Navigating the New Sustainability Disclosure Landscape: A Comparative Overview of ESRS, IFRS S1/S2, SEC Climate Rule, and CA SB 253/261
As sustainability becomes an increasingly critical focus for governments, investors, and key private-sector stakeholders, companies must navigate a rapidly evolving regulatory environment. The growing number of disclosure frameworks underscores the need for enhanced transparency, accountability, and consistency in sustainability reporting.
Key frameworks influencing global business practices include:
- The Corporate Sustainability Reporting Directive (CSRD) and its European Sustainability Reporting Standards (ESRS);
- The International Financial Reporting Standards (IFRS) S1 and S2, introduced by the ISSB;
- The U.S. SEC Climate Disclosure Rule;
- California’s Senate Bills (SBs) 253 and 261.
In September 2024, ERM launched a new report that provides a comprehensive analysis of these key sustainability standards and rules. It includes two detailed comparison tables: the first addressing general reporting elements, and the second focused on climate-specific requirements.
Source: ERM Report 2, Comparing sustainability standards and regulations: ESRS, IFRS S1/S2, SEC Climate Rule, and CA SB 253/261, September 2024
Challenges and Opportunities in Sustainability Disclosure
Navigating Complexity and Overlap
The diverse range of sustainability frameworks, though designed to enhance transparency, often creates overlap and complexity for businesses operating in multiple regions. Companies may find themselves trying to meet conflicting requirements, which can lead to inefficiencies and increased costs.
Alignment and Streamlining
Despite these challenges, significant opportunities exist for alignment between frameworks. By focusing on one robust framework, such as the CSRD or TCFD, businesses can often streamline their reporting processes, ensuring compliance with multiple standards simultaneously.
Source: ERM Report 2, Comparing sustainability standards and regulations: ESRS, IFRS S1/S2, SEC Climate Rule, and CA SB 253/261, September 2024
The Task Force on Climate-Related Financial Disclosures (TCFD) serves as a common thread running through most of the major sustainability frameworks. TCFD’s recommendations on climate-related disclosures offer a comprehensive, consistent approach that aligns with CSRD, IFRS S1/S2, and the SEC Climate Rule. By integrating TCFD’s principles, companies can simplify their compliance efforts, reduce reporting burdens, and enhance the quality and consistency of their disclosures.
Source: ERM Report 2, Comparing sustainability standards and regulations: ESRS, IFRS S1/S2, SEC Climate Rule, and CA SB 253/261, September 2024
Conclusion
With the increasing demand for transparent and responsible business practices, companies that embrace robust sustainability reporting will not only meet regulatory requirements but also stand out as leaders in the marketplace. By aligning with key frameworks, such as the CSRD, IFRS S1/S2, SEC Climate Rule, and TCFD, businesses can simplify their compliance processes, enhance their reputation, and build stakeholder trust.
Download the full report:
