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Sustainability now: An overview of the key reporting frameworks · PwC's accounting podcast

• 0:00
  SPEAKER_03: Thought leadership from PWC's national office.
• 0:07
  SPEAKER_03: Hello, I'm Heather Horn, the host of Sustainability Now, and thanks so much for joining us today.
• 0:13
  SPEAKER_03: One note before we jump into today's episode.
• 0:16
  SPEAKER_03: We recorded this prior to February 26, 2025, when the European Commission released its first omnibus package of proposals to quote, provide substantial simplification in the field of sustainability and EU investment programs.
• 0:32
  SPEAKER_03: End quote.
• 0:33
  SPEAKER_03: For more on these proposals, please look for an upcoming episode.
• 0:36
  SPEAKER_03: And we've also linked a number of resources in the show notes.
• 0:40
  SPEAKER_03: In the meantime, these proposals are drafted and subject to change through the adoption process.
• 0:45
  SPEAKER_03: So in today's episode, we'll continue to focus on the currently enacted requirements.
• 0:50
  SPEAKER_03: With that, let's jump into the recording.
• 0:54
  SPEAKER_03: Hello, I'm Heather Horn, the U.S.
• 0:56
  SPEAKER_03: Sustainability Technical Leader, and I'm so happy you're joining us for the second episode in our series, a sustainability podcast, video podcast, something new for us.
• 1:06
  SPEAKER_03: And in today's episode, we're going to give an overview of the sustainability reporting landscape, talking both about required reporting as well as very quick highlights on some of the voluntary reporting.
• 1:18
  SPEAKER_03: And for this episode, I'm very happy to be joined by my three guests for our entire series.
• 1:24
  SPEAKER_03: And that would be starting with Marginal Lewinsky, Valerie Weeman, and Diana Stoltzwiss.
• 1:29
  SPEAKER_03: And obviously, you three are all in our national office group, focused on sustainability, technical matters, and really our firm's leading U.S.
• 1:39
  SPEAKER_03: um specialists and experts on this topic.
• 1:41
  SPEAKER_03: So welcome, everyone.
• 1:43
  SPEAKER_03: So happy to have you here.
• 1:45
  SPEAKER_03: All right.
• 1:45
  SPEAKER_03: So as I said, I wanted to kick things off with what we're going to be talking about today.
• 1:51
  SPEAKER_03: And it's really, we're trying to give our listeners 30 minutes, 45 minutes, maybe 45 minutes, a summary of sort of a really, really brief history of where we are from a sustainability reporting perspective.
• 2:05
  SPEAKER_03: And again, starting with what's required now.
• 2:08
  SPEAKER_03: And I think it's still important to understand the voluntary frameworks.
• 2:12
  SPEAKER_03: We're going to cover them too.
• 2:14
  SPEAKER_03: And I think really for anyone who's been paying any attention to this, you've really seen this huge change over the past couple years.
• 2:21
  SPEAKER_03: And so we're going to fast forward to the present and make sure everyone kind of knows where we stand.
• 2:26
  SPEAKER_03: So with that said, Martin, let me go to you.
• 2:29
  SPEAKER_03: And can you just give us a really big picture overview of the required reporting landscape?
• 2:35
  SPEAKER_00: Okay, so let me start with uh maybe what happens globally.
• 2:39
  SPEAKER_00: Um primarily two big global frameworks.
• 2:42
  SPEAKER_00: In the European Union, we're talking about Corporate Sustainability Reporting Directive, or CSRD.
• 2:47
  SPEAKER_00: And uh internationally, we're talking about the uh standards issued by the International Sustainability Standards Board, or ISSB.
• 2:55
  SPEAKER_00: Then in US, um I'm always debating how many we have.
• 2:59
  SPEAKER_00: I'm gonna stick to two.
• 3:00
  SPEAKER_00: Uh so first starting with California.
• 3:02
  SPEAKER_00: So in California, they actually have four bills related to or covering sustainability reporting.
• 3:08
  SPEAKER_00: And obviously, we have SEC, but as we all know, SEC climate rule is state right now.
• 3:13
  SPEAKER_00: So we're not gonna be covering it to the, you know, to any extent.
• 3:16
  SPEAKER_00: Uh, we have some other podcasts when our listeners can can go and and and uh listen to overview of Rickbite rules and you know how it was designed.
• 3:25
  SPEAKER_02: Yeah, and Heather, maybe one thing too.
• 3:27
  SPEAKER_02: Commissioner Ueda, acting chair Ueda, um, recently put out a statement about the SEC's views on the climate-related disclosure rules, stating that so I think we all know that those um rules are subject to a number of different court challenges.
• 3:41
  SPEAKER_02: They're still waiting working their way through the court system.
• 3:43
  SPEAKER_02: Under the previous administration, they had supported, they had put in a number of briefs supporting those rules.
• 3:49
  SPEAKER_02: I think, you know, both uh Commissioner Ueda, now acting chair, as well as Commissioner Peirce, had both dissented on voting on those rules and gave another number of reasons, questioning the cost-benefits, the authority of the commission to do those rules, the need for those rules.
• 4:03
  SPEAKER_02: So I think given the changes, he made a statement saying, given those changes in the views, the change in the administration, the composition of the commission, as well as um recent executive order from um President Trump on regulatory actions, kind of all that together to um let the courts know that there's a pause and that they will be giving an update on what their views is.
• 4:23
  SPEAKER_02: So I think it's probably likely that they will not continue to support those rules.
• 4:27
  SPEAKER_02: So I think it's unlikely that we'll see the SEC rules come in the next few years.
• 4:32
  SPEAKER_03: All right.
• 4:32
  SPEAKER_03: Well, I think compared to Kyle Moffat's uh predictions, yours is probably more likely to come true than all the ones we had about when uh when we're gonna see that.
• 4:41
  SPEAKER_03: So thank you for that.
• 4:42
  SPEAKER_03: And also just for listeners, um, many of you who may be paying attention would know that there are also rules that have been proposed, at least in Colorado, New Jersey, and New York, at least as of the date we're Illinois on Friday.
• 4:54
  SPEAKER_03: And Illinois on Friday.
• 4:55
  SPEAKER_03: So as of the date we're recording this.
• 4:57
  SPEAKER_03: And so um we will have a whole separate episode that's really focused on the laws in California, but we'll at least briefly touch on those um other topics.
• 5:06
  SPEAKER_03: So more to come on that.
• 5:07
  SPEAKER_03: All right, so that's the landscape.
• 5:09
  SPEAKER_03: Now I think time to jump into things.
• 5:11
  SPEAKER_03: And Val, I I think one of the things really interesting for people who don't spend a lot of time in the space is they hear about CSRD, they hear about ESRS, but they don't really have that context as actually part of this much, much broader uh regulatory regime in the EU.
• 5:30
  SPEAKER_03: And obviously, we're hearing a lot coming from the EU about changing that regime with the proposed um omnibus that we're expecting now to see in March.
• 5:39
  SPEAKER_03: That said, though, I think it's very helpful to understand that backdrop before we get into the details of reporting.
• 5:45
  SPEAKER_03: I know you spend a lot of time on this.
• 5:47
  SPEAKER_03: So, what are the key directives and laws that you would highlight and what's the overall context?
• 5:52
  SPEAKER_01: So I think that makes sense.
