With the UK government’s recent announcement that its forthcoming Sustainability Disclosure Standards (SDS) will be anchored in the IFRS Sustainability Disclosure Standards, the countdown has begun for UK-based firms. The standards are expected to be issued by July 2024 – giving Chief Sustainability Officers less than a year to prepare.
While IFRS standards are broadly aligned with TCFD recommendations – good news for UK-based organizations currently subject to TCFD-aligned disclosures – the impending disclosures will still require significant preparation. CSOs should consider taking four key steps before the Sustainability Disclosure Standards are issued:
One: conduct a materiality analysis based on sector-specific standards. Materiality assessments will be crucial in informing the disclosure data requirements, making this an essential first step for decision-makers. The IFRS definition of “material” holds that information is material if omitting, obscuring or misstating it could be reasonably expected to influence investor decisions.
Two: operationalize sustainability disclosures with an internal project team. Integral sustainability information does not exist in isolation – nor does the experience necessary to effectively collate and process this data. Organizations need to create cross-functional teams with representatives spanning across operations, finance, legal, risk, HR and EHS. This working group will be responsible for collecting required data and feeding it through to the core sustainability team.
Three: build an ESG information architecture to consistently meet data requirements. With stringent regulatory drivers both impending and already in place, outdated paper-based data collection is no longer fit for purpose. CSOs and other executives must recognize that digital information systems are no longer a luxury, but a business imperative. Organizations need a centralized repository of sustainability data to draw from, and should implement workflows that enhance the traceability and transparency of data. This will be particularly essential to facilitate the assurance process.
Four: partner with the right software provider – or providers. When it comes to selecting software partners to enhance data management and ease disclosure requirements, there is no one-size-fits-all approach. With so many options available, executives should try to gain a comprehensive overview of the market before making a decision. Assessing 20 of the most prominent vendors, the recent Verdantix Green Quadrant: ESG Reporting And Data Management Software is a good place to start. CSOs should consider their organization’s specific needs and functionality requirements to find the right fit.
