With so much change in sustainability regulations worldwide, it can be hard to keep up with the latest developments. To help you navigate the evolving sustainability landscape, we’ve put together a guide with everything you need to know on the key regulations and latest guidance across the EU, UK and US. Read our summary of the key regulations and how they intersect with each other, or download the full guide below.
Comprehensive sustainability disclosure
Despite uncertainty from the Omnibus proposal, the EU’s Corporate Sustainability Reporting Directive (CSRD) is driving a step change in corporate transparency. Mandating comprehensive sustainability reporting for companies with significant operations in Europe, this EU legislation aims to bring sustainability disclosure in line with financial reporting, with comparable status given to both. Alongside this, the International Financial Reporting Standards’ (IFRS) voluntary Sustainability Disclosure Standards developed by the International Sustainability Standards Board (ISSB) are being adopted by a growing list of countries or jurisdictions through their own regulatory processes.
Redefining sustainable investments
Sustainable investment is being driven by the EU Taxonomy, which provides a classification system for sustainable economic activities, while the Sustainable Finance Disclosure Regulation (SFDR) mandates transparency in sustainability-related disclosures for financial market participants within the EU.
Advancing climate-related financial disclosures
To advance climate action and transparency, the UK’s Companies Act amendments and Financial Conduct Authority’s (FCA) Listing Rule on TCFD (Taskforce on Climate-related Financial Disclosures) disclosures require climate-related financial disclosures that align with global standards. In the US, the SEC’s Climate-Related Disclosures Rules has adopted regulations to include climate change disclosures in registered companies’ financial documents if climate change poses a material financial risk to the business. In addition, the Climate Corporate Data Accountability Act (SB 253) and Climate-Related Financial Risk Act (SB 261) will require large companies operating in California to disclose greenhouse gas (GHG) emissions reporting in compliance with the GHG Protocol and climate-related financial risk reporting in line with TCFD.
Promoting ethical practices
On the social side, the Corporate Sustainability Due Diligence Directive (CSDDD) requires companies with a significant presence in Europe to identify, prevent, mitigate, communicate and remedy adverse impacts on the environment and human rights in their value chain. While the EU Pay Transparency Directive (EUPTD) aims to eradicate the gender pay gap by mandating that organisations that employ people in the EU to provide gender-pay-related disclosures.
Avoiding greenwashing in sustainability claims
When it comes to greenwashing, there’s a multitude of guidelines and regulations. For example, the EU Green Transition Directive (GTD) clamps down on unfair commercial practices, including greenwashing, which hinder consumers’ ability to make informed and environmentally responsible decisions. The GTD is intended to work alongside the EU Green Claims Directive (GCD) on the substantiation and communication of explicit environmental claims. Its principal aim is to protect consumers from greenwashing and to make environmental claims on products and services more reliable, comparable and verifiable across the EU.
In the UK, the Digital Markets, Competition and Consumers (DMCC) Act brings new powers to the Competition and Markets Authority (CMA) and updated rules addressing unfair commercial practices, including the use of misleading actions or omissions such as those related to environmental and social claims. This regulation builds on existing guidance; for example, the CMA’s Green Claims Code and the Advertising Standards Authority (ASA) and Committee of Advertising Practice’s (CAP) guidance on misleading environmental claims and social responsibility. In the US, the Federal Trade Commission’s (FTC) Green Guides outline a set of guidelines and principles to ensure effective and non-deceptive marketing claims.
There are significant changes happening in the sustainability regulatory landscape right now, and we are here to navigate you through them. Flag can help you to review the regulatory changes and ensure your sustainability strategy, communications and reporting approach are fit for purpose.
Get in touch to find out more at info@flag.co.uk.