• 5:53
  SPEAKER_01: I think people are hearing a lot of different regulations, and I don't think they understand how they're all interrelated and they're all sourced, really going back to the EU Green Deal.
• 6:02
  SPEAKER_01: Um, so that was a sort of a package of initiatives pretty recent, so 2019, toward the end of 2019, and then I think finalized in the beginning of 2020.
• 6:10
  SPEAKER_01: Okay, to be fair, that's six years ago.
• 6:11
  SPEAKER_01: Okay.
• 6:12
  SPEAKER_01: Well, that seems fairly recent in the context of greater scheme of things.
• 6:15
  SPEAKER_01: I mean, the amount of regulation that's come out in the last five years is pretty impressive.
• 6:19
  SPEAKER_01: Um, so the EU Green Deal was really an effort to um at its core is related to sustainability.
• 6:26
  SPEAKER_01: It's about achieving carbon neutrality by 2050 for they want to be the first carbon neutral continent.
• 6:31
  SPEAKER_01: I didn't know that was a contest, but um, they also, toward that end, they want to receive, uh, achieve a 55% reduction by 2030, which is fairly ambitious.
• 6:40
  SPEAKER_01: And they understand that there are a lot of initiatives that are needed in order to achieve that, related to clean tech, and there are some other uh ancillary regulations that have come out in support of that.
• 6:50
  SPEAKER_01: But uh, the key ones that we talk about is the CSRD, and I know we'll get into that one a little bit more detail.
• 6:55
  SPEAKER_01: Um, that one is really pervasive disclosures about impacts, risks, and opportunities across the spectrum of sustainability.
• 7:01
  SPEAKER_01: But maybe some of the other ones that are related is it also sourced the uh sustainability finance disclosure regulation, so the uh SFDR.
• 7:11
  SPEAKER_01: That one's really geared for financial market participants and it has twofold disclosures related to how they integrate sustainability information into their decision making, as well as there are disclosures required for products that are focused on sustainability.
• 7:25
  SPEAKER_01: On top of that, you have the EU taxonomy regulation.
• 7:28
  SPEAKER_01: You know, that one's near and dear to my heart.
• 7:30
  SPEAKER_01: Um, that one is applicable for financial services as well as non-financial services entities, and that establishes a framework to determine what activities and assets are sustainable or what they refer to as taxonomy aligned.
• 7:42
  SPEAKER_01: And then companies are required to disclose ratios of their percentage of sustainable activities.
• 7:47
  SPEAKER_01: Uh, you also have the carbon border adjustment mechanism or CBAM.
• 7:52
  SPEAKER_01: Uh, that one is about achieving parity for EU companies and basically assesses um fees on carbon-intensive products that are imported into the EU to make sure pricing is comparable with the EU products that are already subject to certain of those carbon taxes.
• 8:07
  SPEAKER_01: And then last I'll mention because it is uh, you know, we're hearing a lot more about it now, is the corporate sustainability due diligence directive or the CS Triple D.
• 8:16
  SPEAKER_01: That one's a little bit different because it's not just about disclosures, it's actually about enacting change.
• 8:21
  SPEAKER_01: So companies are required to initiate due diligence in order to identify social and human rights impacts and environmental impacts and actually take proactive action to mitigate or cease them.
• 8:32
  SPEAKER_03: Yeah, and I think again, as I said, Val, and we'll I think probably have to do a whole separate episode once we see the omnibus regulation.
• 8:39
  SPEAKER_03: It's very interesting that we've seen the EU come out with their competitiveness compass.
• 8:44
  SPEAKER_03: We know they've said they're going to issue multiple of these omnibus proposals.
• 8:49
  SPEAKER_03: And I think the work plan I saw said that there would be three of those proposals at least in 2025.
• 8:56
  SPEAKER_03: And so I do think people are gonna hear all this jargon.
• 9:00
  SPEAKER_03: And uh it really is helpful to understand how it all fits together because it's one thing to say, oh, CSRD, ESRS, which we're gonna get to.
• 9:08
  SPEAKER_03: Although, as Diana said, it is a bit funny to address overregulation with more regulation.
• 9:16
  SPEAKER_01: And they did in that announcement, they specifically mentioned three.
• 9:18
  SPEAKER_01: Obviously, there's a series of them, but the first three they mentioned was that it would address the CSRD, the taxonomy, as well as the CS DIED.
• 9:24
  SPEAKER_03: Well, and SFTR too, I thought, yeah, because sustainable finance was in there.
• 9:28
  SPEAKER_03: All right, so I think that's enough again of that sort of regulatory landscape.
• 9:31
  SPEAKER_03: But Diana, let me go over to you.
• 9:32
  SPEAKER_03: And I think um, you know, diving into then the meat of what we're gonna be talking about in the podcast series is the reporting under the CSRDs.
• 9:42
  SPEAKER_03: So can you share?
• 9:43
  SPEAKER_02: Yeah, so you have the European sustainability reporting standards, so are the standards that kind of detail the comprehensive granular disclosures that are required under the CSRD.
• 9:53
  SPEAKER_02: And so to date, there has been two cross-cutting standards issued, 10 topical standards, and then sector-specific standards are to come at some point later.
• 10:02
  SPEAKER_02: But maybe we'll focus on the standards that have been issued.
• 10:04
  SPEAKER_02: So the two cross-cutting standards, um, those are overarching standards that apply across sectors, across all companies that are required to report.
• 10:13
  SPEAKER_02: And so uh ESRS one, which is the general requirements, kind of covers the overall architecture of ESRS, some of the foundational concepts in the standards, and the general requirements for preparing and reporting under ESRS.
• 10:27
  SPEAKER_02: And then ESRS two details some of the general disclosures.
• 10:31
  SPEAKER_02: So um it focuses on the governance, strategy, impact, risk, and opportunity management, as well as the metrics and targets.
• 10:39
  SPEAKER_02: And that's for all sustainability matters.
• 10:42
  SPEAKER_02: Then you get into the 10 topical standards, which cover a variety of different um social, governance, and environmental topics.
• 10:50
  SPEAKER_02: Uh, you know, things that come to mind like climate change, but it also expands way beyond that into biodiversity, the circular economy, resource use, both your own workforce as well as workers in your value chain, consumers and users.
• 11:04
  SPEAKER_02: I won't go through every one.
• 11:05
  SPEAKER_02: But as you can see, very expansive disclosures across all sustainability matters.
• 11:10
  SPEAKER_03: Um and actually before you go on, Diana, I think it's really important those two cross-cutting standards.
• 11:16
  SPEAKER_03: I feel like, I mean, that's going to be the main topic of our series, other than I will have Marchin on talking about GHG.
• 11:23
  SPEAKER_03: But I mean, really, that is the entire foundation of what companies uh are going to need to report under ESRS.
• 11:31
  SPEAKER_03: And so it is interesting once you really dig into it to see the just volume of information that's in those relatively short standards.
• 11:41
  SPEAKER_03: So anyway, I think definitely something to highlight there.
• 11:44
  SPEAKER_02: And I I think to that point, which will, as you said, we'll go into this later, but like very meaty topics too, in that like materiality is a component of one of those standards, right?
• 11:52
  SPEAKER_02: So as we get into it, there's a lot of required disclosures and a lot of content just in those two standards alone.
• 11:59
  SPEAKER_02: Agree.
