ESG Policies and Regulations Update January 2024

The following details framework updates, and their implications, that occurred in January, as well as highlighting some key updates and releases to be aware of in the coming few years. Frameworks such as those explored in this report can help stakeholders understand how an organisation manages risks and opportunities around such sustainability issues. Often used as a communication tool, it can play an important role in demonstrating the sincerity of a company’s actions as well as ensuring good governance.  

Four in ten British businesses believe sustainability to be profitable, according to a study conducted by SAP. 37% of 300 UK-based business leaders have stated they are therefore motivated to act on environmental sustainability as they see opportunities to boost financial performance.  

January 2024 Update

The general observed trends within frameworks include a growing focus on disclosure, regarding both data and strategy, as well as an increased engagement of supply chains. Climate impacts are also seeing greater levels of inclusion into regulations and policies.  

Implications

Corporate Sustainability Reporting Directive (CSRD)

The CSRD is the delivery mechanism for the ESRS, its overarching framework. The CSRD replaced the NFRD, or non-financial reporting directive, which saw an increase in scope and reporting requirements.  

From 1 January 2024, mandatory disclosure requirements have come into effect, meaning organisations are required to disclose their risks from environmental and social factors.  

European Sustainability Reporting Standards (ESRS)

The ESRS is the overarching framework which sets mandatory disclosure requirements under the EU CSRD, which is its delivery mechanism.  

EFRAG is the technical adviser to the European Commission when developing draft ESRS. EFRAG has published two working papers on ESRS sector-specific standards, SEC1 and SEC2. The first paper, SEC1, lists 40 ESRS standards categorised into 14 sector groups. SEC2 outlines the general approach to sector-specific ESRS, providing a general framework for sector clarification and a comparison with Pillar 3 rules, the GRI and SASB sector classification systems.  

Furthermore, the Commission has recommended delaying the adoption of ESRS standards by 2 years, to allow companies to focus on implementing the first set of ESRS and to limit reporting requirements, as well as to provide the European Financial Reporting Advisory Group (EFRAG) with more time to develop the new standards. 

Global Reporting Initiative (GRI)

The GRI is an internationally recognised and extremely broad framework of standards for reporting on sustainability with requirements, recommendations and guidance on 900 sustainability topics.  

GRI 101 helps organisations understand which decisions and business practices lead to biodiversity loss, where in their value chain impacts occur, and how they can be managed. The disclosures in the new Biodiversity Standard align with the goals and targets of the Kunming-Montreal Global Biodiversity Framework and are consistent with the TNFD recommendations and ESRS standard on biodiversity and ecosystems.  

A new requirement of the final revision includes disclosures regarding offsets. If corporates use biodiversity-related offsets, they will have to disclose the goals of the project, the geographic location, whether and how principles of good practices are met, and whether and how the offset is certified or verified by a third party. The updated standard will come into effect for reporting on 1 January 2026.  

Please find below the links to the mapping tools produced by GRI: 

• ESRS-GRI Standards data point mapping 
• GRI-ESRS interoperability index 

• GRI-ISSB GHG emissions interoperability considerations    

Funding

In its Autumn Statement 2022, the UK Government announced a new, long-term commitment to enhance energy efficiency, aiming to drive down costs for households, businesses, and the public sector with the end goal being a 15% reduction in the UK’s final energy consumption from buildings and industry by 2030 compared to 2021 levels. 

This commitment took the form of new government funding worth £6 billion being made available from 2025 to 2028. These funds have recently been earmarked, in a government press statement on December 18, 2023, for various schemes aimed at delivering energy efficiency assistance to businesses and homes throughout the United Kingdom. Some of these schemes are new, while some are existing schemes that have been allocated more funding. 

Sustainability abbreviations

CSDDD – Corporate Sustainability Due Diligence Directive 

CSRD – Corporate Sustainability Reporting Directive 

ESRS – European Sustainability Reporting Standards 

GHG Protocol – Greenhouse Gas Protocol 

GRI – Global Reporting Initiative  

ISSB – International Sustainability Standards Board 

TCFD – Taskforce for Climate Related Disclosure 

UK SDR – Sustainability Disclosure Requirements  

UK SDS – Sustainability Disclosure Standards