A report assessing the regulatory landscape for sustainability reporting has found that environmental, social, and governance (ESG) disclosure has never been more pervasive globally — and is now firmly in the mainstream of disclosure on organizational performance. As the market implications of certain ESG topics become more evident, interest in the quality of disclosures is also sharpening.

The fifth edition of Carrots & Sticks (C&S) provides an analysis of the latest trends in reporting provisions, covering 614 reporting requirements and resources (a substantial increase on the 383 assessed in the previous report in 2016) across over 80 countries, including the world’s 60 largest economies. A new addition in 2020 is insights and context gathered through interviews with policymakers, who give their views on good practices in phasing in ESG disclosure requirements.

Key C&S 2020 findings include:

• As a global list of key material topics for our planet, the Sustainable Development Goals (SDGs) have become a global reference for sustainability reporting policy. While explicit reference to the SDGs in disclosure requirements remain limited, they are often implied through the themes addressed. Links to responsible business, employment, and accountable institutions (SDGs 12, 16 and 8) are widespread. Reference to public health and education (SDGs 3 and 4) is low, something anticipated to change following the COVID-19 pandemic.

• Europe continues to drive the ESG disclosure agenda, accounting for 245 reporting instruments, while the Asian markets (174) are increasingly active. North America has a low number of reporting provisions (47), a fact that in part reflects the lower number of national jurisdictions in North America. At country level, higher numbers of reporting provisions, including reporting requirements and resources, was found in countries such as the UK, Spain, USA, Canada, Brazil, Colombia, and China.

• Most reporting provisions are issued by governmental bodies, rising by 74% since 2016 to almost 400, while engagement by financial market regulators including centrals banks has also grown significantly. Provisions targeting the private sector, and in particular large and listed companies, account for around 90% of the C&S 2020 listing. Provisions that apply to SMEs and the public sector are largely unchanged since the previous C&S stock take of 2016.

• Alignment in the sustainability reporting field is still falling short, with greater collaboration needed between standard setters, reporters, information users, regulators, and policymakers to streamline requirements and improve the quality of disclosure. Related to the reliability of data disclosed, the overview by C&S 2020 illustrates that agreement on the preferred disclosure venue or format, for example a certain type of report or other, is still lacking.

Peter Paul van de Wijs, GRI Chief External Affairs Officer says:

“As the pandemic focuses the attention of policymakers on how to achieve resilient and climate-friendly economies, the importance of measuring the impacts of companies and encouraging sustainable practices increases. It is positive therefore that both the range and depth of ESG reporting provisions around the world has grown substantially.

Yet questions remain on how to address gaps, particularly in the context of the SDGs, and improve coordination to support more consistent disclosure. To address this twin challenge — spreading the practice of disclosure and driving up the quality — needs strengthened reporting requirements, for which GRI will play an enabling role.”

Cornis van der Lugt, Senior Lecturer Extraordinaire, USB, says:

“Stock exchanges and central banks are becoming more active in pursuing non-financial reporting requirements. This shows how the economic and market implications of diverse ESG topics are becoming more evident. The obvious example is climate-related disclosures. After 2020, the systemic implications of public health and infrastructure weaknesses are likely to receive more attention as well.

The regulatory landscape both reflects and drives perceptions of what are key material themes. Related is the question of target audience. The landscape continues to display confusion about where best to disclose information and who is supposed to be using different types of information.”

The Global Reporting Initiative (GRI) is the independent international organization that helps businesses, governments and other organizations understand and communicate their impacts. The GRI media contact is Senior Communications Manager Sue-Lane Wood, swood@globalreporting.org.

Carrots & Sticks is the flagship publication and online resource for policymakers on non-financial and sustainability reporting instruments, regulation, guidance, and frameworks. C&S was first published in 2006. Its fifth edition (2020) additionally includes in-depth interviews with policy and other decision-makers from 13 countries and regions, including national governments, regulatory bodies, and stock exchanges.

The University of Stellenbosch Business School (USB) is a triple-accredited business school based in Cape Town, South Africa. Its vision is to be recognized as a source of value for a better world.