• 12:00
  SPEAKER_02: All right, keep going.
• 12:00
  SPEAKER_02: I'm sorry.
• 12:01
  SPEAKER_02: Maybe, and so those are the standards that are issued to date.
• 12:04
  SPEAKER_02: I think there is an expectation that there will be new standards for small and medium-sized entities, less complex entities, also for entities that are um non-EU headquartered.
• 12:15
  SPEAKER_02: So I think some simplified standards, which maybe goes into some of the other discussions that we've been talking about around simplification and that type of thing.
• 12:22
  SPEAKER_02: So those are still to be issued as well.
• 12:24
  SPEAKER_02: And then maybe one other point is the CSRD does have mandatory assurance requirements as well.
• 12:29
  SPEAKER_02: So starting with limited assurance and then going to um reasonable assurance later.
• 12:34
  SPEAKER_03: Yeah, and I think, Diana, one key point on those non-EU dedicated standards, the draft we saw is actually a subset of the ESRSs.
• 12:42
  SPEAKER_03: So from that point of view, those aren't simplified.
• 12:45
  SPEAKER_03: It was the ones for the small and medium-sized entities.
• 12:48
  SPEAKER_03: But I guess we don't really know what's to come with those non-EU dedicated standards, the N ESRS, and hopefully in the next couple months.
• 12:57
  SPEAKER_03: So we'll see.
• 12:58
  SPEAKER_03: Yes, more definitely.
• 12:59
  SPEAKER_03: All right.
• 13:00
  SPEAKER_03: So that's definitely a lot to think about.
• 13:02
  SPEAKER_03: I think the other thing maybe I'll just chime in with is I mentioned, or we talked about a bit, how uh voluminous really the information in those cross-cutting standards is.
• 13:13
  SPEAKER_03: But nonetheless, if you take ESRS altogether, it's only the 290 pages.
• 13:17
  SPEAKER_03: And that's for you know, that's the equivalent to all of IFRS accounting standards or all of US GAP.
• 13:24
  SPEAKER_03: And so we have seen a lot of implementation guidance.
• 13:27
  SPEAKER_03: Uh, Frag's put out three IGs, materiality value chain and uh on data points.
• 13:33
  SPEAKER_03: Uh, FREG keeps putting out QAs, although we're in a quiet period right now.
• 13:37
  SPEAKER_03: And then the European Commission has also issued some QAs both on CSRD and on the taxonomy.
• 13:43
  SPEAKER_03: So, and there's interoperability guidance.
• 13:46
  SPEAKER_03: I don't want to forget that.
• 13:47
  SPEAKER_03: So, definitely um uh I think helpful for implementation, although non-authoritative, but I know you use those resources quite a lot.
• 13:55
  SPEAKER_02: No, I think they're extremely helpful.
• 13:57
  SPEAKER_02: And I think to your point, there's more guidance out there in the number of pages and stuff in all these supplemental things than there is in the actual standards themselves.
• 14:05
  SPEAKER_02: But I think given how quickly the standards were developed and how many, the variety of topics that they cover, I think it those are really good resources when you have questions around the implementation.
• 14:15
  SPEAKER_03: All right, that's helpful.
• 14:16
  SPEAKER_03: And so I mentioned there the interoperability guidance issued by FRAG and the ISSB.
• 14:21
  SPEAKER_03: And I do think this is an interesting document because it it does show how those two standards or two sets of standards work together.
• 14:31
  SPEAKER_03: But before we can even get close to getting into that, we should talk about the ISSB.
• 14:35
  SPEAKER_03: So, Val, can you give us some background?
• 14:37
  SPEAKER_01: Yeah.
• 14:37
  SPEAKER_01: Um, and talk about from a number of pages standpoint, uh, they are largely interoperable, but you have, you know, in a collapsed number of pages.
• 14:45
  SPEAKER_01: So the ISSB was established by the IFRS Foundation in 2021.
• 14:49
  SPEAKER_01: I think it was COP26, I think, when it was announced, and then formed shortly thereafter.
• 14:53
  SPEAKER_01: Uh, and it really is uh sort of that sister entity to the International Accounting Standards Board under the foundation.
• 15:01
  SPEAKER_01: So really focused on sustainability reporting.
• 15:03
  SPEAKER_01: And back in 23, they did issue their first two standards.
• 15:07
  SPEAKER_01: So the first one is IFRS S1.
• 15:10
  SPEAKER_01: Um so that one is uh general requirements for disclosure of sustainability related financial information.
• 15:16
  SPEAKER_01: That's a long title.
• 15:17
  SPEAKER_01: It is a long title, so I wanted to make sure that I read it.
• 15:19
  SPEAKER_01: Um, and it's sort of a multi-purpose standard.
• 15:22
  SPEAKER_01: So that one uh really has two purposes.
• 15:24
  SPEAKER_01: One is it's similar to the cross-cutting standards and that establishes the foundations of materiality and reporting, uh, and a lot of that uh information that's covered in the ESRS cross-cutting.
• 15:34
  SPEAKER_01: But at the same time, and I think sometimes this is overlooked, is it is the core of the requirements for your risks and opportunities that are reasonably expected to have an impact on a company's prospects across any topic.
• 15:48
  SPEAKER_01: So there's only one topical standard, and I'll get to that in a minute.
• 15:51
  SPEAKER_01: But if you have risks related to social or biodiversity or opportunities related to your recycling program, all of that and the disclosures required for those risks and opportunities are covered by S1.
• 16:03
  SPEAKER_01: So that's included in the first standard.
• 16:04
  SPEAKER_01: And then they issued their first topical standard, which is related to climate.
• 16:10
  SPEAKER_01: And that one is specifically focused and sort of adapts in some respects the general disclosure requirements in S1, specifically for climate-related risks and opportunities.
• 16:21
  SPEAKER_01: Um between the two of them, uh you do cover still the full range of environmental, social, and government uh risks and opportunities.
• 16:30
  SPEAKER_01: Um, and I think that uh the other element is while they're sector agnostic, meaning they apply to all companies, uh, IFRS S1 does require companies to, I think the term is refer to and consider the Sustainability Accounting Standards Board.
• 16:45
  SPEAKER_01: And those familiar with the SASBE, they've been around obviously a little bit longer.
• 16:49
  SPEAKER_01: And those are 77 specific topics by industry.
• 16:53
  SPEAKER_01: Um, so you need to look at those.
• 16:54
  SPEAKER_01: They can help you generate based on your industry the types of risks and opportunities that you're facing, as well as uh some of the metrics.
• 17:01
  SPEAKER_01: Um, so there is that uh relationship between uh when you apply the I for S, the ISSB standards, and that your requirement to actually consider the SASB standards as well.
• 17:11
  SPEAKER_03: So, a couple things, a couple of follow-up questions.
• 17:13
  SPEAKER_03: I think specifically for SASB, and I'll probably ask both of you because I know you've both spent some time in it.
• 17:18
  SPEAKER_03: I do think this is interesting because SASB obviously was, I can't remember the word they use, but I'll use the word absorbed into um the ISSB, but still exists in terms of the separate standards.
• 17:30
  SPEAKER_03: Uh, the ISSB has taken action to try to make them more international.
• 17:36
  SPEAKER_03: But I do think there's been some, I'll use the word pushback from some companies in terms of, well, but this may not apply to me, or there's 77 different sectors.
