Unlock eSignature Legitimacy for Consulting Agreements in the European Union

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hello everyone thanks so much for being here with us today to chat about the future of climate related disclosure regulation in the EU with some advice for us-based companies trying to navigate their obligations to their EU operations as well my name is Constance dupe I'm the director of sustainability at sustained light and I am joined today by Joanne O'Donnell who is the head of the global Regulatory Compliance team at compliance and risks and Austin Kennedy who is the manager of sustainability reporting and ESG performance of Philip Morris International welcome Joanne and Austin we're so happy to have you with us thank you delighted just a few words on housekeeping before we get started please feel free to post questions via the Q a feature at any time we'll try to answer as many as possible either in the chat or live at the end and if we can't get to your questions we will follow up after the event and also we will send a link to the recording of this presentation in the coming days we have a lot of ground to cover today including an overview of csrd followed by what's most important to know for reporters the esrs including climate transition plans and then we'll wrap it up with a spotlight on International regulations and some insight on what lies ahead and with that I'll hand it off to our expert Joanne to get us started thank you thank you Constance um so my aim today is basically to give you an overview of the main climate disclosure regs currently enforced in the EU with the with a specific focus on the um corporate sustainability reporting directive as as constant mentioned um there's lots of information out there on the csrd which can be really really overwhelming so my aim really is to simplify as much as possible and to help you understand where the CEO swordy fits in um with some of the other EU level disclosure requirements relating to climate and I'm also going to do a bit of a deep dive into some of the EU member State regs in this space as well I'll also touch upon some of the climate disclosures outside of the EU with the specific focus on the US and the UK and then we can kind of look ahead and see what's coming down the track for for 2023 so I wanted to kind of kick off with um with a look at this regulatory growth chart on ESG reporting so this has taken from c2p which is our database at compliance and risks and it covers ESG reporting regulations both proposed and in force uh essentially for the past um seven years since 2016. so the reason why I chose to start with this visual is that it gives you a really really striking um representation of the the rate of regulatory activity in this field particularly in the past two to three years as you can see there has been an incredible proliferation of of climate and ESG reporting regs um particularly since 2022 um and the EU has really been leading the way um in this area so I think it's interesting to explore the reasons why there has been such a sudden increase in climate disclosure Rags particularly in the past two to three years um and you have a lot of sustainability concerns for product manufacturers um that have been increasing at an alarming rate and these are largely driven by you know tightening regulations pressure from investors pressure for consumers and this is really driving companies to try to reduce the burden of their activities and their products on the planet so they're really looking at at how their products are designed engineered and they're looking at ways to to meet their performance and quality requirements while using fewer fewer resources so regulations are really responding to these concerns um and the knock-on consequences is there has been a huge increase in regulation for product manufacturers to contend with so this increased regulatory pressure um is also uh you know it's driven by and it's linked to a shift in consumer behavior and investment Behavior so this means that the companies are really um under immense pressure to incorporate ESG and climate disclosures into their into their strategies so I suppose now that we're getting into the meat of of of today's uh presentation the the EU sustainability reporting framework is really kind of comprised of three main pillars so I'll leave the corporate sustainability reporting directive until the last because that's you know what the focus of this presentation but I wanted to give you a kind of an overview of how the other two regulations also slot in with the sustainability reporting directive as well so you have the sustainable Finance disclosure regulation and then you have the taxonomy regulation so the sustainability Finance disclosure regulation that contains sustainability assessment and disclosure obligations applicable to financial products and financial entities and it essentially sets out the information that investors must collect from their investee companies so again the aim of the sftr is to avoid greenwashing by Financial products so if you are us or non-eu firm you would be impacted by the sfdr if you have EU subsidiaries or you offer products or financial services in the EU then you also have the the add the EU taxonomy which sits in between the the sfdr and the CSM already and that establishes a a classification system um for um for both regime so basically it provides companies and investors with definitions for which economic activities can be considered environmentally sustainable so that is also designed to protect investors against Green washing um the disclosures under the EU taxonomy are mandatory for large companies only but smaller companies can choose to disclose the taxonomy alignment of their products also so as you can see the EU taxonomy sits nicely in between the sftr and the um the Cs or D so I guess to to to chat about the the csrd in particular which is the focus of today's presentation um we need to kind of go back a few years to the non-financial reporting directive um no discussion of the csrd is really complete without first looking at