Global Coalition Calls on the UN to Mandate ESG Reporting with Double Materiality

A coalition of 12 organisations has urged the UN to mandate ESG reporting with double materiality, highlighting the need for businesses to disclose both their sustainability impacts and how these affect financial risks. This approach could offer critical insights for investors and governments and streamline global reporting. As global debates continue, the shift to double materiality could reshape ESG reporting, enhancing long-term investment decisions and regulatory clarity.

On 12th February 2025, a coalition of 12 organisations focused on sustainable finance and corporate reporting called on UN member states to adopt mandatory environmental, social, and governance (ESG) reporting standards, including reporting based on double materiality. This call was issued ahead of the UN’s International Conference on Financing for Development (FfD4), which aims to reform international financial systems to support the Sustainable Development Goals (SDGs).

Organisations backing this call include GRI, B Lab, Capitals Coalition, CDP, the Danish Institute for Human Rights, and the World Benchmarking Alliance, among others. These organisations emphasise the need to integrate sustainable practices into corporate reporting to enable more effective and transparent monitoring.

The Need to Address Both External Impacts and Financial Risks

The coalition asserts that corporate reporting should evaluate not only the impact of business on the economy, environment, and society but also how sustainability issues influence financial risks and opportunities. They argue that such an approach will provide investors, governments, and other stakeholders with essential information to make informed decisions regarding sustainable finance.

Proposal to Integrate Two Key Standards

The letter proposes that national governments incorporate two key sustainability standards into their legislation: the International Sustainability Standards Board (ISSB) standards, which focus on investor information needs, and the Global Reporting Initiative (GRI) standards, which assess external impacts. These frameworks are considered well-established and could help governments act quickly and effectively, leveraging their broad adoption and compatibility.

Benefits of Integrating Existing Frameworks

The coalition emphasises that integrating these standards will provide globally comparable and decision-useful information, ensuring a level playing field and reducing reporting costs for businesses.

The call to action was made as delegates prepare for a key session in New York this week, ahead of the Financing for Development Conference, set to take place in Spain later this year. It is expected that discussions at this conference will further address mandatory ESG reporting and sustainable finance.

Debates in the European Commission Regarding CSRD

The call coincided with ongoing debates within the European Commission regarding the future of mandatory double materiality reporting under the Corporate Sustainability Reporting Directive (CSRD). The EU is considering the "Omnibus" proposal, which may reopen negotiations on the CSRD, the Corporate Sustainability Due Diligence Directive (CSDDD), and the sustainable finance taxonomy.

While the proposed changes aim to ease the regulatory burden on businesses, many large corporations, investors, and civil society organisations have opposed them. Earlier this month, over 150 civil society organisations sent a letter to the European Commission, warning that altering previously approved legislation could create regulatory uncertainty, jeopardise existing investments, and undermine future sustainability commitments.

Conclusions and Impact on Business

Discussions on double materiality and mandatory ESG reporting continue at the UN and EU levels, shaping the future of corporate sustainability standards worldwide. For businesses, this means the need for a more comprehensive approach to disclosure, which may influence strategy and risk management.

Companies that are already integrating ESG principles into their operations will be better positioned to gain a competitive advantage, accessing more precise information for investment decisions. At the same time, insufficient preparedness for regulatory changes could lead to regulatory risks and inefficiencies in reporting.