• 17:46
  SPEAKER_03: That's too many different things to look at, or how is this going to work?
• 17:49
  SPEAKER_03: But I actually think as we've dug into them more, there really is some valuable information for companies.
• 17:54
  SPEAKER_03: So maybe Diana, going to you first, again, I know you looked at a lot of this when we were publishing the last version of the SRG.
• 18:00
  SPEAKER_03: What is your view now that you've had a chance to get into it more?
• 18:04
  SPEAKER_02: Yeah, and I think that's a good point.
• 18:05
  SPEAKER_02: I think, you know, it does focus on the industry and they have industry descriptions to help companies think about what industry they might be in.
• 18:11
  SPEAKER_02: But I think when you actually go into them, there are a lot of metrics that are, I would say, could be sector, could be industry agnostic that apply to a number of different industries.
• 18:22
  SPEAKER_02: And like health and safety is a good example of something that cuts across a number of different industries.
• 18:28
  SPEAKER_02: So I think once you dig into them, there are a lot of metrics that can be helpful.
• 18:32
  SPEAKER_02: And I think, you know, looking at your own industry, but I think not just looking at your own industry too.
• 18:38
  SPEAKER_02: If you go to your industry and there you have a sustainability-related risk or opportunity and you don't see metrics there, I do think it's valuable to look at other industries as well to help identify what material information you should disclose.
• 18:52
  SPEAKER_01: I think anytime you have that kind of a resource, it's got to help.
• 18:55
  SPEAKER_01: I mean, when you're starting and trying to figure out what are my risks and opportunities, and you have a blank piece of paper.
• 18:59
  SPEAKER_01: Um, I think to your point, regardless of your sector, looking through the standards have really good sort of uh trigger areas and key focus areas that I think can help a company identify their own risks.
• 19:09
  SPEAKER_02: And they also have disclosure topics, which are somewhat similar to the sub-topics or sub-subtopics.
• 19:15
  SPEAKER_02: I know we haven't gotten into this level of detail that are in the ESRS, but I think that those can help trigger thinking about, you know, and those would be at the level of like health and safety, you know, diversity or other types of metrics can help you think about what might be applicable kind of from a topic level.
• 19:33
  SPEAKER_03: Any views on SASP Marchin, or should I wait till I get to GHD?
• 19:36
  SPEAKER_00: Let's get to GHG.
• 19:38
  SPEAKER_03: Well, I do have a question though that you can also answer.
• 19:40
  SPEAKER_03: So I'll start with you on this one.
• 19:42
  SPEAKER_03: I'll put you on the spot.
• 19:43
  SPEAKER_03: So I have two follow-up questions for you guys, just listening to the comparison of ESRS and uh the IFRS sustainability disclosure standards.
• 19:52
  SPEAKER_03: And obviously, this was, you know, a few minutes on each, so it doesn't really give a sense.
• 19:58
  SPEAKER_03: But on the other hand, you actually do start to pull out similarities and differences.
• 20:03
  SPEAKER_03: And so as you think about applying the standards, and again, for our listeners' benefit, March focuses on GHGs, probably one of the biggest topics for many companies.
• 20:12
  SPEAKER_03: But what are what are you thinking more broadly when you think, oh, they are very similar?
• 20:18
  SPEAKER_03: Or no, actually, they're it's quite different.
• 20:21
  SPEAKER_00: Well, it all depends on the topic, right?
• 20:23
  SPEAKER_00: So if you focus on the climate climate-related disclosures between the two standards, you can see a lot of similarities.
• 20:29
  SPEAKER_00: Obviously, there are differences in very, I don't want to say acute, but in certain parts of disclosures.
• 20:35
  SPEAKER_00: But more broadly, I would say there's similar, there are a lot of similarities.
• 20:39
  SPEAKER_00: But then obviously, when you look at other ESRS disclosures for other topics, it's much broader than IFRS right now, at least.
• 20:48
  SPEAKER_00: So I think from effort perspective, obviously ESRS requires way more uh consideration up front, right?
• 20:54
  SPEAKER_03: From a detailed perspective, right?
• 20:56
  SPEAKER_03: But then I think that's interesting because it gets into Val's point of this sort of myth that oh, ISSB only covers climate, although to be fair, transition provisions in year one allow you to only report on climate.
• 21:09
  SPEAKER_03: But I do think the fact is the ISSB is covering things um broadly.
• 21:15
  SPEAKER_03: However, there are still a few key differences, but I'm curious, Val, what you have to say.
• 21:19
  SPEAKER_01: I agree.
• 21:20
  SPEAKER_01: I think that the focus of that implementation guidance that you referred to is also it helps to identify areas where even though the words are different, that's really getting at the core, sort of the um sort of a comparable disclosure requirement, even though they've used different words to explain it.
• 21:36
  SPEAKER_01: I think that's a helpful guide to see where there are differences.
• 21:40
  SPEAKER_01: Obviously, when you look at the risks and opportunities covered from an ISSB standpoint, and then you throw the impacts or dependencies that are a little bit broader covered from an ESRS standpoint, there'll be some differences.
• 21:50
  SPEAKER_01: But um to again reiterate the point that you are still looking at how do you disclose useful information about your risks and opportunities.
• 21:57
  SPEAKER_01: And both of them have that same objective.
• 21:59
  SPEAKER_01: So The disclosures that you get from uh both of those standards almost by definition have to be pretty similar.
• 22:06
  SPEAKER_03: Wow.
• 22:06
  SPEAKER_03: I actually I don't you don't agree with me when you say that.
• 22:10
  SPEAKER_03: I not completely actually.
• 22:12
  SPEAKER_03: I think there are, I mean, obviously big picture, there are similarities and a lot of overlap.
• 22:18
  SPEAKER_03: But I do think, particularly when you get into the detail of what disclosures are required, there are, from my perspective at least, a lot of differences.
• 22:26
  SPEAKER_03: But I think this really highlights, and then I'll bring Diana in.
• 22:29
  SPEAKER_03: I think this really highlights though that you can look at it through two lenses.
• 22:32
  SPEAKER_03: Are you looking for interoperability?
• 22:34
  SPEAKER_03: Yes, there is a lot of interoperability.
• 22:36
  SPEAKER_03: But when you get into the detail of reporting, then what's really required.
• 22:42
  SPEAKER_01: Well, exactly.
• 22:42
  SPEAKER_01: And some of the prescriptive requirements are going to differ exactly.
• 22:45
  SPEAKER_01: But from broad based, the idea is to provide transparency to the risks and opportunities for the company.
• 22:50
  SPEAKER_01: And I think that is a foundation, um, engenders a certain element of uh comparability.
• 22:54
  SPEAKER_01: I that I agree with.
• 22:55
  SPEAKER_03: Diana, I was I know you have some views on this.
• 22:58
  SPEAKER_02: So Yeah, and I think that I agree with everything that's been said.
• 23:02
  SPEAKER_02: I think highlighting one of the points that Val made is the impact piece.
• 23:05
  SPEAKER_02: I do think that the requirements under ESRS to disclose impacts, so that's, you know, what is the entity's impact on people and the environment, uh, that is much broader in my mind.