the NF already because the csrd has effectively expanded on and revised the um the non-financial reporting directive so that directive has been a for since 2014 and it applies to public interest entities with more than 500 employees and those entities have essentially been required to report on certain non-financial matters including environmental matters social matters treatment of employees respect for human rights anti-corruption and bribery and diversity and Company boards um the problem with the nfod is and was that it had um it had several deficiencies the main one being that companies were essentially given free reign to choose whatever reporting framework they they wanted to use so there was a real alphabet soup of of differing standards they could choose from the gri the sasb the ungc or the tcfd so this lack of standardization really resulted in stakeholders not having a reliable or trustworthy overview of the company a certain information was not being reported um consistently um stakeholders are really struggling to compare companies due to the inconsistent reporting requirements there was a real lack of credibility and there was an increase in reporting costs for companies because companies were essentially reporting against conflicting and often multiple um reporting standards so because of this um alphabet soup of of uh of reporting um formats the EU launched a consultation in February 2020 in order to revise and revamp the nf4d and the results of this essentially were the the csrd which entered into force in January but it is worth noting that the the nfod will remain in force until the companies have to apply the rules of the csrd so um the csrd entered into fourth fifth of January 2023 and as I mentioned earlier it is the third pillar of the sustainability framework here in the EU it ensures that investors have access to the information they need to assess investment risks arising from climate change and other sustainability issues and it's all about transparency it creates a real culture of transparency about the impacts of companies on people and the environment and similarly the impacts of people on the on the environment on on the company also so I guess we'll kick on in terms of who is impacted so from the outset it's important to note that the csrd is much broader in scope so its predecessor the nfod covered about there was about 11 700 companies that fell into scope whereas the csrd is much broader and that brought about 50 000 companies in scope so it applies to large public interest entities um with more than 500 employees that were already subject to the NF 4D it also applies to large companies that mean it's two out of the following three um thresholds so more than 250 employees they have a balance sheet in excess of 20 million euros and or a net turnover in excess of 40 million euros it also applies to EU listed smes um except micro undertakings so micro undertakings are defined as companies that meet two out of the following three they have less than 10 employees they have a turnover at less than 0.7 million and they have total assets of less than 0.35 million and the final group of companies that fall in scope are non-eu companies with a net turnover in excess of 150 million and that have a subsidiary in the EU that follow the criteria applicable to the EU companies um or have a branch in the EU that generates in excess of 40 million so essentially if you are a us or another non-eu parent company you would be subject to the csrd if you fall into those criteria a couple of other things important to note here as well for for us companies um if you're a non-eu parent company so if you're a U.S parent company that falls in scope of the csrd um the reporting would cover the entire group so that's from the perspective of the parent um there will be a modified set of disclosure standards that will apply to non-eu groups those standards are expected to mainly focus on disclosures relating to companies impacts on people and on the environment rather than sustainability risks facing the companies but the drafts um for these disclosure standards for the non-eu groups have not yet been published yet and the EU also contain the the csrd also contains certain transitional measures to to kind of ease the burden um to phase in the requirement for these non-eu groups so essentially until January 2030 if the non-eu group has an EU subsidiary that is large or an EU listed company and to those independently in scope of the csrd that non-eu group May provide a Consolidated report that covers only the EU subsidiaries rather than the Consolidated Global Group so there are a few um additional transitional measures there for those companies Joanne if I could jump in here was just a quick question um what about uh what about companies that fall outside of the scope of csrds such as unlisted smes will they have any disclosure requirements at all um yeah well the um the European financial reporting Advisory Group um who are responsible for drafting the um the European sustainability reporting standards under the csrd they um they set up a working group in January on a potential standard for unlisted smes so we know that the that listed smes are in scope but there are a lot of unlisted um small and medium-sized Enterprises that would fall outside of scope so the um so afrock have um they're they're they're reviewing and deliberating on a potential voluntary standard that would apply to those um unlisted smes um there is a an issues paper that was released by efrag in January um which contains a pre-publication draft of that voluntary standard so it's not an official draft it's it's what's called a pre-publication draft um and that contains about 48 disclosure requirements um that may apply on a voluntary basis to these um voluntary smes so that's definitely a development um that's worth keeping an eye on in 2023 because it's quite possible that this uh that the official draft of this standard will be released um later in the year right now thank you so the the timelines [Music] um so I guess the you know the time the deadlines are looming and um you