Heard of the current buzz word in town? Yes, it’s ‘sustainability’!
2023 was big in the realm of sustainability. Don’t worry, if you haven’t been keeping track, here’s a quick summary of the major events that shaped the world story:
March: This was the first time top 1000 listed companies (by market capitalization) in India reported using the Business Responsibility and Sustainability Reporting (BRSR) Framework issued by the SEBI, on a mandatory basis. Thanks to this regulation most of you would have seen large portions of companies' annual reports detailing just the ESG initiatives ;)
June: The Ministry of Power, India notified the Carbon Credit Trading Scheme 2023 which lays the foundation for India’s first carbon credits market. Think of it like a stock market for carbon credits! Under this scheme, companies in notified sectors will be required to meet benchmark emission targets or buy offsets from the market.
June: International Sustainability Standards Board (ISSB) of the IFRS Foundation issued its premiere sustainability standards - IFRS S1 & S2. For the accounting folks, this shall mean that sustainability-related information shall also be disclosed like any financial information with or in addition to the financial statements from next year.
July: The European Commission adopted the European Sustainability Reporting Standards (ESRS) which shall be applicable to around 50,000 companies around the globe. While there was a framework in place to report on non-financial information (ref: NFRD), ESRS now replaces that and brings many more companies into its ambit.
October: EU’s Carbon Border Adjustment Mechanism (CBAM) enters its transitional period. This mechanism shall dissuade EU manufacturers to move units or buy from carbon intensive producers (typically in emerging companies with weak climate policies). By default, this is not very favourable for the Indian economy (which is considered carbon intensive) and high-level conversations have already been initiated to address this.
October: The state of California became the first state in the US to pass two bills to mandate reporting on greenhouse gas emissions and climate risks. This is a big move, especially since the US does not have a federal law that mandates climate reporting. Other developed nations like those in Europe have been mandated to report on these parameters through ESRS.
December: COP 28, for the first time, saw 198 countries agree to ‘transition away from fossil fuels’. While the agreement is strewn with subjectivity, it’s the start of something big. To give you some perspective, almost 75% of the electricity generated in India is dependent on coal - imagine having to transition that to renewable energy sources. It is a long, expensive effort for sure.
What’s more exciting for sustainability enthusiasts is that, there is so much more that 2024 holds! Here are some of the events that are likely to take shape this year:
BRSR core (an abridged version of BRSR) of top 150 listed companies in India will undergo reasonable assurance in FY 23-24 for the first time on a mandatory basis.
Eligible companies would report on the ESRS for the first time this calendar year (i.e. the reporting period will be CY 2024).
The EU may pass the Corporate Sustainability Due Diligence Directive which shall mandate eligible companies to set up policies and take real action to prevent negative human rights and environmental impacts.
The US SEC may finally pass the Climate Disclosure rule to mandate ESG disclosures. This is long awaited so much so that many developing nations (India included) already have regulations in place, while the US doesn’t.
Let’s hope for the best!
In case you need any help with improving or reporting on your Company’s ESG performance, feel free to get in touch with Esgity Advisors at disha.veera@esgityadvisors.com.
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