Disclosures:
A Comprehensive Introduction
The integration of sustainability information into corporate reporting stands as a cornerstone of contemporary and emerging business practices. This development is based on increased awareness that without full transparency about firms’ material sustainability impacts, risks and opportunities, important information asymmetries persist and drastically reduce market efficiency. Risks cannot be appropriately priced, nor can preferences be adequately expressed in financing and investment decisions. Research has provided vast evidence that (especially mandatory) sustainability disclosures can reduce such negative effects and can have positive performance, risk, and valuation implications4
Through sustainability disclosures, transparency and accountability are enhanced, catering not only to financial stakeholders’ information needs but also to those of non-financial stakeholders who are interested and invested directly or indirectly in sustainability, including environmental preservation and biodiversity conservation. Increased transparency on firms’sustainability performance enables stakeholders to make better informed decisions and empowers then to hold firms accountable for unsustainable practices. As firms anticipate and experience the integration of sustainability information in their stakeholders’ decision-making processes, they are incentivised to improve their sustainability performance, for instance by adopting measures like nature conservation and biodiversity preservation policies. Corporate ESG disclosures thus serve as a critical first step in increasing corporate accountability, promoting sustainability, and facilitating the evolution of various sustainable finance and regulatory instruments, including transition finance, tradeand due diligence-related regulations, which rely on information about firms’ sustainability risks, opportunities, and impacts.
2.1 Sustainability Disclosure Standards, Frameworks and Regulations
While the prospects of sustainability disclosures are indeed substantial, they hinge on the disclosed information to be reliable,accurate and comparable.However,firms are still granted substantial discretion on the format, quantity, and quality of sustainability-related disclosures. Sustainability disclosures are thus frequently criticised as incomplete, incomparable, and unreliable in research5 and can indeed be misused as greenwashing tools6 . The unstandardized nature of sustainability disclosures thus substantially limits their usability to hold firms accountable and ultimately restricts their real effects (changes in firms’ behaviour)7
4 Dhaliwal et al. (2011), link; Dhaliwal et al. (2012), link; Cho et al. (2013), link; Christensen & Leuz. (2021), link;
5 Boiral et al. (2019), link; Cho et al. (2015), link;
6 Cho et al. (2009), link; Patten. (1991), link;
7 Christensen & Leuz. (2021), link;
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Voluntary standards and frameworks
In response to the before mentioned problems relating to the unstandardized nature of sustainability disclosures, numerous initiatives have developed sustainability reporting frameworks and standards8 . The Global Reporting Initiative (GRI) published its first guidelines in 2000 and is considered the pioneer sustainability standard-setter. Further influential initiatives including CDP, International Sustainability Standards Board (ISSB), Sustainability Accounting Standards Board (SASB), Taskforce on Climate- Related Financial Disclosure (TCFD) and the Taskforce on Nature-related Financial Disclosures (TNFD) were founded and published sustainability reporting standards and frameworks.
Sustainability reporting standards typically specify disclosure content (what needs to be reported), while frameworks typically focus on providing guidance for firms’ sustainability understanding and reporting practices (how to report). Both seek to support the disclosure of high-quality and comparable sustainability information, to increase the usability of sustainability disclosures and thus improve different stakeholders’ monitoring benefits. By addressing the outlined limitations of nonstandardised voluntary sustainability disclosures, reporting standards and frameworks represent a critical first step towards improved sustainability reporting practices. However, as long these initiatives remain purely voluntary and differ in their disclosure requirements and underlying principles, they still allow for considerable discretion in their application and thus result in sustainability information that is insufficiently comparable, reliable and decision-useful As such, the ability of voluntary sustainability reporting standards to contribute to the effective internalisation of firms’ negative externalities remains limited as long as they are not enforced through mandatory reporting regimes.