know there are um from January 2024 the first set of companies are going to fall in scope of the csrd so I guess the directive entered into Force January 2023 um in June of this year we're going to see the the actual standards mandated by the directive are due to be finalized um they're currently with the EU commission and January 2024 is when large EU public interest companies already subject to the nf4d will need to start preparing for their reporting obligations so those reports are due to be published in 2025 but companies um that fall within this first wave will need to start um preparing for the reports in January 2024. then from January 2025 you have the next wave of companies um and they will be the large EU undertakings not currently subject to the nfod so they will have to start preparing for their reporting obligations then that reports or those reports will be published in 2026. similarly January 2026 you'll have the listed smes and other undertakings who will need to start preparing for the reports which will be published in 2027 there is an opt-out possible under certain conditions until 2028 for this group of people of of companies and then in January 2028 you have the non-eu undertakings um with significant EU under um EU turnover those reports will be due in in 2020. nine so as I mentioned those deadlines are looming um and um the the deadlines for the implementation by member states will be June 2024 also that's worth noting speaking of implementation I have a question here for Austin um you are a large accelerated filer what is your plan for complying in ance with this timeline and then also could you offer some advice for listed smes that will be subject to reporting in 2027 but haven't yet launched any types of reporting activities yeah yeah of course I mean I guess first off as Jones under a really great you know uh explaining these standards are going to be impacting you know different companies and different ways across different time Horizons I think the first step is really to just it's really important for companies to understand their potential exposure and then really determine what the implications may be for them so for Philip Morris International I'm just going to use the shorthand tmi's Rogue we're a large publicly listed U.S headquartered multinational company and we're a parent company of her various Affiliates and subsidiaries based in the EU depth haul into different categories on its timeline so for us specifically certain subsidiaries in Europe will be occluded in the first wave and others in the second waves applicability and then as the non-eu headquart company we're going to be responsible to report on this fiscal year 28 data and fiscal year 29. as it's kind of shown in this timeline here in a Consolidated Manner and those standards aren't available yet so there are some questions there for us there are also some open questions on what standards if any will be considered equivalent for non-eu headquarters parent companies um so that's part of the legislation but it hasn't actually been clarified so for example if the issb is considered an equivalent International standard you may be able to report against that of the esrs on a Consolidated group basis that would potentially help quite a bit with a reporting interoperability of various standards um so for us you know in our situation in our circumstances we've already taken a pretty robust sustainability materiality assessment so that we'll discuss that a little bit later on um and historically we have aligned our disclosures with the gri and the statsby where appropriate kind of based on the results of this assessment and those are really the building blocks of a lot of the variety of of proposals that are out currently um so the next step for us really will be to undertake kind of a more detailed Yap analysis you know we have to adjust the current metric definitions to ensure kind of more precise alignment with the esrs widget Concepts and we're also going to have to think about ways to kind of more easily disaggregate data by country Sebastian was explaining we as a parent company could simplify the process a lot for Affiliates subsidiaries in Europe by producing an EU block disclosure in one of our five largest subsidiaries in Europe but to be able to do that you have to be able to disaggregate a lot of data that we currently centralize into this country by country uh country by country level we also have to think a lot about kind of the external Assurance over here so we currently obtain external Assurance for kind of certain environmental and health and safety metrics and Emissions metrics uh as well as some of our kind of business transformation metrics that are that are showing our progress on our smoke free Journey but not to the pool indicator's rear report where the full set of indicators that would fall into CSR and so you know for smes I think the first step is really going to be to understand exposure and Associated timelines um I'd imagine for a lot of us knees it'll be much more straightforward to size that is for us as a large multinational um then I I would imagine that would want to you know follow a similar process they'll want to perform a gap analysis on a technical side of things know whether or not they've already begun reporting against voluntary standards they can they should consider starting that as a test run um and then finally I had also going to say that really this the space has exploded lately so you know traditional large advisory and consulting firms and a smaller and emerging outfits are fairly well prepared and business position to help companies in this area so you know SME shouldn't be afraid to seek external console and advice in the next couple years to really prepare as we head into this term for them yeah it's great advice great agrees great advice Austin looks like there are lots of tools and resources out there and I'll hand it back to you Joanne thank you thank you so much thank you Austin um so I suppose we just want to um review what companies must disclose so disclosures under the csrd cover a wide range of ESG