Navigating the ESG landscape: Comparison of the “Big Three” Disclosure Proposals

Heather Horn, Valerie Wieman, and Andreas Ohl are partners at PricewaterhouseCoopers LLP. This post is based on their PwC memorandum. Related research from the Program on Corporate Governance includes The Illusory Promise of Stakeholder Governance (discussed on the Forum here) and Will Corporations Deliver Value to All Stakeholders?, (discussed on the Forum here) both by Lucian A. Bebchuk and Roberto Tallarita; Restoration: The Role Stakeholder Governance Must Play in Recreating a Fair and Sustainable American Economy—A Reply to Professor Rock (discussed on the Forum here) by Leo E. Strine, Jr; and Stakeholder Capitalism in the Time of COVID (discussed on the Forum here) by Lucian A. Bebchuk, Kobi Kastiel, and Roberto Tallarita.

After years of increasingly vocal demand for enhanced transparency about ESG matters from investors and other stakeholders, regulators and standard setters in various jurisdictions issued definitive proposals to transform ESG reporting in 2022. So far this year, proposed ESG disclosures have been released in the European Union (EU) as part of the Corporate Sustainability Reporting Directive (CSRD), internationally by the International Sustainability Standards Board (ISSB), and in the US by the SEC. These “big three” proposals would each require expansive sustainability disclosures — although their proposed scopes and other details vary. All three proposals were subject to public comment periods that have now closed.

With a global network of reporting requirements that encompass a broad spectrum of value chain contributors, it is likely that most companies will find themselves impacted by one or more of the proposed disclosure regimes. Proactive companies are in the process of assessing the scope and applicability of the proposals so that the appropriate planning can begin now. An SEC registrant that has a subsidiary listed in the EU and a subsidiary in a jurisdiction that requires ISSB reporting, for example, may be subject to the requirements in all three proposals. With equivalency — that is, whether disclosures for one reporting framework can satisfy some or all of the requirements of another — not yet determined, companies captured in multiple reporting regimes have a vested interest in understanding which reporting applies and where it aligns and diverges. Understanding the similarities and differences will help companies develop the requisite reporting strategy, data gathering processes, and related controls, providing for a streamlined process and effective deployment of resources.

This post compares and contrasts key provisions among the three proposals. We offer our perspectives on the proposals, including some of the suggestions we have made to each regulator or standard setter to enhance operability. By understanding the requirements of the different proposals, preparers can develop the appropriate reporting strategy, one designed to capture the right data the first time.


Each of the proposals recognizes that enhanced sustainability disclosures are good for the capital markets. The transparency and accountability engendered by the new disclosures may — and in the case of the CSRD proposal are intended to — influence behavior, and so may be good for the planet, too.

EU regulations and disclosure proposal

The European Commission, the European Parliament, and the Council of the European Union have made strides to ensure that sustainability regulations in the EU will be a reality. A provisional agreement reached in June included the scope and timeline for adoption of the related reporting requirements.

The EU regulations are part of the Corporate Sustainability Reporting Directive and require entities to provide mandatory sustainability disclosures. The CSRD was driven, in part, by the European Green Deal, a December 2019 European Commission package of policy initiatives designed to achieve climate neutrality by 2050 and protect Europe’s natural habitat. Although the EU’s current Non-Financial Reporting Directive (NFRD) has imposed some requirements to disclose environmental and social impacts since 2017, the CSRD would result in more companies being included in scope and more detailed requirements.

The scope of the CSRD will include EU subsidiaries of non-EU parent companies, including US companies and other global multinational companies. For these companies, the CSRD may be applicable at the global consolidated level in addition to the subsidiary level. It would apply to all companies listed on EU-regulated markets and to “large” — as defined in the directive — unlisted companies or groups in the EU.

The CSRD is prompting a more comprehensive ESG disclosure regime as compared to that of the SEC and the ISSB. The directive resulted in the development of the European Sustainability Reporting Standards (ESRS), as proposed by the European Financial Reporting Advisory Group (EFRAG). Thirteen ESRS exposure drafts (EDs) were published in April: two cross-cutting general standards, five environmental standards, four social standards, and two governance standards. EFRAG will submit the ESRS to the European Commission later this year, with adoption expected in mid 2023, after which they will face scrutiny from the European Parliament and Council of the European Union before they go into effect.

