6 trends in impact tracking and reporting you should know about

Nina van Rijn

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5 minutes

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Industry news

At Salacia Solutions we follow market trends and legislative developments closely. This helps our clients to stay up to date on market and legal requirements, and enables us to continuously update our product accordingly. We listed six trends in impact tracking and reporting that companies should know about.

November 29, 2021
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Oleg Laptev

At Salacia Solutions we follow market trends and legislative developments closely. This helps our clients to stay up to date on market and legal requirements, and enables us to continuously update our product accordingly. We listed six trends in impact tracking and reporting that companies should know about.

1. Consolidation of standards and initiatives

We are seeing an increasing number of mergers of initiatives. Two main initiatives – International Integrated Reporting Framework and SASB – merged into the Value Reporting Foundation (VRF). And during COP26 in Glasgow the VRF and the CDSB (Climate Disclosure Standards Board) announced to consolidate into the International Sustainability Standards Board (ISSB) by June 2022.

Also the EU’s Corporate Sustainability Reporting Directive (CSRD) intends to build on existing standards, among others GRI and SASB, rather than inventing new ones. Furthermore the ISSB standards will be developed to facilitate compatibility with legal requirements, such as the European Union’s planned CSRD.

As a result of these consolidations, and of the fact that reporting standards are becoming increasingly embedded in legislation, we expect the ‘market’ of reporting standards to become less cluttered in the future.

2. Reporting requirements increasingly laid down in legislation and regulations

In the EU, the Non-Financial Reporting Directive (NFRD) applies to large public-interest companies with more than 500 employees. This covers almost 12,000 large companies including listed companies, banks, insurance companies and other public-interest entities.

In 2023, the new Corporate Sustainability Reporting Directive (CSRD) will be implemented, replacing the NFRD. The CSRD will apply to companies with two or more of the following characteristics:

  • At least 250 employees
  • At least €20 million in total assets
  • At least €40 million of annual turnover

The CSRD introduces more detailed reporting requirements and requires reporting according to mandatory EU sustainability reporting standards, which are currently being developed. Also, official independent external assurance becomes mandatory.

3. Beyond greenhouse gas emissions

Climate change is widely seen as our most pressing environmental challenge. But in the background, other hazards are simmering. We strongly believe in – and we slowly but steadily see this in the market and in the media – measuring more than just greenhouse gas emissions.

When we look at Rockström and Steffen’s the nine planetary boundaries, we are doing quite okay when it comes to ozone depletion, freshwater use and ocean acidification. How we’re doing on novel entities (pollution by compounds created by humans) and on atmospheric aerosol loading, is still unclear. In terms of land-system change and climate change, we are in the zone of uncertainty and increasing risk. For biodiversity loss and nitrogen and phosphorus pollution, we are well beyond our planetary boundaries.

This means that also information on these indicators is important. As well as on energy, water, resource use and waste generation – if we are to move towards a more circular economy. Therefore, Salacia not only focusses on greenhouse gas emissions, but goes well beyond enabling companies to see the full environmental picture.

4. Stronger synergy between financial and sustainability indicators

Sustainability reporting requirements for financial institutions are becoming stricter. But also for non-financial institution, the synergy between financial and sustainability indicators has been gaining momentum. Evidence of this, can be found in:

  • The name change from NFRD to CSRD in EU-legislation was done to highlight that sustainability topics are also financial topics, rather than opposed to them.
  • Double materiality – another trend we see in the market, as well as in the new CSRD – makes companies both assess their impact on the environment, as well as the impact of the changing environment on their company.
  • The popularity of initiatives and standards that integrate sustainability and financial reporting, such as welcoming the ISSB to the IFRS family.

5. From qualitative to quantitative

We have read hundreds of different corporate sustainability reports over the years. Whereas up until recent years, these have mainly had a qualitative character with a lot of (marketing) text, we are seeing that more and more companies start to include quantitative KPIs and analyses in their annual reports.

The reason for a shift towards more quantitative reporting is manyfold:

  • Organizations are stepping up their data game. Naturally, if more data is available, quantitative analyses becomes within reach;
  • Investors, consumers and regulators demand real and comprehensive evidence. In the past, companies could get away with nice looking projects and promises. However, today organizations must prove how they will meet their company-wide targets and how they are progressing towards their targets;
  • In order to keep our planet below 1.5 °C temperature rise, we need numbers. You cannot manage what you cannot measure, so organizations are increasingly aware of the fact that they need to track their progress if they want to contribute to a cooler earth.
  • Certain certification schemes and other initiatives – such as the fast growing Science Based Targets initiative – demand quantitative evidence of reduction pathways.

6. Beyond direct impact

Companies that have been tracking and reporting on their greenhouse gas emissions, have largely focussed on their scope 1 and 2 emissions (as defined by the GHG-protocol). These are direct emissions from facilities and vehicles controlled or owned by the company and emissions from their energy use.

However, the largest impact (generally about 70-80% of the company’s emissions) occurs in scope 3. This is the impact of all upstream and downstream activities, such as the purchase of goods, commute and business travel, transportation and end-of-life treatment.

Two weeks ago, Shell received quite some negative publicity after they announced they would be reducing their impact by 50% by 2030. Sounds ambitious, but critics were soon to react that the target only involves scope 1 and 2, whereas by far most of Shell’s emissions are in scope 3, when we use Shell’s fuel in our cars. We are collectively waking up to the fact that focussing on scope 1 and 2 is simply not enough. That why the Science Based Targets initiative includes targets on scope 1, 2 and 3 in 2030 and 2050 to be in line with the Paris Agreement.

Salacia Solutions

Salacia Solutions helps companies find their way in an ever changing landscape of standards and initiatives, stay on top of market and regulatory demands, measure their environmental impact for all critical indicators, create synergy with financial indicators by using the same source data, move their reporting from qualitative to quantitative and measure their impact in all three scopes.

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