related topics um obviously environmental so they would cover the EU taxonomy environmental objectives which are climate change mitigation climate change adaptation water and Marine Resources biodiversity resource use and circular economy and then you have the social aspect which would include uh you know human rights diversity and inclusion health and safety and then governance um so you know what policies internal controls um does the company have ownership structural transparency ethics anti-corruption Etc um and all of these are obviously subject to the double materiality concept which we'll discuss um uh shortly also so you know a wide range of disclosures um that that um that needs to be implemented by by companies right and just a quick question here before we will burn um this is something we hear quite a bit but uh companies especially smes tend to be concerned about having to disclose commercially sensitive information how has csrd account for it is there an option to emit certain information that is the inconfidential yeah yeah absolutely so I know this is an area actually that several Regulators have addressed recently so um I know in the EU um this was raised during the the consultation process um by the European financial reporting Advisory Group on the draft standards so uh one of the draft standards I think it's the general requirements um standard that includes an option to Omit certain pieces of information if that information relates to intellectual property or know-how or you know the results of innovation I think there are certain conditions attached to that exemption but the exemption does does exist and I think that the issb last month also approved a similar type exemption to be included in its um sustainability standard also so it's definitely something that that companies are concerned about and that The Regulators are taking into consideration right that's reassuring and also familiar from a lot of the voluntary standards yeah absolutely um so in terms of other um disclosures so again we mentioned all of the nfod disclosures um then these are the the key kind of Concepts that need to be taken into consideration when you are preparing your disclosures so obviously there's a lot of uh talk about uh double materiality um you know companies need to take into account the sustainability risks including the climate change risks affecting the company so that's kind of from the outside in but also how the company impacts society and the environment so from the inside out um business model and strategy including you know opportunities and resilience to sustainability risks is also another important um Factor climate transition plans there's a lot of um uh talk as well about climate transition plans which companies should prepare to ensure compatibility with the transition to a sustainability to a sustainable economy um the csrd mentions specifically the 1.5 degree global warming under the Paris climate change agreement as well as the European climate law also so they are specifically referenced um in that agreement also so companies must share their transition plans and demonstrate compatibility with these goals and time-bounded targets also really really important that there are specific targets for these um for these goals for these plans and um sustainability due diligence process as you all know there is a draft Corporation LSU due diligence directive also making its way through the EU at the moment and and companies will be required to disclose the the due diligence processes that they have implemented with regards to sustainability matters um so that's really really important too um and also information about you know a company's own operations value chain business relationships Etc so um all of those are really really important but the climate transition plans in particular that's definitely one to watch for this year because there's a lot of um a lot of discussion around those at the moment I am gonna jump in again I actually have a couple of questions for both of you on these topics um first Joanne you mentioned the climate transition plans what if a company does not yet have one yeah so the the climate change and the draft climate change um standard under the um csrd it it doesn't actually contain a substantive obligation to produce a transition plan what it states is that companies should disclose any plans that they may have to align their you know their their business model and strategy with those key climate goals that I mentioned there under the Paris agreement and the European climate law so essentially if you do not have a transition or a climate transition plan currently in place what you will need to do is just indicate whether and if so when you are planning to adopt the transition plan so um there's no need to panic on that front just yet right that was my question for Austin if it's something that a company should be concerned about but it sounds like not so much so what does it take to put a climate transition plan into place yes I mean I think the theme of sort of my initial remarks still largely apply and that it really depends a lot on individual companies and their level of maturity in these areas and kind of the extent to which they already report against some of these existing voluntary standards or Frameworks right uh so for example with the the ceb climate questionnaire has already aligned with integrated much of the type of disclosure required right so companies including smes that are already responding to CDP climate with a high degree of transparency or kind of already off to a bid start um and then I think again for other companies that there's just there's really a wealth of experience in the Consulting argument to help with their specific circumstances so I'd really encourage companies to reach out sooner rather than later especially as we get closer to 2026 or anymore as the music are going to be here reaching out so I I'd really encourage companies to get a head start great great insights I also want to touch on double materiality it's been obviously a hotly debated topic for some time and