Refer to our publication, What’s CSRD? You should already know, for more information about the CSRD and the proposed ESRS standards.

ISSB proposal

The ISSB sits alongside the International Accounting Standards Board (IASB), with both boards overseen by the IFRS Foundation. The formation of the ISSB was announced at COP26 — the United Nations global summit to address climate change — in November 2021. The IFRS Foundation trustees acknowledged the importance of collaborating with organizations that have already developed sustainability reporting standards and building upon that foundation. Their commitment to leveraging past efforts is demonstrated by the consolidation of the Climate Disclosure Standards Board and the Value Reporting Foundation (VRF) into the IFRS Foundation in 2022. The VRF was formed in 2021 by the merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council.

Similar to the IASB’s effectuation of standard setting through the issuance of International Financial Reporting Standards (IFRS), the ISSB will issue sustainability reporting standards with an objective of delivering a global baseline of sustainability disclosures that satisfy capital market needs. Individual jurisdictions will subsequently decide to require or permit application of ISSB standards as a basis for sustainability reporting, akin to the process for adopting IFRS for financial reporting.

Under the terms of a collaboration agreement, the ISSB and the Global Reporting Initiative (GRI) are working together to drive the consistency and compatibility of investor-focused baseline sustainability information, while also considering broader stakeholders. The ISSB represents the investor-focused pillar and the GRI is leading the charge on a broader stakeholders-focused pillar, with the collaboration emphasizing the interconnectedness of the two-pillar system and its purpose in the global baseline for corporate reporting.

The ISSB published two exposure drafts in March: one on climate-related disclosure requirements and one on general disclosure requirements addressing governance and other sustainability matters. The final standards are expected to be published in early 2023. More thematic standards will be developed in due course.

Refer to our In depth, What you need to know about the ISSB Exposure Drafts, and our podcast, Diving deeper into the ISSB’s ESG reporting proposal, for more information.

SEC proposal

In a 2010 interpretive release, the SEC outlined how existing SEC disclosure requirements apply to climate change matters. It addressed how the rules governing the Management’s Discussion and Analysis and Risk factors sections in a registrant’s Form 10-K, for example, could reasonably be expected to include references to material exposures or impacts of climate change. At the time, the SEC noted that “climate change has become a topic of intense public discussion in recent years.”

That intensity has increased exponentially in the years since then. The enforcement of existing rules was only going to move the disclosure needle so far. In March 2021, the SEC reiterated the importance of the 2010 interpretive guidance and in a public statement, a Commissioner issued a request for input on the need for climate-related disclosures. After evaluating the admittedly mixed responses to the request for input — with strong opinions in both support and opposition — the SEC issued a proposal in March 2022 that would significantly enhance climate-related disclosures in annual filings and registration statements.

The SEC’s proposal focuses specifically on how climate risks are identified, assessed, managed, and disclosed; the financial impact of severe weather and other natural events as well as transition activities; and greenhouse gas emissions (GHG). A final rule is expected in the fourth quarter of this year, as is a proposal for enhanced human capital disclosures.

Refer to our publication, The SEC wants me to disclose what?, for more information on the climate proposal.

General features of the proposals

One of the foundational points of alignment among the three proposals is the incorporation of elements based on the Task Force on Climate-related Financial Disclosures (TCFD) framework. TCFD is endorsed by over 2,600 organizations worldwide, making it one of the most broadly used sustainability reporting frameworks. [1] Leveraging this popular framework provides a point of continuity with voluntary reporting and unites the three proposals through key themes, including required disclosure of the broad impacts of sustainability-related risks as well as governance and oversight of the related risks and opportunities. Connectivity between sustainability information and financial information echoes throughout the proposals, with each asserting its importance for investor decision making.