• 23:16
  SPEAKER_02: And so I think like requiring all those disclosures, and not that impacts and dependencies don't create risks, and we can get into that whole discussion during materiality, but I think the specific disclosures around impacts, especially when we're looking at, well, really across all aspects of the environmental and the um social disclosures.
• 23:33
  SPEAKER_02: I think that, and then to the point that's been brought up, the the very prescriptive disclosures that are in ESRS, I think that that that's a big difference in the in the level and granularity of reporting under ESRS.
• 23:46
  SPEAKER_03: All right, the helpful perspectives.
• 23:47
  SPEAKER_03: And I know it took us a little more into the detail than we planned for this episode.
• 23:51
  SPEAKER_03: So maybe we're gonna be closer to the longer end, but I thought it's important to try to just give some framework and to give listeners a little bit of insight into what they might be hearing from us.
• 24:01
  SPEAKER_03: So, Diana, let me go back to you.
• 24:03
  SPEAKER_03: And I was running through that different implementation guidance that we have for ESRS, but can you share what we see from an ISSB perspective?
• 24:11
  SPEAKER_02: Yeah, there's also a lot of helpful information out there too to help with the ISSB standards.
• 24:15
  SPEAKER_02: So I think a few different things, some things that have been put out by the ISSB.
• 24:19
  SPEAKER_02: So one is the basis for conclusions, which is similar to what we see with accounting standards or other things, where you know, the standard setter is talking about what were they thinking about, what were the factors that they were considering, what kind of drove some of the decisions that they're making.
• 24:31
  SPEAKER_02: So I think that's really helpful when you're thinking about um, why are these disclosures, what are we trying to get at, and that type of thing.
• 24:38
  SPEAKER_02: Um, they also have some accompanying guidance, which has illustrative examples and illustrative um guidance for both S1 and S2, as well as some educational materials that really help to address one of the points that Val brought up when you're identifying, when you're kind of outside of climate, how do you identify those sustainability-related risks and opportunities before the before any themat, other thematic um standards are issued?
• 25:03
  SPEAKER_02: So I think there's a lot of good examples there.
• 25:06
  SPEAKER_02: And then the the other thing is the IFRS Foundation also does have the transition implementation group, which is a group that meets to talk through some of these issues and they publish minutes to talk about some of those discussion discussions and how they would interpret the guidance.
• 25:20
  SPEAKER_02: So I think there is some really helpful information out there, I was.
• 25:23
  SPEAKER_03: Well, yeah, and I think in particular the TIG, we've actually seen some issues come through that now.
• 25:27
  SPEAKER_03: The ISSB in their most recent meetings said that they are, I think, planning to amend.
• 25:32
  SPEAKER_03: I can't remember the exact term they use, but in our area of GHG.
• 25:35
  SPEAKER_03: So maybe we'll touch on that a little more, Chin in our separate GHG episodes.
• 25:40
  SPEAKER_03: But the other thing actually that really stood out for me is that basis for conclusion.
• 25:44
  SPEAKER_03: And because you're right, that I think as coming from financial reporting background, we love looking at that, trying to understand like what was in their heads at that time.
• 25:52
  SPEAKER_03: Although, to be fair, that's one of the amendments, is something that's between the basis of conclusions and uh the standard, there's maybe some potential difference.
• 26:02
  SPEAKER_03: That's one of the things that ISSB is looking at.
• 26:04
  SPEAKER_03: But what I think is interesting with this is we do have basis, bases for conclusion, those are the words.
• 26:11
  SPEAKER_03: Um we do have those for ESRS, but they're old.
• 26:15
  SPEAKER_03: And I think we've learned from experience they're helpful, but you have to be really careful.
• 26:20
  SPEAKER_03: Yeah.
• 26:20
  SPEAKER_03: And I know we've seen, right, where they actually address things that didn't make their way into the final standard.
• 26:26
  SPEAKER_01: And so it It would be helpful to your point if maybe they were updated, but you're right, is that they were developed based on the initial draft of the standards and there were some significant changes between the draft and the final.
• 26:36
  SPEAKER_03: Yeah, but still definitely helpful, just be careful, I guess would be that was like a little warning.
• 26:40
  SPEAKER_03: A really safety warning there.
• 26:41
  SPEAKER_03: So then, Diana, the other thing is obviously um we're gonna have a whole separate episode about applicability that Val and I are gonna record.
• 26:50
  SPEAKER_03: But I do think it's important to understand what we mean when we talk about the ISSB, because on the surface, it's not that clear.
• 26:59
  SPEAKER_03: You know, we know IFRS accounting standards are pretty much adopted worldwide, except by us in the US and you know, obviously a few other places.
• 27:06
  SPEAKER_03: So, what what is the plan?
• 27:08
  SPEAKER_03: I'll use that word for the ISSB standards.
• 27:11
  SPEAKER_02: Yeah, sure.
• 27:11
  SPEAKER_02: And I think this was one thing that we had a last year we had um New York City Climate Week, and we had a special event uh with us and the ISSB, which was a great discussion.
• 27:23
  SPEAKER_02: And I think one of the things that was really highlighted was one of the goals, which I think Val touched on, of the ISSB standards being this global baseline.
• 27:30
  SPEAKER_02: So similar to IFRS, like a framework that can be used around the globe.
• 27:34
  SPEAKER_02: But to your point, it requires each individual jurisdiction to adopt those standards.
• 27:40
  SPEAKER_02: And so they take those and they make them their own, you know, pretty much adopt them, but they can make slight changes around certain requirements if they want and that type of thing.
• 27:48
  SPEAKER_02: So I think we've started to see that and continue to see more.
• 27:51
  SPEAKER_02: So as of December 31st, 2024, 13 jurisdictions have adopted the standards on a voluntary or mandatory basis, with reporting beginning either January 1, 2024, or January 1, 2025.
• 28:04
  SPEAKER_02: So good movement.
• 28:05
  SPEAKER_02: And then 22 other jurisdictions are planning to adopt them in the future.
• 28:09
  SPEAKER_02: So I think we are seeing a lot of movement too with the ISSB standards and more adoption around the globe.
• 28:16
  SPEAKER_02: And maybe a couple jurisdictions to highlight is both Brazil and Turkey are some of the first among uh required reporting.
• 28:24
  SPEAKER_02: Um, Australia has also adopted the standards and um Canada has too on a voluntary basis.
• 28:30
  SPEAKER_02: And maybe touching on that voluntary real quick too, the ISSB does have some additional guidance, as we were talking about, for voluntary reporters.
• 28:38
  SPEAKER_02: So, how how voluntary reporters can think about using their standards?
• 28:41
  SPEAKER_03: All right, it's a perfect segue.
• 28:42
  SPEAKER_03: It's like I knew this is the next topic because um we're gonna move on then to cover voluntary reporting.
• 28:49
  SPEAKER_03: And this is definitely a topic, I think.
• 28:51
  SPEAKER_03: I mean, we've talked about this, it could have its whole own series.
• 28:53
  SPEAKER_03: Each of the standards we're going to talk about today uh, you know, really could be um, again, a lot of companies follow them and there's a lot of nuance to them as well.
• 29:04
  SPEAKER_03: But for today, we're going to just hit a few highlights.
• 29:08
  SPEAKER_03: But before we get into voluntary, March and I have a few questions for you.
• 29:12
  SPEAKER_03: Okay.
• 29:12
  SPEAKER_03: Uh so first one is on GHG protocol.
