The Summer of Interoperability
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The Summer of Interoperability

ESG reporting keeps getting easier!?

Most would disagree with this statement because of all the new reporting regulations and standards. But, it seems like every other week this summer, we have reported on another quantum leap in the convergence of ESG disclosures.

The ISSB announced in July that its standards would have a high degree of interoperability with the European Sustainability Reporting Standards (ESRS).

This week, a joint statement from the widely used Global Reporting Initiative standards (full disclosure: I am the former CEO of GRI) and the ESRS has confirmed a further “high level of interoperability. Reducing any complexity in disclosure and the possibility of double reporting.” The statement says that companies that currently use the GRI standards will be “well prepared to report under the ESRS.”?

If you are a sustainability practitioner, this is reason to celebrate. The fact is that most companies use the GRI standards to report their sustainability results. This announcement means that thousands of companies will have an easier time with compliance - at least in Europe. The rest of the world is gravitating to the ISSB standards.?

So, if the GRI standards are interoperable with ESRS, and ESRS standards are interoperable with ISSB…everything should work together…right??

OK. By now, we are all confused.? But the good news is that all major standards bodies are “interoperable” - can real convergence be far behind???

What should ISSB’s Next Focus Be?

At the end of last week, the ISSB closed their consultation period, where they asked the public’s opinion on the priorities for their future work. The main issue at hand was what should be the disclosure topic of the next ISSB standard.

Official results aren’t available yet, but the most vocal stakeholders want ISSB to focus on human capital and human rights. A group of asset owners, industry associations, and other stakeholders have warned against separating these two topics into distinct standards. Instead, they say they should be consolidated into one standard to avoid overlaps and confusion.?

Europe’s ESG standard-setting body, the European Financial Reporting Advisory Group (EFRAG), also said separating the two would perpetuate “misunderstandings about how they interrelate.”?

In their comment letter, EFRAG suggested that ISSB prioritize updating the Sustainability Accounting Standards Board (SASB) standards as a guide to build their own sector-specific standards - interoperability rides again!?

The Materiality Schism

Another issue that came up in the ISSB consultation was the hotly contested issue of materiality. Allianz was the loudest voice asking ISSB to switch to double materiality, saying it’s “absolutely essential” for the ISSB’s materiality definition to include “inside-out impacts. Adding that “investors are (increasingly) interested in a company’s impact on the planet and people, irrespective of concrete/immediate financial effects.”

ISSB was established to develop disclosure standards for financial reports. This distinction diverges from the ESRS and the GRI, which are concerned about both our planet and the bottom line of the reporting companies.?

But maybe these points of view are not divergent. According to Allianz and other investors, such as California pension fund CalPERS, companies' impacts on the environment and society are essential data points for investment decisions.

Africa’s First Climate Summit

Monicah Mwangi/Reuters

Africa’s first climate summit, in Kenya, came to a close this week. The overwhelming sentiment of the event was that Africa is not hapless and in need of aid.

Instead, the continent wants investment from developed nations to unlock their green potential. Kenyan President William Ruto, who hosted the event, said that Africa had 60% of the global renewables potential and a third of the minerals needed to electrify the global economy, but around 600 million Africans lacked reliable electricity. Adding that Africa “must go green fast, before industrializing, and not vice versa.”?

The result of the event was the Nairobi declaration. The declaration asks for a global carbon tax, for developed nations to meet their unfulfilled pledge of giving $100 billion annually to developing countries, and a pledge of $23 billion for green growth and climate mitigation and adaptation efforts across the continent.

Costs of Invasive Species

Munir Uz Zaman/AFP/Getty Images

A new UN report revealed that at least 3,500 invasive species across the planet cost $423B every year and threaten global biodiversity. From mice and crawfish to non-native grasses that exacerbated last month's Maui wildfire, the report says that invasive species regularly cause extinctions and can permanently damage the healthy functioning of ecosystems.?

Thankfully, the report also revealed that eradication projects of invasive species have a high success rate of 88%. But, it also said that countries should focus on controlling the movement of species over eradication.?

To help investors and companies better assess their nature-related risks, including invasive species, the upcoming Task Force on Nature-Related Financial Disclosures (TNFD) developed a common definition for ‘nature positive.’ Nature positive is the new catch-all term for biodiversity - like ‘net-zero’ is for climate - but more work is needed to define the term to avoid greenwashing.?

It’s STILL HOT

US Army/Reuters

It should come as no surprise that scientists this week confirmed this summer was the hottest on record. The global average temperature from June, July, and August was 16.8C (62.2F) - 0.66C above average.?

As August gave way to September, 60 million Americans are under heat alerts again this week, and the costs of climate-related disasters are spiraling while FEMA’s disaster relief fund is dwindling. Polarized US politics may delay the needed funds and even shut down the US government entirely.?

Rachel Cleetus with the Union for Concerned Scientists said, “It’s just an extraordinary, harrowing summer when it comes to extreme events, many of which bear the fingerprints of climate change.”

A new report from the WMO revealed that heat waves also negatively affect air quality. WMO Secretary-General Petteri Taalas said, "Heatwaves worsen air quality, with knock-on effects on human health, ecosystems, agriculture, and indeed our daily lives,"?

Have Your Say on ESG and Climate News

With so much ESG and climate news, you may think we miss some important stories. Our community now has more than 34,000 subscribers (THANK YOU), so it’s time to let you have your say on the ESG and Climate stories that are top of mind. Post your stories with hyperlinks here, and we will pick the best to feature in the next editions.? Who knows, maybe no one ever reads this far…but let’s give it a go for a couple of weeks - don’t let us down ;)? ?

The views expressed on this website/weblog are mine alone and do not necessarily reflect the views of my employer.?

Other Notable News:

Notable Podcasts and Events:?

Oral Gray

Managing Partner

1 年

How do I reach you

Asle Gunnar Frydenlund SMA

Water-without-border, Safe Drinking Water, Humanitarian Crisis & Water, Water-AID, National Defence & Water, Atmospheric Water Harvest, Farm Irrigation, Electricity from Wind, Solar & Kinetic Technologies

1 年

When can we hope corporate leaders to use a proactive sustainability approach in business strategies to prevent wrong decision making and avoiding g adverse consequences from the way we work and run our business activities effectively? When can we begin to think proactively and “prevent a killing instead of reporting a murder when it’s too late to avoid” kind of socio-economic consequences thinking? When will we learn the difference between accounting and accountability is the difference between reporting a dead person and a prevented death? Have we not learned anything from lack of measurable results related to equality, climate, sustainability, sustainable goals, poverty, overfishing, poverty, slavery, access to education and electronic banking and the list holds 140 issues totally missed? What did we learn? Why do we need to repeat all our failures? Maybe we should talk about how to solve this because it’s not going anywhere but are delayed due to new count and reporting ideas for business?

Eric VILLEPREUX

Consultant RSE et ESG / Industries Extractives in SSA - Fluids SME w/ Law Firms / Legal Departments

1 年
Matheus Valadares

Engenheiro Metalurgista | ESG | SGI | INVENTáRIO GEE | Consultoria | Coordenador da Qualidade na Modulax Siderurgia SA

1 年

Sounds like a good news to know that new steps are being taken.

Massimo Boselli

FI Client Executive at Citi | CFA ESG | Sustainable Finance

1 年

This is a good news, kinda

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