Topics in scope Proposed standards span a broad list of environmental, social, and governance topics, including one dedicated to climate disclosures Proposed standards address climate and other sustainability risks

Additional standards are expected in the future

Proposed rule addresses climate-related risks

A rule addressing human capital is expected in the future

Industry standards Sector-specific standards are in development Industry-based climate metrics based on the SASB’s standards would be required Industry-specific disclosures are not required
Location of disclosures Disclosure would be included within a dedicated section of the management report

No financial statement footnote disclosure would be required

Disclosure would be included as part of general purpose financial reporting — such as in management commentary, but with flexibility on location

No financial statement footnote disclosure would currently be required

Disclosure would be included in a separate section of the annual report or registration statement

A financial statement footnote would include disclosure of the impact of severe weather and transition-related activities


One striking difference among the proposals is the breadth of topics in scope, although there may be further alignment if the SEC and ISSB issue further guidance as expected. EFRAG is also expected to propose further sector-specific standards.

Another key difference among the proposals is the SEC’s requirement to include specified disclosures in the notes to the financial statements, a proposal which sparked strong stakeholder feedback on both sides of the debate. We support standardized climate-related disclosures in the footnotes to the financial statements because we believe this information would aid investors in better understanding the impact of climate risks on the financial statements (although as discussed in the “Materiality” section, we do not agree with the SEC’s proposed 1% disclosure threshold).

The ISSB and EFRAG do not propose specific disclosure in the notes to the financial statements, although both proposals refer to the importance of interconnectedness between sustainability disclosures and general purpose financial reporting. The IASB and FASB have each released guidance emphasizing the current accounting standards that could reasonably be expected to elicit disclosures about the impact of climate events and risks. [2] In addition, the IASB is considering the need for additional climate risk disclosures as part of its Third Agenda Consultation.


As in traditional financial reporting, sustainability disclosures will be driven, in large part, by an assessment of what’s material. The approach to materiality, however, is one of the key differences among the proposals. The SEC and ISSB proposals consider the impact of sustainability on the company through an investor lens, requiring information about how it could impact financial performance. In contrast, the proposed ESRS standards widen the definition of materiality to also require a company to consider how it has impacted, or will impact, the environment.

Materiality Materiality would be assessed

based on “double materiality,” consisting of “financial materiality” (an outside in perspective) and “impact materiality” (an inside out perspective)

Materiality would be assessed based on factors that could reasonably be expected to influence the primary users’ assessments of a company’s enterprise value Materiality would be assessed based on the definition of materiality in existing Securities Laws / Supreme Court precedent

A 1% bright-line threshold would be applied for financial statement footnote quantitative disclosures



Time horizons for specific disclosures Time horizons are prescribed for several elements of the proposal

The prescribed time horizons may vary (e.g., general requirements refer to short term as one year, while short term for transition risks would be five years)

Time horizons for disclosure of risks and opportunities over the short, medium, and long term are not defined Time horizons for disclosure of risks and opportunities over the short, medium, and long term are not defined


Each of the proposals requires companies to consider risks that may occur over the short, medium, and long term, which requires an assessment of materiality over these time periods. Today, materiality is typically considered in the context of a company’s current financial condition and may not explicitly consider future periods, especially periods that extend as far into the future as many potential climate-related impacts. We believe additional guidance in this area — such as specifying that time horizons should be limited to those periods when the impact on future cash flows could have a material effect on investors, or in the case of double materiality, a material effect on stakeholders — would be helpful to ensure consistency and comparability.

We also believe that investor-focused materiality will assist in achieving comparability of reporting. While the SEC and ISSB have largely leveraged the definition of materiality used in today’s financial reporting, there may be some questions as to how traditional concepts of materiality would translate to climate and GHG emissions reporting. We also have concerns about the operationality of so-called double materiality. EFRAG’s proposed assessment of “impact materiality” raises questions in terms of practical implementation. In particular, it would appear that consistency could be impossible to achieve among companies reporting on the myriad of ways in which they may impact their surroundings. The proposed ESRS standards also specify that financial materiality should be interpreted differently for sustainability reporting compared to financial reporting, although the nature of those differences is unclear.