• 29:15
  SPEAKER_03: And I didn't want to put that in voluntary or necessarily the required, although it's probably closer to required at this point.
• 29:23
  SPEAKER_03: But can you give something very brief and then obviously we'll have two separate episodes on that?
• 29:28
  SPEAKER_00: Yeah, so the basically GHG protocol is foundational.
• 29:31
  SPEAKER_00: Almost every rule that we just talked about as an element of uh reporting related to reporting of GEG emissions.
• 29:38
  SPEAKER_00: And almost every of this regulatory framework points to GEG protocol and various standards issued by GEG protocol um as a kind of a basis of foundation of the reporting requirements.
• 29:51
  SPEAKER_00: Um obviously there are some challenges as it relates to the protocol.
• 29:54
  SPEAKER_00: It hasn't been updated for quite some time now.
• 29:58
  SPEAKER_00: And right now, actually, protocol is in the process of updating.
• 30:01
  SPEAKER_00: So they created multiple, they first of all, they improved their uh governance structure.
• 30:06
  SPEAKER_00: They created multiple working groups where they're looking at existing standards and uh you know what updates are needed.
• 30:13
  SPEAKER_00: And I think they plan to issue the drafts in 2026 uh of a few updates, and in 2027 it's gonna be kind of formally published.
• 30:24
  SPEAKER_00: So um we'll see.
• 30:25
  SPEAKER_00: I'm really interested in how it's gonna work, considering that a lot of the standards currently point to existing GEG protocol and how potential changes will be uh treated in those existing standards.
• 30:38
  SPEAKER_00: What's gonna happen from the standard setting perspective?
• 30:41
  SPEAKER_00: So we'll see, but as you mentioned, you kind of made a segue to voluntary reporting.
• 30:45
  SPEAKER_00: Obviously, the the protocol is being used for like more than a decade or two decades right now.
• 30:51
  SPEAKER_00: You know, practically every, not everybody, but a lot of companies reporting this information um voluntarily, it's using and relying on the on the standard.
• 31:00
  SPEAKER_00: From a practical perspective, I and I can say I work with a lot of clients, everybody is applying the guidance in GEG protocol slightly different.
• 31:08
  SPEAKER_00: And a local regular environmental regular regulatory requirement, like EPA in uh in US or in other countries, they have their own own regulators, might impact how the protocol is being interpreted and implemented in practice.
• 31:23
  SPEAKER_00: So the whole process of updating is going to be even more interesting.
• 31:27
  SPEAKER_00: How it's gonna impact the entire um, I would call it, uh, world of emissions ecosystem.
• 31:34
  SPEAKER_00: Yes, that's the word ecosystem of emissions report.
• 31:36
  SPEAKER_03: So, March, I think that's um super helpful.
• 31:39
  SPEAKER_03: One key point that I should make there, though, is that GHG protocol reporting itself is required by one of the California laws, so a California um SB253.
• 31:48
  SPEAKER_03: So we will talk about that in the other episode.
• 31:51
  SPEAKER_03: But I do want to follow on on something you mentioned and the fact of working with your clients, because I think, unlike the rest of us, you definitely are in the field, you're working as an engagement partner and working directly with clients versus we are answering questions and working with clients in that way, but not the sort of day-to-day.
• 32:10
  SPEAKER_03: And in particular, I think what may be interesting for our listeners is to understand just broadly, if you have any observations, is you're seeing companies move from the world of voluntary reporting and maybe they're preparing for ESRS, maybe they're preparing for California, some probably ISSB, like what you're seeing is they're making that transition.
• 32:30
  SPEAKER_00: It's a very good question.
• 32:31
  SPEAKER_00: I could spend a lot of time talking about it, try to make it quick.
• 32:34
  SPEAKER_00: But um, I think the main question that people starting with is for those obviously who used to report some of this information voluntarily before, how can I take my existing reporting and transform it into various regulatory uh framework and requirements?
• 32:51
  SPEAKER_00: Depending on what is your footprint?
• 32:53
  SPEAKER_00: Are you just a US-based company or do you have a global footprint?
• 32:57
  SPEAKER_00: Answer to this question might be different, quite drastically different, quite frankly.
• 33:01
  SPEAKER_00: But that's the main question.
• 33:03
  SPEAKER_00: Okay, I have this information, at least part of it.
• 33:05
  SPEAKER_00: Can I take it and somehow transform it?
• 33:08
  SPEAKER_00: And oftentimes the the answer is it depends, right?
• 33:10
  SPEAKER_00: I mean, how how much emissions, for example, how compliant were you with GEGG protocol?
• 33:16
  SPEAKER_00: Did your reporting cover the entire footprint of GEGG emissions?
• 33:20
  SPEAKER_00: All scopes, scope one, two, and three, right?
• 33:23
  SPEAKER_00: And then seeing how it can you can transform it, whether this is California required reporting or uh ESRSs or ISSB.
• 33:30
  SPEAKER_00: Let's say now that the topic, main topic is Australia, because Australia is kind of moving forward with uh with their uh their rules.
• 33:38
  SPEAKER_00: So can we take what we have and can we um translate it into the those uh reporting requirements?
• 33:44
  SPEAKER_00: Second big question is what is going to happen with voluntary uh reporting once we start reporting based on this regulatory framework?
• 33:52
  SPEAKER_00: Do we keep it?
• 33:53
  SPEAKER_00: Um, do we amend it somehow or like abandon it entirely?
• 33:57
  SPEAKER_00: So that's the a lot of my clients, they recognize the fact that maybe topics that they covered before might be slightly different.
• 34:04
  SPEAKER_00: I don't want to say broader, but different than let's say what they would have to report under ESRSs.
• 34:08
  SPEAKER_00: And we have a lot of these circumstances, and clients still want to report some of those information to the stakeholders.
• 34:15
  SPEAKER_00: So, what should be the venue of that reporting going forward?
• 34:19
  SPEAKER_00: Um, and last but not least, which is dear to me, uh the auditability becomes the kind of a main question and also a big part of the preparation because a lot of our um clients either historically didn't have it um assured, if they had it, they had it assured based on either like partially and based on limited assurance.
• 34:41
  SPEAKER_00: So a few questions is uh do I have enough data to be audited?
• 34:45
  SPEAKER_00: What is the difference between the limited and reasonable assurance?
• 34:49
  SPEAKER_00: Quite frankly, a lot of clients are already thinking ahead.
• 34:51
  SPEAKER_00: And and like if I do now limited assurance as required by ESRSs, if they're subject to ESRS reporting, what would be the impact of you moving to reasonable assurance?
• 35:01
  SPEAKER_00: So a lot of, especially bigger clients start thinking about it.
• 35:04
  SPEAKER_00: I'm not saying they're fully implementing and making moves on, you know, changing the processes and controls, but this is what we get a lot of questions because the clients are planning.
• 35:14
  SPEAKER_00: Because the designing your regulatory reporting structure is really kind of difficult in this kind of a mixed environment.
• 35:21
  SPEAKER_00: And um, and having the clear answers were you know where there are the differences, how it interacts with voluntary reporting, and how good my information is to be audited kind of a may drive what decisions they're gonna make in terms of the reporting strategy.
• 35:36
  SPEAKER_00: And there's a lot of potential reporting strategies for companies with global footprint.
• 35:40
  SPEAKER_03: All right, we have a follow-up episode, it sounds like I do think key point, I think Diana mentioned this on ESRS that the ESRS is subject to limited assurance, moving to reasonable assurance.
• 35:51
  SPEAKER_03: And then with ISSB, that's gonna depend on the jurisdiction, but we're seeing the jurisdictions require limited assurance.
• 35:57
  SPEAKER_03: And then obviously in California, we also have limited assurance for uh the SP253 or the GHG protocol reporting.
• 36:05
  SPEAKER_03: So definitely, I think your focus on uh auditability is important and an important focus for our audience as well.
• 36:12
  SPEAKER_03: We have just, I want to run through, as I said, these voluntary frameworks.
• 36:15
  SPEAKER_03: We're gonna do like a little round robin here.
• 36:17
  SPEAKER_03: I'm gonna start with Marchin.
• 36:19
  SPEAKER_03: Uh, he's gonna talk about TCFD, Task Force on Climate Related Disclosures, and then we'll talk about GRI, Global Reporting Initiative Standards, CDSB framework application guidance, and then I'll go back to Marchin for task force on nature-related financial disclosures.
• 36:34
  SPEAKER_03: But Marchin, let's start with TCFD.
• 36:36
  SPEAKER_00: Okay, so TCFD first published its uh climate-related financial disclosure recommendations back in 2017.
• 36:45
  SPEAKER_00: Um, they are structures across four main pillars that are critical to operations of a company: governance, strategy, risk management, and the metrics and targets.
• 36:55
  SPEAKER_00: And um why are we even talking about the TCFD?
• 36:58
  SPEAKER_00: When you think about this, this framework was foundational to a lot of recommendations and uh disclosure requirements under a lot of this regulatory framework.
• 37:08
  SPEAKER_00: We're talking about ESRSs, we're talking about uh IFRSs as well.
• 37:13
  SPEAKER_00: The SEC rule that is state was based on a lot of these recommendations.
• 37:17
  SPEAKER_00: California requires the TCFD, uh the Bill 261 requires TCFD aligned reporting.
• 37:23
  SPEAKER_00: So these standards were um kind of a really foundational for design of um of a lot of um uh regulatory framework.
• 37:32
  SPEAKER_00: Um the interesting thing is that historically TCFD itself was monitoring the compliance.
• 37:39
  SPEAKER_00: So for all the volunteer reporters who are publishing TCFD aligned reports, um, the task force itself was issuing the annual reports about the status of compliance, how compliant those reports were.
• 37:51
  SPEAKER_00: The reason being because a lot of our clients found that framework to be useful, right?
• 37:56
  SPEAKER_00: For because that takes the framework takes the view of financial statement kind of a users, right?
• 38:02
  SPEAKER_00: And the risks that affect the company that should be disclosed in financial statements.
• 38:06
  SPEAKER_00: So this very useful framework, but it's pretty comprehensive, I would say, and a lot of our clients struggle with proper implementation of all the recommendations uh for the specific industry.
• 38:16
  SPEAKER_00: So TCFD itself was publishing those uh reports just to help companies to assess um how to properly kind of imply uh implement those um recommendations.
• 38:28
  SPEAKER_00: But um in October 2023, TCFD concluded that they fulfilled this mission and formally was disbanded.
• 38:37
  SPEAKER_00: Because, as we mentioned before, all these recommendations are essentially embedded in a lot of these regulatory reporting frameworks.
• 38:44
  SPEAKER_03: Yeah, and I do think understanding those pillars, yeah, I know there's four, sometimes we almost call them five because we split metrics and targets, but I think understanding that framework is helpful to just understanding the structure of the other standards.
• 38:58
  SPEAKER_03: But let's keep going.
• 38:59
  SPEAKER_03: Diana, GRI.
• 39:00
  SPEAKER_02: Okay, so the initial mission of the Global Reporting Initiative or GRI was to develop a mechanism to ensure entities were accountable for their environmental conduct, but it was later expanded to also include social, economic, and governance issues.
• 39:16
  SPEAKER_02: So the GRI framework uh requires an entity to report its impacts on the economy, the environment, and people.
• 39:24
  SPEAKER_02: And they have three different sets of standards.
• 39:26
  SPEAKER_02: So they have three universal standards, which I think are similar to all these, you know, they cover all these foundational concepts.
• 39:31
  SPEAKER_02: So they have those out there.
• 39:32
  SPEAKER_02: They have 40 different sector standards.
• 39:34
  SPEAKER_02: Not all those are developed or out there, but some of the high impact uh industries are out.
• 39:39
  SPEAKER_02: So oil and gas, mining, coal.
• 39:43
  SPEAKER_02: And then they do have 32 uh topical standards.
• 39:47
  SPEAKER_02: So seven economic standards, eight environmental standards, and 17 social standards.
• 39:51
  SPEAKER_02: I think when you go, and I am not a GRI expert, but you know, when you go and start to read some of this stuff, it is it is very expansive.
• 39:59
  SPEAKER_02: There's a lot of information out there under GRI.
• 40:02
  SPEAKER_02: Um, but GRI has signed a memorandum of understanding with both the IFRS Foundation and FRAG to collaborate on the development of future guidance and standard setting.
• 40:12
  SPEAKER_03: Well, and I think it's interesting with GRI is it's almost often considered almost in tandem with the ISSB because it brings the impact side.
• 40:20
  SPEAKER_03: Yeah.
• 40:21
  SPEAKER_03: And so if you go ahead and take GRI and ISSB together, then maybe you get ESRS, or at least you get the full spectrum of impacts, risks, and opportunities.
• 40:29
  SPEAKER_03: Right, right.
• 40:30
  SPEAKER_03: Yeah.
• 40:31
  SPEAKER_03: All right, very helpful.
• 40:31
  SPEAKER_03: And then Val, I'll go to you to CDSB.
• 40:35
  SPEAKER_01: So the Climate Disclosure Standards Board, their mission is really kind of the new flavor of integrated reporting.
• 40:41
  SPEAKER_01: Um, so their mission was really about uh that in order to get a full sense of corporate performance, you need to look at both their financial resources but also their natural resources.
• 40:50
  SPEAKER_01: Um, so trying to uh enhance the disclosures and to really focus on aligning the objectives of reporting in order to make sure that you have that connectivity between the financial information.
• 41:00
  SPEAKER_01: Now, they've uh initially developed a framework specific for climate.
• 41:04
  SPEAKER_01: Um, they subsequently and expanded that to include environmental and social topics, they expanded it to align with the TCFD requirements.
• 41:12
  SPEAKER_01: And they also have these application guidance documents, uh, two in particular.
• 41:17
  SPEAKER_01: They did have a climate one, they now have water-related disclosures and biodiversity-related disclosures.
• 41:23
  SPEAKER_01: Now, those topics really provide information about what is decision useful, um, about the impacts and dependencies for companies to disclose.
• 41:32
  SPEAKER_01: And actually, according to CDSB's website, they actually say that these will be useful until the ISSB develops their topical standards.
• 41:39
  SPEAKER_01: So they really see them as foundational and sort of filling a bit of a specificity gap, so almost a topical standard.
• 41:47
  SPEAKER_01: And the uh ISSB is clearly looking at that as part of their um, as they develop the new standards, they'll be one of the things that they consider as well.
