 2013/34/EU on the requirement for large companies to disclose non-financial information. The CSRD is a new EU law that lays down stricter requirements with which companies must comply in terms of sustainability reporting. This directive modifies the NFRD on the disclosure of non-financial information and seeks to increase transparency and comparability of information regarding environmental, social and governance (ESG) performance. The CSRD is based on the ESRS (European Sustainability Reporting Standards), drawn up by the EFRAG (European Financial Reporting Advisory Group), which defines what information must be included in the report and how it should be reported.
The Global Reporting Initiative (GRl) was introduced to a wider audience during the World Summit for Sustainable Development in 2000. This initiative lays out a series of sustainability reporting metrics that enable organizations not only to measure their impact from an environmental, social and economic standpoint in a way that is unambiguous, uniform and comparable, but also to make it public in a format that can also be understood by non-experts. By having access to a universal language for sustainability reporting, companies are able to compare their progress and communicate their efforts efficiently. The GRI standards comprise the universal standards (GRI Series 1, 2 and 3) and three topic-specific standards for the economic, environmental and social spheres (GRI Series 200, 300 and 400), which also include the relevant industry standards.
When the SASB uses the term "sustainability", it refers to business activities that maintain or enhance a company's ability to generate long-term value. Together with the GRI, the SASB is one of the most important frameworks for sustainability reporting: the SASB standards identify the environmental, social and governance matters that are most relevant to financial performance in 77 sectors. Investors all across the world now recognize these models as a fundamental component in the disclosure of ESG matters. The SASB approach identifies five areas (environment, social capital, human capital, business model & innovation, and leadership & governance) and splits them into 77 sub-dimensions based on 26 variables (“materialities”). The list of “materialities” can be used as a starting point to help identify and highlight the areas that a particular company is focusing on.
On September 25th, 2015, the governments of 193 UN member states signed the 2030 Agenda for Sustainable Development: an action plan endorsed by the UN General Assembly, which includes 17 specific Sustainable Development Goals, falling under the larger umbrella of a wider action plan with a total of 169 targets or milestones. As well as governments and nations, the 17 goals are applicable to all companies. The SDG principles illustrate exactly what companies are required to do.
The Carbon Border Adjustment Mechanism (CBAM) is an EU tool that came into force in October 2023. It introduced a new carbon levy to ensure that efforts to reduce greenhouse gas emissions within the EU are not counteracted by a concomitant increase in emissions outside of the EU for goods produced in non-EU countries that are then imported, the aim being to prevent “carbon leakage” i.e. companies moving their carbon-intensive production activities abroad to evade emissions standards. The CBAM is part of the “Fit for 55” package. During the initial transition period, it only applies to imports of certain carbon-intensive goods: cement, iron and steel, aluminum, fertilizers, electricity and hydrogen. The way it works is based on a system of certificates: importers must purchase CBAM certificates in line with the carbon emissions associated with the products they import from non-EU countries. The CBAM is an important step for the EU in promoting sustainable practices and preventing production from being outsourced to countries with less stringent regulations, ensuring a just transition to a low-carbon economy.