In our view — which is shared by numerous other commenters — the SEC’s current proposed financial statement footnote disclosure threshold of 1% would not provide the type of meaningful information that investors are demanding and it would be difficult for registrants to implement. Applying the traditional concepts of materiality would result in more cohesive disclosures and greater focus on the information that would be important to investors.

Targets, transition plans, and resilience

The proposals all include required disclosure of a company’s targets or goals, how it intends to meet its targets and goals, and related progress toward applicable milestones. A key difference among the proposals, however, is the CSRD requirement for companies to set emission target values as of prescribed dates and for transition plans aimed at “the limiting of global warming to 1.5°C,” with an intent to drive behavioral change. [3] The SEC and ISSB proposals do not prescribe specific targets or dates, instead requiring disclosure of any targets set by the company.

Targets and transition plans Commitment to and disclosure of GHG emission reduction targets would be required in five-year rolling periods, including target values for at least 2030 and, if available, 2050

A transition plan would also be required to align with the Paris Agreement (or updated international agreement on climate change)

Disclosure would be required of any climate-related targets set by the company

Such targets would need to be compared to the “latest international agreement on climate change” (currently the Paris Agreement)

Disclosure would be required of any climate-related targets or goals set by the company

Such targets or goals would include those set in response to regulatory requirements or climate-related treaty or law

Use of scenario analysis The use of scenario analysis would be required to assess resilience

Would need to be consistent with the Paris Agreement and limiting climate change to 1.5°C

The use of scenario analysis would be required to assess resilience

Disclosure of whether a scenario aligns with the “latest international agreement on climate change” would be required

An alternative means of assessing resilience would be permitted if unable to perform scenario analysis

Any means could be used to assess resilience

Additional disclosures would be required if scenario analysis is used

The proposal does not require consideration of specific scenarios


The disclosure of targets or goals is an important element of each proposal. These disclosures provide a degree of accountability, both with regard to behavioral changes in line with the Paris Agreement, and also to help alleviate greenwashing. The flexibility afforded by the ISSB and SEC proposals regarding the use of scenario analysis and the nature of selected scenarios allows management to choose the variables most impactful to its business, or alternatively, choose widely accepted scenarios, such as those detailed in the Paris Agreement. The fundamental ambition of the Paris Agreement is to limit global warming to well-below 2°C above pre-industrial levels by the end of this century, and to pursue efforts to limit global warming even further to 1.5°C.

Instead of choosing company-specific scenarios, some argue that adopting targets, models, and calculation methods that are universally applied will enhance comparability, consistency, and reliability of the reported disclosures. For example, the ESRS standards propose a definition of “net zero” consistent with the Science Based Targets initiative (SBTi). The SBTi also provides criteria and guidelines to companies in line with the latest climate science as a pathway towards meeting the goals of the Paris Agreement.

GHG emissions — general

All three proposals would require GHG emission disclosures and reference the Greenhouse Gas Protocol, although use of the GHG Protocol is not required by the SEC. One notable difference among the three proposals is with respect to the required organizational boundary (i.e., the scope of entities included in the GHG disclosures). The SEC and EFRAG proposals would require alignment with the financial statements, whereas the ISSB provides the flexibility allowed by the GHG Protocol.

GHG Protocol Consideration of the GHG Protocol and GRI 305 is required [4]

The “organizational environmental footprint method” proposed by the European Commission may also be considered

The use of the GHG Protocol would be required Use of the GHG Protocol would not be required, although the proposed requirements are based on its concepts
GHG emissions organizational boundaries Emissions would be reported following the organizational boundaries of the consolidated financial statements

Scope 1 and scope 2 emissions of associates and joint ventures accounted for under the equity method are not explicitly addressed

Emissions would be reported using either a control or equity share approach (consistent with optionality described in the GHG Protocol)

Scope 1 and scope 2 emissions of associates, joint ventures, unconsolidated subsidiaries, and affiliates would be separately disclosed

Emissions would be reported following the organizational boundaries of the consolidated financial statements

Scope 1 and scope 2 emissions for equity method investments would be included in a company’s scope 1 and scope 2 emissions, respectively


The GHG Protocol is currently the most widely used framework for GHG emissions measurement. In addition, certain industries (e.g., financial services, aviation) are developing standards using the GHG Protocol as a basis.

