Reporting Intelligence – December 2024

Unpack this month’s key updates in reporting as CDP and EFRAG align frameworks, the FRC launches a consultation on updates to UK Stewardship Code and an EY study highlights gaps in corporate transition plans.

1. GRI and CDP join forces to streamline sustainability reporting

The Global Reporting Initiative (GRI) and CDP have announced a cooperation agreement to closely align their reporting standards and platforms, thereby easing sustainability reporting for companies and improving access to data on corporate environmental impacts. The collaboration includes a joint mapping exercise to align the CDP questionnaire with GRI’s forthcoming climate, energy, biodiversity, and water standards.

Over 14,000 organisations use GRI standards, while CDP operates a global environmental disclosure system, enabling stakeholders to track performance in areas like climate change, deforestation, and water security. In 2023, over 23,000 companies disclosed through CDP, a 24% increase from the prior year.

This agreement continues efforts by both organisations to align their frameworks with other sustainability standards, including an announcement by CDP, detailed next in this reporting intelligence section.

Read more here

2. From complexity to clarity: CDP and EFRAG align frameworks

CDP and the European Financial Reporting Advisory Group (EFRAG) have achieved significant interoperability between CDP’s disclosure platform and the European Sustainability Reporting Standards (ESRS), aiming to ease reporting for companies navigating multiple sustainability frameworks.

The European Commission has tasked EFRAG with developing an ESRS under the Corporate Sustainable Reporting Directive (CSRD). The agency will introduce detailed sustainability reporting rules, expanding the requirements to over 50,000 companies starting in 2024. The ESRS includes comprehensive reporting on environmental, social, and governance impacts.

Joint mapping between CDP and EFRAG revealed a strong alignment, particularly with the ESRS climate standard (ESRS E1), enabling the seamless integration of CDP and ESRS disclosures.

By 2025, the organisations plan to release comprehensive mapping to enhance alignment further and provide ESRS-aligned insights, streamlining sustainability reporting for European companies.

Read the press release here

3. EY study finds 60% of companies lack transition plans, despite rising climate risk

A new EY study reveals that only 36% of companies globally reference climate-related financial risks in their financial statements, while nearly 60% have yet to disclose transition plans. The sixth annual EY Global Climate Action Barometer analysed 1,400 companies across 51 countries and 13 sectors, finding that while 94% report on TCFD recommendations, the quality of reporting remains low, with an average score of 54%.

Despite increased scenario analysis (67%, up from 58%), qualitative disclosures dominate, with only 20% of climate references being quantitative. Regions with regulatory mandates, such as the UK (69%) and EU (60%), lead in reporting quality, while the U.S. lags at 53%.

Decarbonisation strategies focus on Scope 2 emissions (55%), while only 18% include Scope 3, which represents the bulk of emissions. Moreover, only 41% of companies report having transition plans, and less than 24% have validated targets through the Science Based Targets initiative (SBTi).

Read the full report here

4. 57% of global GDP embraces ISSB standards for sustainability reporting

According to a new IFRS Foundation report, over 30 jurisdictions, representing 57% of global GDP and more than half of global greenhouse gas (GHG) emissions, are moving towards the adoption of International Sustainability Standards Board (ISSB) disclosure standards. This marks rapid growth since May 2024, when only 20 jurisdictions were progressing towards ISSB adoption.

The ISSB was launched in 2021 to develop sustainability disclosure standards. The first standards (IFRS S1 and S2) were released in June 2023. Sixteen jurisdictions have finalised their ISSB adoption, while 14 others are advancing their plans. All jurisdictions with finalised or proposed climate disclosure rules require reporting of Scope 3 GHG emissions.

The report also highlights TCFD progress, noting that 82% of companies aligned with at least one TCFD recommendation in 2023, up from 73% in 2022. However, only 2% to 3% disclosed on all 11 recommendations.

Read the full report here

5. FRC launches consultation on updates to UK Stewardship Code

The Financial Reporting Council (FRC) has launched a consultation on updating the UK Stewardship Code, aiming to enhance investment transparency and support economic growth. Running until February 2025, the proposed changes include a revised stewardship definition emphasising long-term sustainable value, streamlined reporting processes, and targeted principles for different service providers, including proxy advisers. For the first time, the Code will offer dedicated guidance to assist signatories in implementing reporting requirements more effectively. The consultation follows extensive stakeholder engagement and builds on interim measures from July 2024. FRC CEO Richard Moriarty emphasised the importance of maintaining the UK’s global leadership in stewardship standards while reducing unnecessary reporting burdens. The updated Code is expected to be published in 2025, with the first reporting cycle in 2026.

Read more here

6. IFRS Foundation launches guide to help companies identify and report on sustainability risks and opportunities

The IFRS Foundation has released a new guide to help companies identify and disclose sustainability-related risks and opportunities. Responding to increasing investor demands, the guide assists businesses in understanding how their dependencies and impacts on resources can affect financial prospects. Building on its sustainability disclosure standards launched in June 2023, the guide provides insights into materiality assessment, the connectivity between sustainability and financial reporting, and practical considerations for implementing the IFRS S1 standard. The publication aims to support companies in navigating complex sustainability reporting requirements, offering guidance on identifying material information that could influence cash flows, access to finance, and capital costs. This strategic resource targets enhanced transparency in corporate sustainability reporting.

Access the full guide here

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