Mandatory regulation
By increasing the quantity, reliability and comparability of sustainability information, mandatory reporting standards help different stakeholders (consumers, financing institutions, business partners) integrate corporate sustainability information in their decision-making. Anticipating stakeholders’ consideration of the new sustainability information alongside their sustainability preferences, firms are incentivised to increase their sustainability performance.9 Through this mechanism mandatory reporting regimes can help internalize firms’ negative sustainability impacts. The mandate to disclose sustainability information based on specified standards and through specified channels increases not only the comparability and reliability of firms’ sustainability information, but will also make it easier for different stakeholders
8 Cooper & Michelon. (2022), link
9 Christensen & Leuz. (2021), link;
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to access sustainability information they are interested in. Furthermore, mandatory sustainability reporting regimes could increase the ability of stakeholders to benchmark firms’ sustainability performance vis a vis each other and over time and increase stakeholders’ ability to hold firms accountable.10
Mandatory sustainability disclosure regulations and standards, including the EU’s Corporate Sustainability Disclosure Regulation (CSRD) and its corresponding European Sustainability Reporting Standards (ESRS), drafted by the European Financial ReportingAdvisory Group (EFRAG), represent a recent development, that will likely further increase the reliability, accuracy, and comparability of sustainability disclosures.11 Due to the CSRD’s mandatory nature,the ESRS’s specified disclosure requirements, and the need for firms to seek assurance on their disclosed sustainability information, the usability and impact of sustainability information increases.
While sustainability disclosure regulations increase globally and have the potential to help internalize firms’ negative sustainability impacts, there are major inconsistencies and gaps that need to be addressed to enable the pricing-in of sustainability impacts and risks. These issues relate to limited comparability, restricted accessibility, or insufficient assurance of the disclosed information. Further examples include the exemption of small- and medium-sized enterprises (SMEs) from many mandatory ESG disclosure regulation (see the IPSF report for more information). In consultation with expert organizations, CDP has outlined ten key principles that should form the basis of robust environmental disclosure policy and regulation to overcome the outlined inconsistencies and gaps.12
2.2 Analytical lens: The Building Blocks of Sustainability Disclosures
Although there is growing alignment between different sustainability disclosure standards and frameworks13, there is still much potential to increase these ongoing efforts and to further enhance alignment and interoperability for increased comparability of sustainability information and increased feasibility in terms of implementation In the context of global markets and supply chains, it is now critical to increase regulatory cooperation to ensure that initiatives in key countries around
10 Christensen & Leuz. (2021), link;
11 The EFRAG is an independent, multistakeholder advisory body, mainly funded by the European Union (EU) (link), which provides technical advice to the European Commission on preparing sustainability reporting standards (link). The EFRAG standards are adopted by the European Sustainability Reporting Standards (ESRS). Therefore, companies that are required to apply the Corporate Sustainability Reporting Directive (CSRD) should follow the ESRS. Consequently, companies that identify biodiversity and ecosystems as a material topic should disclose aspects related to biodiversity and ecosystems.
12 CDP. (2023), link
13 “Accountability for Nature: Comparison of Nature-Related Assessment and Disclosure Frameworks and Standards”
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the world are coordinated. To assess and compare different sustainability reporting standards, frameworks, and disclosure regulations, it is helpful to differentiate between seven distinct, but interlinked ESG disclosure building blocks:14
• Disclosure Content: determines the specific Environmental, Social and Governance (ESG) information to be disclosed, including the breadth of factors covered, quantitative or qualitative data requirements, and the level of reporting metrics’ specificity.
• Mandatory versus Voluntary: Distinguishes between legally mandated and voluntary ESG disclosure measures, with mandatory measures enforced by regulatory authorities and voluntary measures offering flexibility to entities.
• Materiality: Defines the relevant or “material” ESG issues for reporting. The “outside-in” materiality approach considers ESG factors impacting firms’ financial performance (financial materiality) and the “inside-out” materiality approach (impact materiality) accounts for firms’ ESG impacts on its external environment When both perspectives are considered, the materiality approach is defined as a “double materiality” approach.
• Scope: Establishes criteria for determining which entities, products, or services are subject to the ESG disclosure measure, such as entity size, legal status, sector affiliation, or specific financial products.
• Assurance: Ensures the accuracy and reliability of disclosed ESG information through verification or auditing processes, whether performed internally or externally and ranging from comprehensive audits to consistency checks.