We support the use of a set of globally accepted standards for the measurement of greenhouse gases to provide enhanced comparability and usefulness of company-specific data. We recommend that ESG standard setters and regulators work together to ensure that key elements that support high quality standards are more formally incorporated into the maintenance and ongoing development of the GHG Protocol, such as establishing formal due process, amending for the impact of current accounting standards, and implementing a continuous update process. More formal processes would also help to ensure that its principles keep pace with developments in greenhouse gas measurement.

To this end, in March, the World Resource Institute announced its intention to assess the need for incremental and expanded guidance, a key focus of which would be alignment with accounting rules.[5] For example, the GHG Protocol predates US GAAP and IFRS changes to lease and consolidation accounting. The process will commence with research on current practices, followed by a global survey and stakeholder consultations to inform the need for additional guidance.

Although all three proposals leverage the GHG Protocol, the SEC and EFRAG proposals would mandate organizational boundaries aligned with the financial statements. We support this alignment because investors understand the concept of consolidated financial statements, and they rely on the knowledge that all information reported in an annual report is reported on the same basis, for the same group of entities.

GHG emissions — scope 1 and scope 2 disclosures

All three proposals include requirements to disclose scope 1 and scope 2 GHG emissions in carbon dioxide equivalent (CO2e) tons and to present one or more intensity metrics (a ratio of emissions to specific financial statement measures), excluding the impact of purchased or generated offsets. All three proposals also scope in the same seven gases — which are consistent with those included in most major reduction schemes — although only the SEC proposal would require disclosure of scope 1 and scope 2 emissions by each gas on a disaggregated basis.

Scope 1 and

scope 2 GHG emissions

Proposed disclosure of gross scope 1 and scope 2 emissions for the company’s reporting boundary

Scope 1 emissions under regulated emission trading schemes would be separately disclosed

Scope 2 emissions would be separately disclosed using both the location-based and market-based methods

No requirement to disaggregate emissions by type of GHG

Proposed disclosure of gross scope 1 and scope 2 GHG emissions for the consolidated group and separately for its associates and joint ventures

Scope 2 emissions would be separately disclosed using both the location-based and market-based methods

No requirement to disaggregate emissions by type of GHG

roposed disclosure of gross scope 1 and scope 2 GHG emissions for the consolidated group, including equity method investments

Scope 2 emissions would be disclosed using either the location-based or market-based method (or a combination)

Would require emissions to be disaggregated by type of GHG

GHG emissions intensity Disclosure of total GHG emissions per unit of net turnover (i.e., revenue) would be required Disclosure of scope 1 and scope 2 GHG emissions per unit of physical or economic output would be required Disclosure of total scope 1 and scope 2 GHG emissions per unit of total revenue and per unit of production (or an alternative, if not available) would be required


GHG emissions are among the most common disclosures provided by companies that issue voluntary sustainability reporting. We support the SEC’s proposed requirement to require disaggregated information about the type of greenhouse gases emitted by a registrant — and encourage these disclosures in the EFRAG and ISSB proposal — because this would be meaningful information for investors given the differing levels of global warming potential among the different gases. Disaggregated data may also aid investors in understanding a company’s risk profile because different gases may be subject to varying regulations. In addition, as the science and methodology for monitoring and measuring greenhouse gases continue to evolve, we support flexibility to allow for the expansion of reported gases to keep pace with broader scientific and societal developments.

We acknowledge that a GHG emissions intensity measure is a widely used metric. In the context of a net zero or other substantial greenhouse gas reduction commitment, however, the absolute quantity of GHG emissions released into the atmosphere — and progress toward the goal — is more meaningful than a GHG intensity measure. Further, an intensity metric may mask emissions growth: for example, if a company is increasing revenue by raising prices, its revenue-based intensity metric may show a decline even if emissions have increased for the same number of units sold. Therefore, we believe that intensity metrics should not be mandated in all cases.

