Companies are responding to climate issues but the standards and tools to fully address ESG challenges remain in development, industry leaders said at a business event this week.

Much focus at the Reuters IMPACT conference in London was given to a new EU Corporate Sustainability Reporting Directive (CSRD), due to take effect on 1 January 2024, that will require larger firms to publish regular reports on the social and environmental impacts of their activities. Yet current reporting standards are fragmented and often vary between nations and companies.

Corporate sustainability reporting standards diverge

We have been in “a period of extreme divergence” in terms of standards, said Sue Armstrong-Brown, global director of environmental standards and thought leadership at environmental disclosure non-profit CDP. Although a global baseline is in sight, the divergence remains too great, she added.

New International Sustainability Standards Board (ISSB) standards released in June 2023 provide a solid foundation for standardised reporting alongside existing Global Reporting Initiative (GRI) standards. Reporting is through the CDP (formerly known as the Carbon Disclosure Project), if the company is one of the around 50% globally that do so.

Companies have to decide how they report and figure out whether the standard they have chosen is compliant with applicable regulations in their jurisdiction. Regulators have to decode different standards. The challenge is compounded by the fact that a lot of current reporting is based on estimates, particularly around scope 3 emissions, which are emissions produced by suppliers to and users of products that a company produces.

CSRD will only affect multinationals and large national firms at the start; the conference repeatedly heard that small and medium enterprises (SMEs) often lack the incentives and capacity to produce quality ESG reports.

Big picture climate change

Reporting is only one piece of the puzzle. The aim of corporate sustainability reporting standards is to allow businesses to quantify efforts they are making to decarbonise their production and supply chains, ideally incentivising other companies to do so. There was plenty of talk at the Reuters IMPACT conference about the need to measure and quantify these moves but also conversations about the existential threat climate change poses.

Economist Ann Pettifor and UN Global Compact Network UK executive director Steve Kenzie discussed whether capitalism can survive these shocks, and another panel questioned the fitness of current corporate leaders to tackle the climate crisis.

Many companies have committed to net zero, but numerous sessions on how to convince executives to buy into decarbonisation and move suppliers towards more sustainable production suggest there is still demand for these skills.

The role of politics

Heather Buchanan of Bankers for Net Zero, an organisation that “operates at the touchpoint between the real and the financial economy”, emphasised that politicians are worried about the risk profile of decarbonising. This is compounded by an “anti-woke” backlash, fuelling far-right regimes across the world.

Ingmar Juergens, co-founder and CEO of Climate & Company, a sustainable finance think tank, explained the entanglement of the two causes: “With this really weird Identitarian, anti-climate, anti-woke story they want to go to the elections. That’s not conservative politics. That’s nonsense. But that’s what we’re up against.”

As COP28 approaches, GRI CEO Eelco van der Enden’s wishes at Reuters IMPACT seem apt not only for world leaders but all players in the global economy: “I would stick to the words of the late and great American philosopher, Elvis Presley: a little less conversation and a little more action.”