• Disclosure Channel: Specifies where ESG information should be disclosed, encompassing standalone sustainability reports, integrated reports, annual reports, websites, or specific regulatory channels.
• Reporting Standards: Provide guidelines and frameworks for reporting entities to ensure consistency and comparability in ESG disclosures, catering to different sectors, sizes, and reporting regimes.
14 Climate & Company also published a study that presents a “Comparative Analysis of Upcoming Disclosure Standards” where three proposals for disclosure standards where analysed (EFRAG, ISSB, and the US Securities and Exchange Commission (SEC)). The analysis provides recommendations for the seven building blogs. Overall, the study highlights the need for harmonised disclosure that enables decision-makers to consider sustainability risks and impacts.
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Figure 1: Building blocks for sustainability disclosure regulation
Source: Climate & Company (2023)15
As a concrete example, the study published by Climate & Company (2023)16 elucidates how each building block can support the incorporation of deforestation reflection into disclosure standards.
3. Disclosure Content: Zooming in on Biodiversity and Nature
In the following, we highlight standards and frameworks that integrate nature and biodiversity, such as the GRI, the ESRS, and the TNFD. The GRI has just launched its new Biodiversity standard GRI 101: Biodiversity 2024, which is built on key global developments in the biodiversity agenda, such as the GBF (Figure 2). Through this disclosure standard, organisations can better understand and communicate their biodiversity practice and demonstrate their adoption of an approach to managing biodiversity impacts. It requires, for example, (i) an emphasis on impacts throughout the supply chain, (ii) location-specific details, and (iii) data regarding direct causes of biodiversity loss. The GRI standards are voluntary in nature, and GRI 101 is set to be officially implemented in 2026, though companies are encouraged to adopt it ahead of time.
15 Climate & Company. (2023), link
16 Climate & Company. (2023), link
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Figure 2 – GRI 101: Biodiversity 2024
Source: GRI (202417)
Furthermore, frameworks including the TNFD are also key to moving forward with nature-related disclosure at a global level and in alignment with the GBF. Key decision-makers, including companies and countries have been involved in both the development and negotiation of the TNFD and the GBF. In 2024, the TNFD has gained even more significant momentum, with 320 organisations in 46 countries committing to making disclosures based onTNFD recommendations18.This includes large companies, financial institutions (FIs), and other organizations. This underscores the growing recognition that businesses and investments are intertwined with nature and climate, signifying a shift towards treating these as strategic considerations.
The TNFD recommendations provide a framework for aligning corporate reporting with global biodiversity goals. It has set up a consultation group with representative organisations from 15 different countries to move forward with the framework implementation. The GRI and EFRAG have collaborated with the TNFD to advance the disclosure on biodiversity, which demonstrates an expected alignment between these standards and the disclosure framework.
Other disclosure standards which target nature-related risks is the Natural Capital Protocol. The report “Accountability for Nature: Comparison of Nature-Related Assessment and Disclosure Frameworks and Standards”, presents an interesting comparison between the standards and frameworks mentioned above and those focused on biodiversity (GRI, TNFD, EFRAG). The analysis indicated a growing
17 GRI. (2024), link
18 TNFD. (2024), link
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coherence between the reviewed approaches, revealing an upward trend of alignment with regard to fundamental concepts and methodological strategies.Table 1 provides more information on the disclosure standards and frameworks mentioned.
Table 1. Overview of key standards and frameworks with a focus on nature and biodiversity Approach Guidance Type Mandatory/ Voluntary Status Target report prepares
ESRS Standard Mandatory
GRI Standard Voluntary
Natural Capital Protocol Framework Voluntary
To be in force in early 2024 for the first group of companies
GRI Biodiversity
Standard revised version released in 2024
Current version released in 2016, a new version will be available in 2024
TNFD Risk management and disclosure framework Voluntary Released in September 2023
Source: UNEP (202419)
Business & FIs
Business, FIs and other organizations
Business & FIs
Business & FIs
Despite the criticality of nature and biodiversity loss’s impacts, there are yet no international mandatory disclosure regulations in place. Except for the EU CSRD, disclosure requirements related to biodiversity in other G20 jurisdictions are not comprehensive, missing specific indicators and metrics. The lack of clarity and consensus on biodiversity indicators and metrics globally partially explains the rarity of disclosure requirements in non-EU countries.20 However, in order to achieve the GBF–Target 15: Businesses Assess, Disclose and Reduce Biodiversity-Related Risks and Negative Impacts, it is imperative for governments to incorporate disclosure for business into policies, laws, and administrative measures, ensuring interoperability across jurisdictions. The collective efforts of governments and the private sector are essential in transforming GBF–Target 15: Businesses Assess, Disclose and Reduce Biodiversity-Related Risks and Negative Impacts into national regulations that mandate disclosure, thereby ensuring that businesses fully account for their impacts on biodiversity.This collaboration is vital in turning words into action, fostering a sustainable relationship between businesses and biodiversity, and effectively implementing sustainable finance instruments that prioritize biodiversity protection.
19 UNEP. (2024), link
20 CDP. (2023), link
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4. The role of G20 to increase alignment of nature and biodiversity disclosures
Since 2015, under Turkey’s Presidency, the G20 has addressed sustainability disclosure issues with a focus on climate-related risks.21 Within the G20, there are 8 outof the 17 world megadiverse countries (Australia,Brazil,China,India,Indonesia, Mexico, South Africa, and the United States), which constitutes a significant presence and underscores the importance for the intergovernmental forum to prioritise biodiversity and ecosystem protection on the political agenda. Urgent action is now required in all G20 jurisdictions to further include nature-relevant aspects into their existing and developing sustainable finance regulatory frameworks. All jurisdictions should be encouraged to develop comprehensive financing strategies aligned with nature-positive outcomes. Under the Brazil’s G20 presidency, countries have a significantopportunity to make substantial progress on biodiversity disclosure within the efforts already implemented for ESG disclosure. The current landscape of sustainable finance and sustainability disclosures globally, in particular the emerging standards focusing on biodiversity and nature, presents an unprecedented opportunity to leverage the potential of global financial markets for sustainable development.
With the G20 nations playing a central role,there is a growing emphasis on fostering international cooperation on sustainability disclosures to increase corporate transparency and accountability on a global scale. International alignment on disclosure regulation is crucial not only for regulatory efficiency but also to establish a level playing field for businesses worldwide. Without alignment, disparities in reporting requirements could potentially disrupt trade relations and impede global efforts to address pressing issues such as climate change, biodiversity loss, and human rights violations.
Businesses worldwide are increasingly advocating for regulatory cooperation to address these challenges. There is a growing acknowledgment that international alignment is key to reducing reporting burdens while upholding high standards of transparency and accountability. Capitalising on existing entry points for international sustainable finance alignment and building alliances with established standard setters and frameworks, such as GRI and TNFD, can facilitate a more harmonised approach to sustainability reporting.
By focusing on increasing international alignment on disclosure policies and practices,the groundwork can be laid for broader sustainable finance alignment amongstG20 countries and beyond.International collaboration mustextend beyond governmentstoencompasspartnershipswiththeprivatesector.Engagingcorporate decision-makers in key jurisdictions can foster a culture of transparency and accountability that transcends borders. Highlighting best practices and providing 21 CEBRI. (2023), link
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support for implementation can help overcome barriers and drive progress towards a more sustainable global economy.
Concrete steps through regulatory cooperation within the G20 framework are necessary to advance these objectives. This includes the mandatory adoption of ambitious and aligned disclosure standards in key jurisdictions, supporting the effectiveimplementationofthesestandards,andpromotingpositivenarrativesabout the feasibility and benefits of sustainability reporting. Furthermore, it is important to acknowledge the relevance of global supply chains in the sustainability agenda.
However, it is important to note that disclosure standards and frameworks on biodiversity and nature have recently been published, and a deeper understanding of their implementation, as well as how to align them, is still necessary before formulating a concrete action plan.
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