Which companies have to do ESG reporting?

ESG reporting involves disclosing information about an organization's impact and practices in three key areas: environmental stewardship, social responsibility, and corporate governance. This reporting helps consumers and investors assess whether a company's values align with theirs and guides investment decisions based on qualitative and quantitative ESG factors. ESG reporting covers various aspects: environmental issues like carbon emissions and renewable energy, social aspects like diversity and human rights, and governance issues like executive compensation and shareholder rights.

Which companies have to do ESG reporting?

ESG reporting requirements vary by region. In the U.S., the Securities and Exchange Commission has guided disclosing climate change-related risks and opportunities. The EU has more stringent regulations, like the Sustainable Finance Disclosure Regulation (SFDR), and Asia also requires ESG disclosures in some countries.

While ESG has traditionally focused on public companies, private entities also face growing demands from various stakeholders for ESG disclosure. This includes potential regulatory requirements in the U.S. and the EU, stakeholder expectations, and market pressures. Private companies should consider the evolving landscape, including proposed rules like the U.S. SEC's climate risk disclosures and the EU's Corporate Sustainability Reporting Directive. It is important for private companies to proactively develop ESG reporting strategies.

ESG reporting involves the public disclosure of a company's environmental, social, and governance data. It aims to ensure transparency and measure sustainability performance, helping stakeholders like investors, consumers, and NGOs make informed decisions. There's a global increase in mandatory ESG regulations, indicating that ESG reporting is becoming a permanent aspect of the business landscape. This includes legislation in various countries, impacting different types of companies.

As of April 2022, the UK requires certain companies to provide climate-related financial disclosures in their strategic reports. This includes large companies, publicly traded companies, and large LLPs with significant turnover and employee count. In the EU, the CSRD has replaced the NFRD, expanding the scope of ESG reporting to around 50,000 companies, covering a significant portion of the EU's corporate turnover.

There are no mandatory federal ESG disclosure requirements in the US. However, proposed amendments by the SEC aim to establish disclosure requirements for funds and advisers focusing on ESG. The Canadian government plans to introduce mandatory climate-related reporting for federally regulated financial institutions, aligning with the TCFD framework starting in 2024. Malaysia has mandated ESG reporting for publicly listed companies since 2016, and China has introduced voluntary guidelines for ESG disclosure. New Zealand requires large publicly listed companies, banks, insurers, and investment managers to provide climate-related disclosures from the 2023 financial year onwards.

In summary, ESG reporting is becoming increasingly important for companies worldwide. While the specific requirements vary by region, organizations should be proactive in understanding and meeting the evolving regulatory landscape. Whether mandated or not, ESG reporting can provide valuable insights into a company's sustainability performance, attract investors, and enhance reputation.