COP28's impact on ESG reporting: key takeaways for your business
After an intense 12-day stretch of negotiations, COP28 has reached its end. The big question now is: what's the final outcome?
Published: December 2023
The 28th annual UN Climate Change Conference, COP28, has just wrapped up. In a year witnessing the hottest months ever recorded, and with time running out to keep the Paris Agreement alive, the stakes for a COP meeting have never been higher.
For the first time in COP history, the final draft included the need to “transition away” from fossil fuels, going beyond the previous language of merely "phasing out" or "phasing down.” This change is seen as a huge win – infusing the conference with renewed energy and hope. However, despite this progress, there still remains a sense of disappointment among many as parts of the text are seen to contain unjust loopholes, potentially undermining the urgent action needed.
While it's too early to label COP28 as a success or not, there have been several advancements in the field of ESG reporting. Key, influential players in the ESG sector have introduced new initiatives aimed at making corporate ESG reporting smoother and more impactful.
In this blog, we’ll go over announcements made at COP28 that will impact the future of ESG reporting. Let's dive in!
1. The SBTi launches its bold call to action - Supply Change: Take Action On Supply Chains"
A significant highlight was the Science Based Targets initiative (SBTi) launching its ambitious call to action, "Supply Change: Take Action On Supply Chains Today.” This initiative is designed to encourage companies to engage more actively with their suppliers and start tackling their Scope 3 emissions. By doing so, the SBTi seeks to spark a chain reaction so that the companies' suppliers set their own science-based targets. The ultimate goal is to create a widespread movement toward decarbonization across the entire economy. Leading the way in this movement are companies known for their dynamic and extensive supply chains, such as AstraZeneca and H&M. Read more on how you can get involved here.
2. 400 + organizations commit to adopting the ISSB Standards
Over 400 large companies, investors, and institutions, from 64 different pledged to align their climate reporting with the International Sustainability Standards Board (ISSB) Standards. Among these are giants like Unilever, Ericsson, and the IKEA Foundation. Their goal? To make corporate climate reporting more consistent and transparent by adopting the ISSB's Climate Standards as a universal benchmark.
This collective pledge to the ISSB Standards is expected to set off a domino effect: companies linked with these organizations or to their partners will likely face increasing pressure to adopt similar practices. As a result, we can foresee a growing number of businesses worldwide adopting standardized reporting methods.
What are the ISSB Standards?
The ISSB Standards are a set of sustainability reporting standards developed by the International Sustainability Standards Board(ISSB), aiming to create a comprehensive global baseline of corporate sustainability reporting. There are currently two standards published- General requirements (S1) and Climate (S2). More standards covering additional themes and industries will be issued in the future.
3. PRI, IFRS, and UNEP (among others) collectively launch of the Taskforce on Net Zero Financial Policy
During the conference, leading representatives and experts of the ESG landscape, including the Principles for Responsible Investment (PRI), the United Nations Environment Program – Finance Initiative (UNEP FI), the United Nations Conference on Trade and Development (UNCTAD), and the International Financial Reporting Standards (IFRS) announced the launch of the Net Zero Financial Policy Taskforce.
The Taskforce on Net Zero Policy focus is to transform net zero ambitions into tangible action and help move away from visionary statements by aligning global policies with the zero vision.
This way, the Taskforce will help ensure the credibility and accountability of 1.5-alined net zero emissions commitments by companies, organizations, and other non-state actors.
The Taskforce operates on three main objectives:
- Create a collaborative space To provide a space for various stakeholders to work together on net zero strategies.
- Offer research and technical Support To supply with the right guidance and resources to aid the transition to net zero.
- Exploring Regulatory Opportunities: The Taskforce looks for ways within existing regulatory frameworks to implement the recommendations of the High-Level Expert Group (HLEG) from last year's COP27.
What are the HLEG recommendations?
The report by the United Nations Secretary-General’s High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities (HLEG), “Integrity Matters: Net-Zero Commitments by Businesses, Financial Institutions, Cities and Regions,” sets out ten practical recommendations to bring integrity, transparency and accountability to ensure that net-zero pledges are fully aligned with limiting global temperature rise to 1.5°C above pre-industrial levels, by establishing clear standards and criteria.
Companies with a net-zero pledge are advised to record their alignment with the HLEG report using the implementation checklist. Find the checklist here.
4. EU’s next step: reporting standards for small and medium-sized companies
Starting in 2024, large European companies will face a new era of sustainability reporting. Under the newly established Corporate Sustainability Reporting Directive (CSRD), they're required to adhere to the European Sustainability Reporting Standards (ESRS) for their reports starting from the financial year 2024. This marks a significant step in standardized corporate sustainability disclosure.
Both that’s not all. During COP28, the EU announced that the next step is to create disclosure standards for small and medium-sized (SME) companies. These standards will help SMEs respond to requests they may get from banks, large company customers, and others on their sustainability information.
Start your ESG reporting in Worldfavor
All these pledges, announcements, and initiatives point to one thing: the importance of data. We really need data. We need it to track our progress against environmental commitments, we need it to respond to the increasing demands of stakeholders, and we need it to take meaniful action and reduce our negative impact.
Every stakeholder, every organization, and every supplier has a vital role to play. Are you playing yours yet?
Standardize your ESG reporting and connect with all your suppliers in Worldfavor. The platform lets you collect and access data directly from companies in your value chain – no estimates. High-quality, primary ESG data enables you to take sustainable action and drive positive, long-term impact. Want to know more? Book a personalized demo today!
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