Will the next year deliver harmonization of global sustainability frameworks?

Over the past few years, the world has collectively paid heightened attention to the worsening climate crisis. While much uncertainty remains about what the coming years will hold as it pertains to climate change and the promotion of sustainability across society, one thing is becoming increasingly clear: we are trending toward greater regulation regarding sustainability around the globe.

 

Last Autumn, the much-anticipated UN Climate Change Conference, COP26, convened in Glasgow and resulted in a mixed bag of emotions. While it was disappointing that the main objectives of the conference - namely, to unite the nations of the world in pledging to reach net-zero emissions targets by mid-century and limit global warming to 1.5 degrees Celsius by 2100 - were not quite met, the conference still generated much good. Governments made promises and side deals to reduce their emissions and protect their natural resources. The United States and China issued a joint agreement pledging to work together on sustainable initiatives. Attendees were asked to update their nationally-determined contributions each year, beginning at this year’s COP27 taking place in Egypt in November.

 

Despite - or perhaps partially fueled by - the disappointment, a path toward progress still exists. And that path will be paved with greater regulation from government agencies and other regulatory frameworks worldwide.

As a result of COP26, many governments made promises—now they’ll need to show that they meant what they said. Increased regulation, therefore, is inevitable, as is a correlated increase in the number and expectation of requirements from other regulatory frameworks. For global corporates, there is now no escaping this fact: companies and investment funds will need to state their goals regarding sustainable initiatives transparently, strive to meet those goals, and submit reports detailing whether those goals are being met. What’s more, it’s safe to assume that soon those types of disclosures will be mandatory all over the world.

 

In recent years, we’ve witnessed a growing trend toward increased regulation across continents. The EU is currently ahead of the game and the leader in the global governmental regulations space regarding sustainable finance. The bloc released the EU Taxonomy for Sustainable Activities in 2018, which was implemented in March 2021, and the regulation on sustainability-related disclosures in the financial services sector (SFDR) has already resulted in increased reporting requirements for sustainable investing.

 

APAC, too, is beginning to increase its regulations. China is working with the EU to harmonize taxonomies for environmental investing with a joint classification, Japan is discussing mandatory disclosure, South Korea has plans for mandatory labeling of ESG funds, Singapore has released guidelines on managing environmental risk for asset managers, Hong Kong has released a set of guidelines on how firms can market and execute their ESG strategies, and Taiwan has tightened rules on ESG fund launches.

 

In North America, the US —which fell behind during the Trump administration—is now reasserting its sustainability leadership role. The US has rejoined the Paris Agreement, and market regulator the SEC has reviewed existing climate-related disclosures, created a new enforcement task force and proposed guidelines on implementing new standardized disclosure rules.

 

Around the world, other non-governmental corporate regulatory frameworks have become embedded in reporting processes, including the Task Force on Climate-Related Financial Disclosure (TCFD), the International Sustainability Standards Board (ISSB) from the IFRS, the UN-supported Principles for Responsible Investing (PRI) and many more.

It means that creating a culture of multilingual transparency and disclosure is gaining increasing importance. Each of these regulatory bodies demands transparent and accurate disclosure of sustainability objectives, successes and failures. Global corporations will be challenged to meet these reporting requirements wherever they do business worldwide.

 

Time is of the essence when it comes to meeting this particular challenge, because competition will surely emerge that encourages organizations not just to meet requirements, but to exceed them. For example, while regulatory bodies might require global corporates to publish an annual report on ESG initiatives, companies may choose to go a step further by releasing a quarterly report or a monthly newsletter.

 

Global corporates need to become proactive about improving and systematizing their reporting, with huge attention paid to traits that will becoming increasingly valued in a more sustainable, more climate-aware world: transparency and accuracy.

 

That’s where we come in. At RWS, we can assist with all your multilingual reporting needs, and we can help you devise a system that allows you to be proactive, rather than reactive, when it comes to ESG disclosures.

If COP26 showed us anything, it’s that we’re all in this together – this message is already being escalated in the run-up to COP27. In the coming years, we expect to see greater collaboration and harmonization among global regulatory bodies and corporate regulatory frameworks. Keeping up with increased requirements may feel like a daunting challenge, but it needn’t be. Reach out today to learn more about how RWS can help your company become more proactive about meeting regulations, creating a culture of transparency and accuracy across your organization.