You’re not a sustainability expert. But your company will be covered by new reporting rules. What’s your move?

It’s the board and C-suite question I’ve been asked most this week: What do non-ESG executives and boards need to know about the recent announcements and rules on ESG disclosures??

Spoiler alert: This post is not for you if you are looking for deep technical details of recent ESG regulatory announcements from the SEC (Securities and Exchange Commission), the California government, the European Union and its CSRD (Corporate Sustainability Reporting Directive) rules and, now, the Canadian Sustainability Standards Board (CSSB). But if you want a practical plain-language perspective on what these measures mean for companies and the questions you should ask your sustainability team and advisors, and yourself as a leader, this article is for you. ?

There are so many sustainability and ESG expectations, standards and regulations coming at companies. Executives and board members—even those who are not sustainability experts—have a vital role to play. It is asking the right questions. ??

Playing that role helps companies make well-informed decisions on what to disclose and commit to publicly. It also helps organizations decide what to do and what not to do to achieve those commitments. ?

Asking the right questions pinpoints the implications of disclosing goals or performance too quickly or with poor data. It helps make sure your company understands the costs, benefits, and timelines of your commitments and can explain clearly to stakeholders what you are doing and not doing—and why.

Whether or not your company will soon have new sustainability reporting obligations, there are five important areas to watch and related questions to ask.?

1. Restating your ESG metrics—whether those are goals or actual performance—can be as damaging and difficult as restating your financials. Do you have non-financial accounting policies and controls on the roles, data collection and calculations that will give stakeholders and regulators confidence? Do you have external assurance on key measures that will be linked to compensation?
2. Has your management team and board reviewed data more than once before it’s disclosed for the first time? Are you confident in the methodology for collecting the data and performing the calculations? Have you discussed this with your auditors??
3. If you are disclosing goals or commitments, do you understand what is required to achieve those commitments? Have you explored the cost, availability of technology, need for emissions offsets and change impacts? Have you analyzed the benefits of acting and when those benefits will materialize??
4. If you are disclosing goals or commitments, do all affected divisions or business units understand how their activities, decisions and actions contribute to—or detract from—your organization’s performance? Do they have appropriate management- or board-level accountability, oversight and governance to help them achieve those commitments? Can they see their progress frequently enough to course correct as needed??
5. Have you or your teams looked beyond regulations and standards to determine what is material to your business and your stakeholders, as well as what you measure and report? Do you have robust documentation on how you determine what is material to your organization’s enterprise value? Have you also considered how your customers’ evolving expectations could change their buying decisions? Do they have their own sustainability commitments that could require you to disclose additional information? How will your investors, lenders and insurers respond to the commitments you disclose and your performance against those commitments? And how do the sustainability matters that are most important to your employees and communities affect your enterprise value??

There’s a common theme running through all these questions. Before releasing any data, setting any commitments or targets, it’s important to discuss it at the executive and board level. You want to see it more than once, understand the methodology,?and ensure that any key metrics for which you need external assurance are discussed with your assurance provider. Ultimately, you want to be certain that?your disclosures of metrics, goals, governance, and oversight are drown-proofed.?

How are you preparing for these new regulatory requirements? Leave a comment or get in touch directly. And check out our latest blog for more information on key highlights of the CSSB's draft standards and the potential impact on Canadian filers. ?