GHG emissions — scope 3 disclosures

Scope 3 emissions include a company’s upstream and downstream activities, which the GHG Protocol classifies into 15 categories based on the activities giving rise to the emissions. All three proposals include specific requirements to disclose scope 3 GHG emissions, although smaller reporting companies would be exempt from the SEC’s proposed scope 3 requirements.

Scope 3 GHG


Scope 3 emissions would be disclosed in total and disaggregated by GHG emissions attributed to (i) upstream purchasing, (ii) downstream sold products, (iii) goods transportation, (iv) travel, and (v) financial investments

Emissions related to significant scope 3 categories would be separately disclosed

Scope 3 emissions would be disclosed in total, including component categories Scope 3 emissions would be disclosed in total, including component categories if (1) they are material or (2) the company has set an emissions reduction target or goal that includes scope 3 emissions

Emissions related to significant scope 3 categories would also be disclosed (if scope 3 disclosures are required)



emissions intensity

Disclosure of total GHG emissions per unit of net turnover (i.e., revenue) would be required Disclosure of scope 3 GHG emissions per unit of physical or economic output would be required Disclosure of scope 3 GHG emissions, per unit of total revenue and per unit of production (or an alternative if not available) would be required if scope 3 disclosures are required


Investors are interested in scope 3 emissions data, particularly in circumstances when a company’s upstream or downstream activities are emissions intensive. Reporting of scope 3 emissions, however, may be challenging for many companies, given their reliance on upstream and downstream entities for the underlying data. Further, the disparate sources of information, as well as level of estimation required, may create challenges in developing the scope 3 amounts in a reliable and timely manner.

We believe the needs of investors should be balanced against the potential difficulties for preparers in producing reliable, timely information. For example, when there is a related announced target or goal that includes scope 3 emissions, disclosure may be relevant to investors because of the accountability it creates. In the absence of a target or goal related to scope 3 emissions, we believe allowing alternative approaches that may balance investor needs against preparer challenges would be helpful.


Confidence in the information disclosed by registrants is a critical component of efficient capital markets. Providing investors with comparable confidence in both sustainability and financial information is a driver of the assurance requirements in the EFRAG and SEC proposals, although there are key differences in the scope of the proposed standards. Whether similar assurance will be required for those applying the ISSB’s proposed standards will be decided by the jurisdictions adopting the standards.

Both the EFRAG and SEC proposals include a phased assurance approach, beginning with limited assurance and increasing to reasonable assurance at a later date. Limited assurance is a negative form of assurance stating that no matter has been identified by the auditor to conclude that the subject matter is materially misstated (a review). Reasonable assurance will require more extensive procedures, including consideration of a company’s internal controls (an audit).

Assurance, excluding GHG


Sustainability information would initially be subject to limited assurance, transitioning to reasonable assurance at an unspecified date Sustainability information would be subject to assurance based on the rules of the jurisdictions adopting the standards Footnote disclosure would be subject to assurance through the financial statement audit and internal control over financial reporting attestation requirements

Outside of the footnotes, only scope 1 and scope 2 GHG emissions would be subject to required assurance


Assurance on GHG emissions GHG emissions would be subject to the same assurance as other sustainability information GHG emissions would be subject to assurance based on the rules of the jurisdictions adopting the standards Scope 1 and scope 2 emissions would be subject to limited assurance in year two and three for large accelerated and accelerated filers, transitioning to reasonable assurance beginning in year four


In our global investor survey completed in fall 2021, 79% of respondents report having more trust in ESG information if it has been assured. Respondents noted that companies’ disclosures of ESG information should be assured at the same level as a financial statement audit (i.e., reasonable assurance), with 73% agreeing with that level of assurance for ESG metrics and 70% agreeing for ESG narrative disclosures. [6]

Further, we believe that certain aspects of the attestation standards may require clarification to enable assurance on the entirety of the sustainability information as envisioned by the EFRAG proposal. Reporting on, and assurance of, compatibility with global or territory goals may be particularly complex as there are multiple future factors to be considered which are not under the control of a reporting entity. Setting specific scenarios, models, and/or calculation methods to use (e.g., SBTi for climate change) would enhance comparability, consistency, and reliability of the reporting and increase the likelihood of reasonable assurance being achievable.

