Introduction
The year was marked by significant regulatory advancements, continued efforts to streamline reporting standards, and an intensified focus on value chain accountability. With mandatory sustainability reporting deadlines looming and voluntary reporting at an all-time high, companies worldwide face growing pressure to align their practices with evolving frameworks and fortify their sustainability strategies.
Join us as we review key ESG developments from 2024, including changes in the global sustainability reporting landscape, efforts toward global alignment, value chain scrutiny, and the critical role of data in driving meaningful and compliant sustainability disclosure.
Regulatory Changes
In 2024, the ADEC ESG team, our clients, and companies around the world had a keen focus on regulatory compliance. Many climate-related reporting laws go into effect within the next few years — some as early as 2025, such as the Corporate Sustainability Reporting Directive (CSRD) and the SEC climate rule — and it remains vital for companies to ensure that their reporting programs are up to the challenge.
Together, these regulations will affect vast numbers of companies worldwide. For example:
- The CSRD and Corporate Sustainability Due Diligence Directive (CSDDD) will affect larger EU companies and companies doing business in the EU.
- California’s climate disclosure laws will apply to many larger private and public companies doing business in California.
- While the requirements of the SEC climate rule are not as rigorous as those of other mandates, it does impact any publicly traded company that files with the SEC.
These regulatory mandates have differing requirements regarding data assurance, business resilience, and climate transition. For example, the EU’s CSDDD and the Germany Supply Chain Act both cover due diligence and value chain reporting, but the requirements for each are somewhat different. Scope 1, 2, and sometimes 3 GHG emissions data play heavily into the CSRD, California’s SB 253, and the SEC climate rule—all, again, with differing reporting requirements. That said, companies already involved in voluntary reporting against frameworks like CDP, the Global Reporting Initiative, and the UN Sustainable Development Goals will find the looming shift to mandatory reporting to be less of a strain on resources. With systems, policies, and expectations already in place, these organizations are well-positioned to meet—and exceed—regulatory action as it moves to catch up.
ADEC ESG worked tirelessly with our clients in 2024 to prepare them for applicable regulations, both current and emerging. For example, we completed a regulatory risk gap analysis for a client in the U.S., analyzing key global regulations pertaining to the company’s priority sustainability topics such as energy, emissions, labor, and human rights. These regulations spanned the U.S. (SEC climate rule), Europe (CSRD), the UK (Climate-related Financial Disclosure Regulations), and global disclosure standards (International Financial Reporting Standards S1 and S2).
The recommendations for immediate actions presented to the client’s executive leadership team allowed the organization to prioritize next steps and allocate resources to their most immediate needs and initiatives.
Alignment Across Standards
The arena of sustainability reporting standards has been plagued by an ongoing problem for years: a proliferation of standards that partially – but never fully – overlap. The combination of an alphabet soup of acronyms, varying standards requesting different levels of reporting, and different questionnaires leads to an unintentional lack of transparency for organizations.
However, over the past few years, we’ve seen greater efforts from international groups to standardize these reporting standards and streamline sustainability reporting for organizations and investors seeking ESG data — and this trend continued in 2024.
In 2023, the International Sustainability Standards Board (ISSB) created the International Financial Reporting Standards (IFRS) S1 and S2 to provide a global baseline of sustainability disclosures while also meeting the information needs of investors. In 2024, CDP fully aligned its questionnaire to the IFRS S2 climate-related disclosures.
The ISSB has also assumed responsibility for the Task Force on Climate-related Financial Disclosures (TCFD) in monitoring companies’ progress on climate-related disclosures. The IFRS S2 borrowed much from the TCFD’s structure, including incorporating TCFD recommendations within its core content.
Regulations such as California’s SB 261 also require disclosures in alignment with the TCFD recommendations. The European Sustainability Reporting Standards (ESRS)–the standards which guide companies that are subject to the CSRD—also partially aligns its E1 Climate Change guidance with IFRS S2. Voluntary disclosure frameworks continue to set high standards for reporting companies that are driven to go above and beyond for their sustainability reporting programs, paving the way for global regulatory action as lawmakers take steps to catch up.
To help keep our community up to date on these changes, ADEC ESG published regularly to our blog and newsletter, and hosted a number of focused webinars—like our CDP 2024 Deep Dive. We strive to keep our community updated on news across both mandatory and voluntary standards, from CDP and EcoVadis to international climate- and nature-related disclosures.
Wider Value Chain Scrutiny
An organization’s value chain is intrinsically linked to its impact. For example, a company’s scope 3 GHG emissions (i.e., indirect emissions that occur within a company’s value chain) often account for the highest proportion of its total emissions, and this is true across a wide range of industries. Supply chain operations—including effects on both environmental matters and human rights—also have a huge impact on the communities of the people who work within them.
In addition, supply chain disruptions — and their resilience — have become major topics since 2020. As we remember, COVID-19 caused major disruptions and made the public much more aware of the importance of supply chains for their health and well-being. In later 2023 and into 2024, new and soon-to-be-effective regulations shone a spotlight on human rights and environmental impacts throughout the value chain. Many companies began taking action to prepare for reporting starting in 2025 and 2026.
- The CSDDD requires companies that do business in the EU market to conduct human rights and environmental due diligence across their value chain.
- The CSRD mandates reporting of value chain data across a wide range of topics, including working conditions, forced labor, child labor, scope 3 emissions, localized pollution of water and air, and more.
- California’s SB 253 requires that companies that do business in California publicly disclose their scope 1, 2, and 3 emissions—the first legislation in the U.S. to address scope 3 (value chain) emissions.
Voluntary reporting standards also provide frameworks through which companies can disclose value chain sustainability data:
- EcoVadis provides a platform through which companies can take a closer look at how their value chains are performing on sustainability. Companies can send EcoVadis response requests to their suppliers, facilitating greater engagement with these suppliers and giving companies important decision-making data on their supply chain partners.
- CDP Supply Chain members can request that their suppliers respond to CDP, providing members with important information about their value chain sustainability. CDP also provides a Supplier Engagement Assessment for responders.
- As a part of its alignment with IFRS S2 and the CSRD, CDP’s questionnaire includes a growing focus on value chain data, with many questions related to a company’s value chain risks, opportunities, impacts, engagement, and policies.
The Importance of Data
With both voluntary and mandatory sustainability reporting on the rise worldwide, having a solid data foundation is more important than ever. It’s vital to set meaningful KPIs that fit your company’s goals, needs, and strategy. It’s also important to develop systems to streamline the collection, monitoring, and validation of that data, including:
- Having key points of contact in relevant departments
- Utilizing specialized software when needed to help track and monitor data points
- Prioritizing risk management and future-proofing
- Setting up internal controls to ensure consistency and accuracy, in the face of assurance requirements (like those of the CSRD)
Conclusion
As 2024 demonstrated, the landscape of ESG is becoming more complex, with global organizations taking steps to align and standardize their frameworks and scrutiny intensifying across value chains. Navigating these changes effectively requires compliance as well as a proactive approach to sustainability that aligns with your organization’s values and long-term goals.
ADEC ESG provides fully integrated industry expertise, software solutions, and data management services to help global companies meet their sustainability goals and operate more efficiently. Sign up for our monthly newsletter GreenWatch to stay up to date on changes in the regulatory space.
This blog provides general information and does not constitute the rendering of legal, economic, business, or other professional services or advice. Consult with your advisors regarding the applicability of this content to your specific circumstances.
