CSRD

Laws and regulations that require companies, both private and public, to disclose their greenhouse gas (GHG) emissions continue to expand in the European Union and in the United States.  Under the EU Corporate Sustainability Reporting Directive (CSRD), beginning in 2025, EU-based public companies and large EU-based private companies will be required to report all material Scope 1, 2, and 3 GHG emissions as set forth in the European Sustainability Reporting Standards.  In the United States, California recently passed landmark climate-related disclosure legislation that will require U.S. companies that do business in California and have greater than $1 billion in annual revenues to file annual reports publicly disclosing their Scope 1 and 2 GHG emissions beginning in 2026 and Scope 3 GHG emissions in 2027.  This legislation is expected to be joined by the U.S. Securities and Exchange Commission’s (SEC) proposed climate-related disclosure rule.  Initially proposed in March 2022, if finalized, the SEC rule would require public companies to disclose their Scope 1 and Scope 2 emissions and material Scope 3 emissions.  And later this year, world policymakers, activists, and business leaders will convene at COP28 to discuss global progress towards achieving the net-zero GHG emissions targets set by the Paris Agreement.

The Greenhouse Gas Protocol (GHG Protocol) sits at the center of all these efforts.  Established by the World Resources Institute and the World Business Counsel for Sustainable Development in 2001, the GHG Protocol establishes comprehensive standards for private and public entities to calculate and report their GHG emissions and track progress towards their emissions targets.

Continue Reading Calculating and Reporting Greenhouse Gas Emissions: A Primer on the GHG Protocol

The European Union (“EU”) has passed the world’s most far-reaching mandatory environmental, social, and governance (“ESG”) reporting regime.

The Corporate Sustainability Reporting Directive (“CSRD”) will apply to an initial group of large EU companies from 2024 and gradually extend its reach to smaller companies over the course of the following four years. It is ultimately expected to apply to more than 50,000 companies incorporated, listed, or doing business in the EU. Notably, from 2028 the CSRD will apply to non-EU parent companies that generate more than EUR 150M of net turnover in the EU and have at least one EU subsidiary subject to the CSRD (or a local branch of a certain size). (See Appendix for a table with detailed information on the CSRD’s application thresholds and dates.)Continue Reading EU Mandatory ESG Reporting Takes Shape: CSRD is Passed and EFRAG Adopts Draft ESRS

ESG and sustainability disclosure and reporting requirements for listed and non-listed companies are rapidly taking shape. As announced at COP26, there is now an International Sustainability Standards Board (“ISSB”) tasked with encouraging global uptake of ESG reporting standards. In the EU, the European Financial Reporting Advisory Group (“EFRAG”) is the body tasked with developing mandatory sustainability and ESG reporting standards under the EU’s Corporate Sustainability Reporting Directive (“CSRD”). Both the ISSB and EFRAG have each recently published ESG and sustainability disclosure and reporting “prototypes”. These prototypes are important pieces to an emergent reporting regime that is very likely to become critical commercially—if not mandatory—for many companies. There are also encouraging signs that what has until recently been a relatively disjointed set of standards, is beginning to come together under a more harmonized agenda and institutions.

This blog presents an overview of some of the detailed climate-related disclosure and reporting metrics covered by the ISSB and EFRAG climate prototypes, and highlights critical considerations for companies as more detailed and mandatory ESG and sustainability reporting frameworks begin to take shape.Continue Reading ESG & Sustainability Reporting Developments: Climate Disclosure Prototypes