ESG reporting - an evolving landscape

To be properly prepared, firms need to develop a prioritised sustainability reporting strategy. Firms should first identify each of the reporting standards, regulations and other requirements that apply to them across their corporate structure and geographies, the timeframe in which these requirements will apply, and the data needed for meeting these reporting requirements. To future-proof this assessment, firms should perform regular horizon scanning given the rapid pace of reporting developments.

For example, the topic of nature and biodiversity is looming large given the finalisation of the Taskforce on Nature-related Financial Disclosures (TNFD) requirements and the specific topic included in the European sustainability reporting standards. The key for firms will be identifying the extent to which requirements overlap and can be served by the same underlying data.

Firms should then conduct a materiality assessment. This assessment will consider compliance requirements but also other reasons to report sustainability metrics. For example, any metrics linked to the firms' funding or to executive remuneration may be considered material and therefore included in a strategy voluntarily.

The next step is a review of reporting readiness by comparing current reporting against a firm's desired reporting. An assessment of readiness will consider necessary uplifts in controls, technology and data.

The strategy can inform resourcing needs or, alternatively, resource constraints could shape the reporting strategy. There would need to be an appropriate operating model to deliver this strategy, to facilitate planning, controls, reporting and monitoring at a level that we often associate with financial reporting and audited to a level of reasonable assurance.

Seize the moment

Here in the UK, and worldwide, financial services firms have a vital part to play as primary stewards of capital. Net Zero, the Just Transition and other global aspirations will rely heavily on actions taken by these firms. Transparent reporting by the sector, as well as across all companies more broadly, will help drive towards these aspirations and keep firms honest in what they say and do.

The UK has an opportunity to build a world class reputation for sustainability reporting and external assurance on this topic. This can further strengthen our internationally renowned capital markets, our position as a leading business destination and reinforce our commitment to sustainability more broadly. It is critical that the UK seize this moment.

Originally published by Thomson Reuters © Thomson Reuters