• 41:54
  SPEAKER_03: Well, and these are may consider in the ISSB framework.
• 41:57
  SPEAKER_03: So something that you can look to and they're specifically referenced.
• 42:01
  SPEAKER_03: So very interesting.
• 42:02
  SPEAKER_03: All right, Martin, back to you.
• 42:05
  SPEAKER_00: Um, what am I talking about?
• 42:06
  SPEAKER_00: TCN.
• 42:07
  SPEAKER_00: Then TNF.
• 42:09
  SPEAKER_00: TFND, right.
• 42:10
  SPEAKER_00: So I'm always getting confused about uh all the acronyms.
• 42:13
  SPEAKER_00: So TNFD, which is Task Force for Natural Nature Related Financial Disclosures, uh, built on recommendation disclosure of TCFD, right?
• 42:21
  SPEAKER_00: So even the name is very uh very similar.
• 42:24
  SPEAKER_00: Um, it published its uh recommendation, including 14 disclosure recommendations across material nature-related dependencies, impacts, risk, and opportunities across the same four pillars like TCFD.
• 42:37
  SPEAKER_00: Uh, so we're talking again, governance, risk management, strategy, metrics, and targets.
• 42:42
  SPEAKER_00: Um, the um again, when you think about TCFD, it's primarily climate related.
• 42:48
  SPEAKER_00: TNFD, it's a nature related.
• 42:50
  SPEAKER_00: So we're talking about slightly different realms like land, freshwater, ocean, atmosphere.
• 42:56
  SPEAKER_00: So that's I just want to put it into perspective that there's a difference between the two, although the disclosure requirements about the governance and risk might be fairly similar, right?
• 43:05
  SPEAKER_00: Um, the TNFD published recently the first set of sector guidance.
• 43:09
  SPEAKER_00: I think it's eight sectors with specific requirements for financial institutions.
• 43:13
  SPEAKER_00: Uh the sectors included in the first batch are agriculture, oil and gas, power, uh, electric utilities.
• 43:21
  SPEAKER_00: So the key eight big eight eight sectors, right?
• 43:25
  SPEAKER_00: Um and um it's all maybe it's not so foundational uh to all the regulatory framework as TCFD, but it's also mentioned and referred to both in ESRSs and uh uh ISSB standards, right?
• 43:40
  SPEAKER_00: So uh interestingly, ESRSs refer, uh include multiple references to the materiality assessment framework for identification of this nature related dependencies and risk, which is called, which is developed by TNFD and is called LEAP Locate, Evaluate, Assess, and Prepare.
• 43:58
  SPEAKER_00: And um ISSB.
• 44:00
  SPEAKER_00: Also, in some educational materials, uh, refer to NFD NFD standards for uh you know how to help assess risk related to nature-related disclosures.
• 44:11
  SPEAKER_01: And I'd have to guess that the one of the next focus areas for the ISSB is the biodiversity standard, so the new thematic standard.
• 44:18
  SPEAKER_01: So I have to think that that's gotta be mentioned pretty significantly when they develop that.
• 44:22
  SPEAKER_01: All right, very interesting.
• 44:23
  SPEAKER_03: And definitely this leap framework is something we all learned quite a lot about uh this fall when we were updating or creating our sustainability reporting guide and more to come on that.
• 44:34
  SPEAKER_03: But definitely very helpful, I think, for companies that are reporting from an environmental perspective to look at that and to look to understand that leap approach.
• 44:41
  SPEAKER_03: And then there's obviously supplemental information in each of the e um standards under ESRS.
• 44:48
  SPEAKER_03: All right, there's a great overview.
• 44:50
  SPEAKER_03: I think obviously we could keep talking, but I think that's enough for today.
• 44:53
  SPEAKER_03: But just to wrap things up, I'm curious about any final thoughts or any practical advice.
• 44:58
  SPEAKER_03: So, Val, go to you first.
• 45:00
  SPEAKER_01: Starting with me.
• 45:00
  SPEAKER_01: Yes.
• 45:01
  SPEAKER_01: Um I actually like that we covered sort of a full gamut of disclosures.
• 45:05
  SPEAKER_01: Uh, and my first advice would be that I think every topic we've touched on will be the subject of a future podcast.
• 45:10
  SPEAKER_01: So they should clearly stay close to the side.
• 45:12
  SPEAKER_01: Well, not the voluntary, not the voluntary.
• 45:14
  SPEAKER_01: Not the voluntary.
• 45:14
  SPEAKER_01: Um, but I think overpromise.
• 45:17
  SPEAKER_01: But I think for um companies, uh most of them are not sort of at step one, but some of them are, and I think that the foundation is important.
• 45:23
  SPEAKER_01: And even for companies who have progressed, I think understanding sort of where they came from and how they fit together is really important.
• 45:29
  SPEAKER_01: Marta?
• 45:30
  SPEAKER_00: Uh so I think something that I already mentioned, having the clear reporting strategy is gonna be crucial, right?
• 45:35
  SPEAKER_00: Fully understanding what are your requirements, how they are kind of interacting with each other, and how you should prepare to that.
• 45:42
  SPEAKER_00: Because it's not a simple question.
• 45:44
  SPEAKER_00: Um, if like we've seen it in the in case of California, a lot of clients were initially saying, oh, let's wait for what's gonna happen in California.
• 45:51
  SPEAKER_00: Now we see a lot of clients rushing to the answer, okay, what do I do?
• 45:54
  SPEAKER_00: Am I in scope?
• 45:55
  SPEAKER_00: How can I use my current reporting?
• 45:57
  SPEAKER_00: So thinking about this, this kind of a various reporting framework and reporting strategy to me is crucial at this very point.
• 46:05
  SPEAKER_02: Diana?
• 46:06
  SPEAKER_02: Yeah, I think as we've highlighted, as you can see throughout this, like there's a lot of different regulations out there, but they're also moving very, very quickly.
• 46:13
  SPEAKER_02: And it's changing very, very quickly.
• 46:15
  SPEAKER_02: You know, even as Val highlighted, there was a recent change within the past week.
• 46:20
  SPEAKER_02: You know, we've seen new things coming out from the commission.
• 46:22
  SPEAKER_02: So I think this environment continues to change really quickly.
• 46:25
  SPEAKER_02: And so I think it's important to stay on top of how it's evolving, you know, monitoring what jurisdictions you're in, what are the reporting requirements, and how are they evolving, because I think it will continue to move.
• 46:37
  SPEAKER_03: So I completely agree.
• 46:38
  SPEAKER_03: And I also think going with that, you have just understanding the foundations.
• 46:42
  SPEAKER_03: I think understanding TFDCFD, where this came from, and understanding these similarities and differences between the ISSB standards and the ESRS's is going to be very important for companies, particularly reporting in more than one jurisdiction.
• 46:56
  SPEAKER_03: Not to mention, of course, March and GHG protocol, also very near and dear to my heart.
• 47:00
  SPEAKER_03: So, all right.
• 47:01
  SPEAKER_03: Well, as always, so nice to talk to you guys.
• 47:03
  SPEAKER_03: Thank you so much for joining me.
• 47:05
  SPEAKER_03: And for our listeners, thank you so much for tuning in and listening to us.
• 47:09
  SPEAKER_03: And I hope you stay tuned for the remaining episodes in the series and also check out our other podcasts on sustainability.