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Sustainability Reporting is Evolving. Are You Ready for What’s Next?

Sustainability Reporting is Evolving. Are You Ready for What’s Next?

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Over the past few years, environmental, social and governance (ESG) sustainability disclosures have shifted from a nice-to-have to a business imperative. While sustainability reporting was once largely voluntary, the regulatory landscape is rapidly catching up with stakeholder expectations, and companies are under growing pressure to elevate the quality, consistency and reliability of their sustainability data.

In the early 2020s, most sustainability reporting was guided by voluntary frameworks like GRI, SASB and TCFD. By 2021, a majority of large public companies, 92% of the S&P 500 and 70% of the Russell 1000, were publishing standalone sustainability reports. But without standardized frameworks, companies were left to navigate a fragmented reporting environment, often leading to inconsistent metrics and limited comparability.

That’s changing fast.

A New Global Push Toward Sustainability Standardization

The launch of the International Sustainability Standards Board (ISSB) in late 2021 was a pivotal moment for global ESG reporting. In 2023, the ISSB released its first two standards, IFRS S1 (general sustainability disclosures) and IFRS S2 (climate-related disclosures), with the goal of aligning sustainability reporting more closely with financial reporting in terms of rigor, auditability and investor relevance.

Meanwhile, the EU’s Corporate Sustainability Reporting Directive (CSRD) began phasing in across large European companies in 2024.  At some point in the near future, U.S. companies with significant European operations or value chain connections will begin to feel the impact, even those that are not directly subject to EU regulations but are included in the scope of the reporting by those customers that are.

U.S. Sustainability Rules Are Becoming More Prescriptive

After several years of proposals and public comment periods, the U.S. Securities and Exchange Commission (SEC) finalized its long-awaited climate disclosure rule in 2024. The rule requires publicly traded companies to include detailed climate-related risks and greenhouse gas emissions in their annual filings, with phased implementation based on filer status. While some reporting thresholds were softened from the original proposal, the direction is clear: sustainability data is becoming a formal part of financial disclosures.

Additional SEC rules already in place touch on human capital disclosures, board diversity and cybersecurity governance, all expanding the scope of what companies need to track and report.

What This Means for Private and Mid-Market Companies

Even if your company isn’t publicly traded, the rising tide of sustainability regulation affects you. Pressure from investors, lenders, customers and supply chain partners is intensifying, and many large organizations are starting to push reporting requirements down to private and mid-market suppliers. In short: if you haven’t started thinking about your sustainability posture and the potential of being asked (or required) to report certain sustainability metrics, you may soon be forced to catch up quickly.

The numbers underscore this shift. According to the Governance & Accountability Institute’s 2024 Sustainability Reporting in Focus report:

  • 93% of Russell 1000 companies issued sustainability reports in 2023, up from 90% the year before.
  • Among mid-cap companies (market caps between $2B–$4B), 87% published sustainability reports, up from 82% in 2022.
  • Adoption of key frameworks is rising: 81% used SASB standards, and 60% aligned with TCFD, a massive leap from just 4% in 2019.

Disclosures are no longer just about optics; they’re becoming key risk indicators. Climate risk, talent strategy and supply chain resilience are all coming under the sustainability umbrella, and CFOs are increasingly expected to oversee these disclosures with the same accuracy and scrutiny as financials.

Where to Focus Now

To prepare for what’s ahead:

  • Map your current sustainability data: Identify what you already track, where gaps exist and what your stakeholders are asking for.
  • Align with emerging standards: Start with ISSB guidance; it’s becoming the global baseline.
  • Integrate sustainability with financial reporting: ESG reporting can’t be siloed. Finance leaders must treat ESG metrics with the same level of control and audit-readiness as financial data.
  • Invest in sustainability literacy: Cross-functional collaboration between finance, legal, operations and sustainability teams is essential to building a credible sustainability reporting program.

Looking Ahead

The bar for sustainability disclosures is rising, not just from regulators, but from stakeholders who want transparency, accountability and performance. Companies that embed sustainability into their strategy and reporting infrastructure now will be better positioned to meet investor demands, win business and avoid last-minute scrambles as standards evolve.

At Frazier & Deeter, we help companies turn sustainability initiatives from a regulatory challenge into a strategic advantage. Our enterprise-ready services are designed to ensure compliance with evolving regulations like CSRD and California’s SB 253, while strengthening your position with investors, insurers and other key stakeholders. Whether you’re looking to enhance sustainability reporting practices, secure sustainable financing or mitigate risks, our team is here to help. Contact us today to explore how we can support your organization’s sustainability journey.

Contributors

James Douglas, Partner

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