certainly divides the EU and the U.S approach when it comes to regulated reporting so Joanne first can you elaborate a bit more on what double materiality tries to accomplish compared to financial or single materiality sure so so essentially double materiality is is basically where a company needs to take into consideration both financial and impact so Financial materiality is is where the company has to report on how sustainability issues create Financial risks for the company so that's kind of the outside in perspective um impact materiality is where the company um has to look at how the company impacts people and the environment so it's from the the inside out so the double materiality encompasses both basically it's the Inside Out perspective and the outside in perspective and this this perspective is quite different um from the SEC climate disclosure rules um currently um you know published in or proposed in the in the US as well as the um the the issb rules both of those are kind of financial impact only so that's that's really where the big difference um is with the I'm the csrd right and Austin you'd mentioned that you have done a materiality assessment already a double materiality assessment uh can you tell us a little bit or give some advice about what companies can do ahead of the rules going into effect to identify topics that meet the double material any standard under csrd yeah of course yes sort of PMI we undertook our most recent sustainability materiality assessment in 2021 and we used three lenses um so we looked at stakeholder interest and then the internal or inward impact and the external or outward impact and then we reported kind of prioritize Consolidated results but then we also reported results specific to each of these methods so for example the outward impact was all the inward pack result and so on and then we also put together a list of emerging sustainability topics maybe quite haven't quite reached that level yet but that we anticipate will and sort of the short medium term um and so for us we we think this really is helped stakeholders understand what single versable materiality looks like for our business and for our circumstances but then it also helps us future proof to process a bit and kind of set ourselves up for adhering to some of these impending righteous whether that science has fear or if or SEC proposals or yes ORS um so we're gonna need to revisit this and obviously we'll need to make some necessary adjustments but we feel the process has left us pretty well positioned to understand the topics that we think we'll need to report against um and it gives us a pretty solid foundation moving forward um so I I would suggest to companies that you know you know maybe haven't already undertaken a materiality assessment or maybe they have but it hasn't been through this lens of double materiality did they get started on that even if it's an internal exercise um to really begin to understand again what is the exposure and what are the potential applications for the company and then I would say you know on the more technical side at this point for us where we already report against as being gri we are fairly kind of comfortable with our ability and sort of infrastructure to collect some of this enterprise-wide data um but then the next step is really exploring how to do this head circuit you block level or the external Assurance as I mentioned before to really respond to the chcd requirements in a more streamlined manner yeah great advice thanks Austin great thank you thank you Austin um so other key Concepts as well that are quite important for the csrd is this concept that Austin mentioned there of assurance so the csrd introduces for the first time an eu-wide requirement for limited Assurance um for the sustainability information so the idea is that there will be this requirement that reports be subject to limited Assurance initially and potentially then um depending on whether or not these Assurance sustainability standards are published or not there will be a move to reasonable Assurance in the longer term so the whole idea behind this is to ensure that reported information is accurate and reliable and it really is designed to you know to avoid the pitfalls that were experienced with with the with the nfod and digitization as well it's another important concept here so undertaking will be required to prepare their financial statements and management record in a single Electronic Reporting format and digitally tag it making it machine readable um so so that's also an important aspect and then I guess the the big aspect which I'll touch upon in a bit more detail or um shortly are these mandatory European sustainability reporting standards so unlike the nf4d where companies could choose to report um using any uh reporting framework the csrd specifically mandates reporting ing to these um European sustainability reporting standards so these standards were proposed or published by ephrag which is the financial reporting Advisory Group they were submitted to the EU Commission in December I believe so they're currently with the EU commission um and they will be published hopefully finalized in in June of this year um so these standards are are really really quite important I'll jump in again with another question um Can can Mia tell us about the types of penalties imposed for non-compliance with csrd sure so um the the directive pretty much gives member states um a cart blocks to to to kind of impose whatever administrative um sanctions or penalties that are um that are necessary if uh if a company violates the provisions of the directive as this is a directive um each member state has to implement the provisions of the directive it's unlike a regulation in the EU regulations are directly enforceable in in member states but directives on the other hand need to be implemented so directives typically do give member states um a certain amount of leeway the directive does State however that whatever sanctions and penalties are imposed by a member state they have to be effective proportionate and persuasive and they have to take