Effective dates and transition

If adopted in their current form, the final rules and standards would introduce a new era of reporting by requiring sustainability-related information to be issued together with annual financial statement reporting. The final standards or rules are expected to be issued in the near term — at the end of this year or early next year — with effective dates potentially as early as 2023 and 2024 for some SEC filers and CSRD reporting companies, respectively.

Timing of application Timing is established by the CSRD and would be phased by type of entity

Disclosure requirements would be applicable in 2024 (filing in 2025) for a “large undertaking,” as defined, that has securities listed on an EU-regulated market and more than 500 employees

Timing will depend on how standards are implemented in each jurisdiction Timing would be phased by type of filer

Disclosure requirements could be applicable as early as 2023 (filing in 2024) for large accelerated filers

Scope 3 disclosures would be required a year after other disclosures

Comparative information  Comparative information would not be required in the first year of adoption, but required thereafter Comparative information would not be required in the first year of adoption, but required thereafter Comparative information would be required for all periods presented

Information that is not reasonably available could be omitted under existing SEC guidance [7]


The expected timing of adoption of the EFRAG and SEC proposals is aggressive, and it would provide minimal time for companies to prepare for sweeping changes in the scope of reporting. Given the demand for this information from investors as well as the EU’s intention to make meaningful progress on the Green Deal in the near term, we understand the appeal of rapid implementation. We also, however, understand that companies need time before initial adoption to develop the new systems, processes, and controls necessary to produce information of the scope required by the proposed disclosures at a level of quality commensurate with that needed in regulatory filings. Many commenters, including PwC, advocated for more lead time in their comment letters.

While EFRAG and the ISSB acknowledged the challenges in preparing comparative information in the initial year of adoption, and provided for prospective application, as proposed, SEC registrants would be required to provide comparative information for all years presented (unless they qualify for the accommodations provided in the SEC rules). In our response to the SEC, we recommend omitting comparatives in the first year, consistent with the approach proposed by the EFRAG and ISSB.

Final thoughts

The EFRAG, ISSB, and SEC are in the midst of evaluating the breadth of responses to their proposals. The input received may result in changes to the final rules and standards; respondents to all three sets of proposals frequently highlighted the practical need for international collaboration and consistency, including equivalency determinations when appropriate. Whether the final standards will reflect further alignment — despite their differing objectives — will become apparent once the final rule and standards are issued over the upcoming months.

Stakeholders should continue to monitor developments, including proposals for sustainability-related disclosures beyond climate expected from the ISSB and SEC. Effective compliance will require participation from a broad spectrum of resources beyond traditional reporting specialists, as well as willingness to learn a new area of expertise. Further, preparing for the new reporting requirements may span a year or more, depending on current readiness and the number of reporting regimes that will be applicable. And, with the proposed effective dates looming for some companies, now is the time to focus on understanding the scope and potential impact of the rules.


1Task Force on Climate-related Financial Disclosures, 2021 Status Report(go back)

2IFRS Foundation, Effects of climate-related matters on financial statements; FASB Staff Educational Paper: Intersection of Environmental, Social, and Governance Matters with Financial Accounting Standards(go back)

3Proposal for a Directive of the European Parliament and of the Council, amending Directive 2013/34/EU, Directive 2004/109/EC, Directive 2006/43/EC and Regulation (EU) No 537/2014, as regards corporate sustainability reporting, pages 49 and 50(go back)

4Global Reporting Initiative Reporting Standard No. 305, an emissions-specific standard that forms part of the GRI’s interrelated standards on reporting impacts on society, the environment, and the economy(go back)

5GHG Protocol to assess the need for additional guidance building on existing corporate standards(go back)

6PwC’s 2021 Global investor survey: The economic realities of ESG(go back)

7Securities and Exchange Commission, Proposed rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors, page 113,“A registrant, however, would not need to provide a corresponding historical metric for a fiscal year preceding its current reporting fiscal year if it is eligible to take advantage of the accommodation in 17 CFR 230.409 (‘Rule 409’) or 17 CFR 240.12b-21 (‘Rule 12b-21’)”(go back)

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