Navigating Voluntary Reporting
Introduction
Sustainability reporting has surged in importance over the last decade. As pressure mounts for companies to adopt responsible practices and reduce environmental impact, reporting has become a key tool for transparency and accountability.
There are two main types of sustainability reporting to consider in order to ensure regulatory compliance, meet market demands, and future-proof your business: Mandatory Reporting and Voluntary Reporting.
Mandatory Reporting vs. Voluntary Reporting
Mandatory reporting is governed by legal regulations that require companies, depending on their size and industry, to disclose environmental, social, and governance (ESG) data, such as carbon emissions and climate risks.
In the EU, regulations like the Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CS3D), and the Eco-design for Sustainable Products Regulation (ESPR) are significantly transforming how companies conduct business. Meanwhile, in the U.S., progress has been slower, with regulatory efforts like the SEC’s Climate Rule still pending and only a few states passing climate-related legislation. While these reporting requirements are gaining traction, they remain limited in scope.
Voluntary reporting, on the other hand, involves similar ESG disclosures though it is not legally mandated. This gives companies flexibility in how they report and what they choose to disclose, making it a powerful tool for early adopters looking to stay ahead of future regulatory changes, while benchmarking against peers will also inform how a company may report.
Benefits of Voluntary Reporting
Even without mandatory obligations, voluntary reporting offers several strategic advantages for companies:
Risk Management
Voluntary reporting allows companies to identify potential vulnerabilities within their operations, helping to mitigate risks before they escalate into more significant issues.
Stakeholder Engagement
As consumers, investors, and other stakeholders increasingly demand transparency and accountability, voluntary reporting helps meet these expectations. It also attracts capital from investors who prioritize sustainability in their decision-making.
Competitive Advantage
In today’s sustainability-driven marketplace, voluntary reporting can differentiate your company from competitors, positioning it as a leader in responsibility and strengthening its overall sustainability strategy.
Regulatory Preparation
As ESG regulations expand, voluntary reporting helps companies set up the necessary systems, teams, and processes in advance. This proactive approach ensures a smoother transition when compliance becomes mandatory.
Voluntary Reporting Frameworks
While voluntary reporting allows companies flexibility in what they disclose, following a recognized framework lends credibility to disclosure and ensures alignment with best practices in reporting. Below are two frameworks to consider:
Science-Based Targets Initiative (SBTi)
Carbon Disclosure Project (CDP)
Science-Based Targets Initiative (SBTi)
The Science-Based Targets Initiative (SBTi) supports companies in setting science-based targets to reduce greenhouse gas emissions in line with the Paris Agreement, aiming to limit global warming to 1.5°C. As one of the most widely adopted frameworks, SBTs are increasingly integrated into mandatory reporting standards as regulations evolve.
Who can submit SBTs to the SBTi
Companies of all sizes, including small and medium-sized enterprises (SMEs), are eligible to submit science-based targets for SBTi validation.
How can my company submit SBTs
Commit: Sign and submit the SBTi Commitment Letter to signal your company's dedication to setting science-based targets.
Develop Targets: Develop targets that align with SBTi criteria and the latest climate science, ensuring that your goals reflect the urgency of emissions reduction.
Submit for Validation: Companies have up to 24 months after signing the commitment letter to submit their targets for validation. This process involves providing supporting data, completing the SBTi Corporate Target Submission Form, and booking a validation start date.
The SBTi typically provides validation decisions within 30 days for near-term targets and 60 days for financial institutions or net-zero targets.
Key dates to know
While targets can be submitted at any time throughout the year, SBTi reviews submissions on a first-come, first-served basis. Planning ahead is essential to align target validation with your company’s broader sustainability reporting deadlines.
In 2024, SBTi will pause target submissions for maintenance from October 1 to October 29. Companies are encouraged to submit their targets before October 1 to secure a validation slot.
Carbon Disclosure Project (CDP)
The Carbon Disclosure Project (CDP) is the leading global platform for companies, cities, states, and regions to disclose their environmental impacts. CDP covers four key areas: climate change, water security, forests, and plastics. Each year, participating companies complete an updated questionnaire that reflects emerging climate trends and global events.
This disclosure is valuable for investors, customers, and the public, providing the most up-to-date environmental data on a company’s performance.
Who can fill out a CDP questionnaire
Companies of all sizes, along with governments and cities, are invited to disclose their environmental impact through CDP.
How can my company disclose to the CDP
Each year, CDP distributes a tailored questionnaire for participating companies. To start, companies must register with CDP and prepare by gathering relevant environmental data. Once the questionnaire is completed and submitted, CDP reviews the responses and provides a score that reflects the company’s performance.
Key dates to know
Deadlines and questions change annually. For 2024, CDP opened its registration and questionnaire in April. The reporting window runs from June until October 2 for scored submissions, and October 16 for non-scored submissions.
Our Recommendation
Incorporate voluntary reporting into your strategy to meet current customer and investor demands, create competitive advantage, future-proof your business and prepare for mandatory disclosure.
Where Bespoke ESG Can Support
At Bespoke ESG, we provide tailored support to help your business navigate the complexities of voluntary ESG reporting. Our services include:
Framework Selection: Assisting you in choosing the most relevant reporting framework(s) that align with your business goals and industry.
Data Collection: Helping you gather the necessary data to ensure accurate and comprehensive disclosures.
Disclosure Submission: Guiding you through the entire disclosure process to ensure clarity, accuracy, and alignment with best practices and managing submissions
Regulation Strategy: Preparing your company not only to meet current regulatory requirements but to exceed them and get better scores.
For a detailed overview of current EU and U.S. regulations, view our Sustainability Regulation Timeline.
Disclaimer: The information provided in this document is for general informational purposes only and does not constitute legal advice. Regulatory advice is provided solely within the scope of contracts between Bespoke ESG and its clients.