into account certain uh criteria such as the the gravity duration of the breach of the the specific reporting um requirement um whether the company has had any previous infringements um whether the company is cooperating that sort of thing but essentially it means that you may have a situation whereby um uh infringement of uh uh the the directive in Ireland let's say could potentially result in stricter penalties than in France or in in Spain so that's um that's just something to to bear in mind that there will be slightly different slightly differing um infringement procedures in each of the EU member states right yeah that definitely takes reporting to the next level yeah um I will pose another question to both of you and I know we've we've touched on how companies can uh prepare but since we're wrapping up the key Concepts here if you both could maybe uh weigh in on um you know how how companies can prepare to meet these obligations obviously to avoid these sanctions and and do so in an effective and efficient way sure I mean I can I can kick off maybe before Austin I mean what I would say is and I mean Austin has touched upon this already is is to really understand the the timelines I think you know looking at the csrd look at the draft um sustainability reporting standards assess whether and when your subsidiaries or your entire Consolidated group will become subject to it um you know consider you know which wave you will fall into um so again we've just been familiar with the directive and the draft standards and I think also it's important to decide particularly for those companies um who may be um required to submit reports for the first time you need to really decide what what company department will own the process because traditionally you know the finance department um was responsible for financial reporting but now that we're looking at non-financial reporting um there will be a lot of other organizations in the company involved you know human resources you know sustainability working groups communities Etc so it's really I think deciding um who who will be involved and and also collecting the data again this is something that Austin already alluded to um that's going to be one of the biggest challenges particularly for companies who have never prepared Consolidated financial statements before so it it's how do you obtain information from your subsidiaries inappropriate timelines and to the standards that will be subject to this appropriate level of assurance so that's going to be a challenge and then I think finally and again Austin also mentioned this is um is really looking um whether you do it internally or whether you Outsource it is is keeping track and monitoring all of the regulatory developments in this area because um regulations are coming out all of the time so it is a real challenge for a lot of companies to keep on top of these regulations so I would recommend um either you know appointing one person or a number of people within your organization to Monitor and track all of these regulations and the developments within the csrd tracking the member state implementations of the csrd or Outsourcing it to um you know a professional regulatory tracking service like compliance and risks for instance um whereby you know you have a lot of companies um that's that specialize in this area so that would be really really important just keeping on track of what's coming down the line yeah and I think my my initial thoughts uh kind of building house party what you were saying at the beginning but in terms of who to get involved within your organization I would say really um to get your internal audit and risk functions involved um to either perform sort of a gap analysis of your existing disclosures or to provide commentary on your non-financial reporting process because oftentimes those processes are different within even within the same company um so this can really help simplify things and and reduce cost and burgundy when you're thinking about engaging with external insurance providers um but it can also help streamline and strength internal controls and other processes you know just more generally um and then also building off what you said it's also a really good idea to start putting together cross-functional working groups or teams that might include your like corporate secretary legal operations human resources and so on I'm truly started the conversation and help ensure you have that kind of resources and buy-in from across the organization because there are so many more topics kind of a standard financial report that you're really going to have to consider um and then I think one other thing I stood out on your previous slide was digitization and so I think similar to my comments at climate transition cleanse there there are a huge number of kind of established and emerging service providers that can help with sustainable Management systems and Report preparation tagging whether it's through X URL in the US or similar functionalities with the esrs um so it sounds kind of foreign sounds kind of scary um but but really it's it's a very common feature I think a lot of these reporting uh software right inside and we're definitely a recurring theme Here of cross-functional collaboration which I think a lot of sustainability of reporters will be very familiar with that and you know maybe it's going to be uh a little a little newer to the financial organization but probably something that has other benefits for companies as well for sure yeah definitely for sure so I'll touch a little bit here about about the uh or touch on the um the standards that were um published by efrag and there are 12 of them in total currently before the commission as I mentioned earlier these are all due to be public finalized at the end of June um there were 13 to begin with but um when during the consultation process ephrak decided to streamline them and they were reduced to 12. so there are two cross-cutting standards so basically these are standards that apply to all sustainability matters across the board and then you have um five environments so you've