2024 ESG trends: Key global and Australian reporting developments
2024 ESG trends: Key global and Australian reporting developments
It’s been a transformative year for ESG in 2024, with mandatory reporting becoming a global norm. If you’ve missed our regular articles and updates throughout the year, this article provides a comprehensive snapshot of the key reporting developments. We highlight the must-know trends in both the Australian and global markets from 2024.
As ESG issues become more important, companies, governments and investors are adapting to new sustainable business practices and mandatory regulations worldwide. This includes ensuring the legitimacy of ESG claims, using technology and data for ESG management, complying with new mandatory disclosures, and maintaining supply chain transparency.
The rise of international ESG disclosure standards
Globally, regulatory frameworks have evolved rapidly, led by Europe and the US. These developments have set the stage for an exciting 2024, with several key ESG trends from these countries expected to control and influence the Australian landscape.
Global
Significant strides have been made in global sustainability reporting in 2024, reflecting a unified effort to enhance transparency and accountability. The International Sustainability Standards Board (ISSB) has been pivotal, with jurisdictions representing over half the world's economy aligning with its standards to create a global baseline for sustainability disclosures.
This movement is complemented by the interoperability efforts between the Global Reporting Initiative (GRI) and the Taskforce on Nature-related Financial Disclosures (TNFD), which aim to streamline reporting standards and reduce market fragmentation.
The 2024 IFRS Foundation Integrated Thinking and Reporting Conference, held in Milan on October 18, brought together global stakeholders to discuss the value of integrated reporting and its role in supporting the ISSB’s IFRS® Sustainability Disclosure Standards (IFRS S1 and IFRS S2). Read their six key takeaways.
The IFRS Foundation released a new guide to help companies identify and disclose key sustainability-related risks and opportunities that could affect their cash flows, access to finance, or cost of capital. The guide emphasises understanding the IFRS S1 concept of sustainability risks and opportunities, including their origins from a company’s dependencies and impacts. It also highlights the materiality process, showing how companies can leverage existing processes from financial statement preparation to apply ISSB standards effectively.
Europe
The European Union (EU) has also been active, introducing the Corporate Sustainability Due Diligence Directive (CSDDD) to enforce due diligence on human rights and environmental impacts.
Additionally, the EU's dual reporting requirements under the European Sustainability Reporting Standards (ESRS) and IFRS Sustainability Disclosure Standards are set to enhance the quality and comparability of sustainability disclosures.
The European Union’s Corporate Reporting Directive (CSRD), effective 5 January 2023, requires EU member states to integrate it into national law within 18 months. This directive expands on the Non-Financial Reporting Directive (NFRD), mandating broader and more detailed disclosures under the EU Sustainability Reporting Standards (ESRS). For some large European entities, climate disclosures are already mandatory from the year ending 31 December 2024.
The European Council introduced new regulations for ESG rating providers to enhance the reliability and comparability of these ratings, thereby increasing investor confidence in sustainable financial products.
United States
In the United States, the Securities and Exchange Commission (SEC) finalised its climate disclosure rules, mandating comprehensive climate-related disclosures in financial reports.
Collectively, these initiatives mark a significant step towards a more cohesive and effective global sustainability reporting landscape, encouraging businesses worldwide to adopt robust and transparent sustainability practices.
Australia’s reporting landscape
In Australia, climate matters dominate the reporting agenda, followed by governance and social issues. Corporate accountability remains the most common subject of disclosure.
In 2024, Australia saw significant advancements in sustainability reporting, marking a pivotal shift towards greater corporate transparency and accountability. The Australian Accounting Standards Board (AASB) has approved new sustainability reporting standards, aligning with the International Sustainability Standards Board (ISSB) guidelines. These standards, effective from 1 January 2025, mandate climate-related disclosures for large entities, with a phased implementation for smaller entities.
The Australian Securities and Investments Commission (ASIC) has issued guidance to help businesses prepare for these new requirements. The guidance emphasises the importance of robust governance and record-keeping processes. Similarly, federal and state governments have introduced similar requirements for the public sector, with a phased implementation schedule that aligns with the AASB’s S2, ensuring consistency across both private and public sectors.
Additionally, the proposed timeline for assurance over sustainability reports outlines a phased approach to auditing these disclosures, starting with limited assurance and progressing to reasonable assurance over several years.
This phased approach aims to give businesses and auditors time to develop the necessary capabilities. As mandatory climate reporting becomes a reality from January 2025, Australian businesses must adapt quickly to meet these new standards, ensuring they remain compliant and leverage the opportunity to enhance their sustainability practices.
Support and tools
The IFRS Foundation has created educational materials to help global entities apply the international sustainability disclosure standards.
ASIC has developed a comprehensive suite of resources, news, and regulatory guidance to support businesses take action and accountability in sustainability reporting.
If you’re interested in exploring the global sustainability reporting developments for entities in the EU and the US, check out our BDO Global Sustainability Resources tab.
We’ve also created a broad range of tools and resources to help meet these requirements and foster a deeper understanding and engagement with sustainability topics. If you would like to connect with a member of the national sustainability team who can support you on a range of sustainability topics, including reporting, governance, carbon accounting or assurance, contact us today.