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The need for a multi-stakeholder global dialogue

The future of corporate reporting, and ultimately the future of global markets, will rely on successfully aligning and mainstreaming sustainability reporting, writes Ian Mackintosh, chair of the Corporate Reporting Dialogue (CRD).

In October last year, the CRD – an initiative bringing together the major corporate reporting standard setters and framework providers globally – welcomed the publication of the Investor Agenda for Corporate ESG Reporting, the result of investor bodies working together to set out a clear statement on what investors need from environmental, social and governance (ESG) reporting.

The publication, which was born out of a CRD meeting, called for both investors and companies to think more about systemic issues, including the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, the UN Sustainable Development Goals and their links to individual companies.

For companies, this is a matter of strategy and sustainable value creation, the report said. For investors, particularly those with longer-term time horizons, systemic risks need to be reflected in valuation models and incorporated into engagement with company executives and board members. 

The report challenged standard-setting organisations to present a coherent vision of how standards can and should fit together to help companies communicate their strategies for long-term sustainable value creation to investors. It also spelled out the need to get ESG reporting right, including both simplifying and mainstreaming the ESG landscape, to facilitate the creation of effective, sustainable future global markets.

The CRD Better Alignment Project participants, including the reporting standards and framework CDP, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council, and the Sustainability Accounting Standards Board are now responding to market needs via a global consultation process.

Launched in March 2019, the consultation will gather views from stakeholders on how to drive better alignment of sustainability reporting frameworks, as well as with frameworks that promote integration between non-financial and financial reporting.

Through an online survey aimed at both report preparers and users, available on www.corporatereportingdialogue.com until 30 April 2019, and regional multi-stakeholder engagement roundtables, held in locations around the world until the end of May 2019, stakeholders will be consulted on how to support effective disclosures, addressing the TCFD recommendations, and identifying how non-financial metrics relate to financial outcomes and how this can be integrated in mainstream reports. 

Information gathered from the consultation period will help to shape an initial report, due for publication in September 2019, showing the linkages of the TCFD recommendations with the respective frameworks and the linkages between the frameworks. It will also inform potential areas for CRD participants to focus on going forwards as we drive better alignment.

Mainstream Integration

Starting with the TCFD recommendations this year, and expanding into other areas of sustainability reporting in 2020, the Better Alignment Project’s objectives of simplifying and integrating reporting will serve to pave the way towards the integration of sustainability into mainstream financial reporting, a move that could revolutionise business-as-usual, as environmental, social and governance risks and opportunities start to be priced into the marketplace. 

Our stakeholder dialogue needs not only to be global, but also needs to occur between disparate stakeholders, including business, finance, policymakers and civil society organisations, in order for sustainability reporting, starting with that of the TCFD recommendations, to be both meaningful to the financial community and truly reflective of the ESG issues that are most relevant to companies. 

The CRD’s global consultation aims to gauge where the current obstacles lie in both reporting and using corporate ESG information. It will be essential to bring together voices across industries and sectors to reach consensus on how to create a reporting system that both reflects ESG challenges and the financial risks and opportunities associated with ESG issues. 

We are committed to establishing a sustainability reporting system that reflects global market needs as well as those of other stakeholders, and would encourage all sections of the finance and accounting world to join the consultation and play their part in shaping the future of corporate reporting. 

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