got a series then of 12 topical standards five environmental standards so they cover climate change pollution water and Marine biodiversity and ecosystems and resource use and then you have the four social standards so covering your own Workforce workers in the value chain affected communities and then consumers and end users and then you have one governance standard which is a business conduct standard so as I mentioned um in the earlier part of the consultation there were in fact two governance standards but uh efrag decided to merge these um into one and a couple of important things to note about these is well as they don't actually cover metrics so they're all they're sector agnostic they cover strategy targets action plans and resources the actual metrics are going to be set out in sector specific standards which I mentioned here those sector-specific standards have not yet been published but they are expected to be coming out um later this year um along with the SME proportionate standards also so again there's there's a lot of work efrag is doing a lot of work in relation to these to these standards and at each standard then contains a certain number of disclosure requirements and there are 82 disclosure requirements actually in total covering all 12 standards um this number was reduced during the uh the original consultation process there were actually 136 disclosure standards but again um you know bearing in mind that efrag we want to make this process as simple um for companies as possible they decided to consolidate and and streamline a lot of those disclosure requirements so we're now looking at a total of of 82 um potential disclosure requirements and Joanne do you expect any substantive changes to the esrs draft before the commission now or is it likely to be enacted as as a roastly as is yeah I mean I guess it's hard to tell until the final versions are actually published by the Commission in June it's really really hard to tell but the EU commission have stated that you know their purpose isn't really to change the substance of these standards their their main focus is is to to improve the clarity of the standards so I was actually on a i attended a webinar a couple of weeks ago that was hosted by the IRS department of trade and Enterprise and there was a spokesperson from the EU Commission on that webinar and I mean he confirmed that it's not really their intention to make any substantial changes so I don't I don't foresee anything substantive but there may be um uh yeah some areas where they they improve the clarity of certain Provisions so um we'll just have to watch this space I think at the moment right so I just know for those preparing yeah I think so I think so um so again because the the this coil this this webinar is focusing on client uh climate transition or climate disclosure regs I kind of just wanted to just do a little bit of a deep dive into what a climate transition plan should include um you know and it's interesting actually in a recent um uh survey published by the CDP and of those companies that have disclosed a transition plan only 0.4 were regarded as actually being credible so there's a lot of talk about climate transition plans um but you know there's a real um I think focus on on credibility and tangible climate transition plans so the the draft climate change standard does include some guidance and some pointers as to what a climate transition plan should include um and essentially they should they should allow or should outline what a company will deliver on in terms of their strategy to align with the you know the latest climate science recommendation so they should include very clear measurable Targets on on greenhouse gas emissions and and you know Net Zero pledges to be achieved in a specific time frame so the targets should be time bounds that's really really important they should have the detail as to how to translate these commitments into action um and governance mechanisms you know are these climate transition plans approved by the board are the approved by management how are they going to be financed how are they going to be governance governed and then obviously just transition so there's a lot of um um discussion as well at the moment about climate transition plans that include the just transition so by just transition I mean you're not looking just at greenhouse gas emissions but you're also looking at the the social component of transitioning towards you know a world that will stay within this global warming of 1.5 so companies need to ensure that this transition towards a neutral economy happens in a very very fair way so these are all aspects that um that a climate transition plan should include so this slide is is it can be quite daunting when you look at it first and it's just really it's you know and I'm not going to go through it in a huge amount of detail but I just wanted to give um I suppose our listeners and attendees today a slaver of what's going on outside of the EU and because even though the EU is most definitely leading the way in this area there's a lot of jurisdictions that are at the following suit as well so I kind of wanted to focus on maybe two or three of these in particular I guess um the one that um seems to be getting a lot of attention at the moment or the or the two rules that are getting a lot of attention at the moment are the two U.S Draft rules so we spoke about them or Austin mentioned them earlier in particular the the climate disclosure proposed rule um from the the um the SEC the Securities and Exchange Commission so this rule was published back in March and it essentially it would apply if it's finalized to listed companies and it would require them to include certain climate related disclosures in their statements and periodic reports so this rule is due to be finalized in April 2023 so that's definitely um wanted to keep an eye on um and similarly in November in 2022 the US also proposed this Federal supplier climate risks and resilience rule again this this would require major um Federal contractors and also significant Federal contracts actors to include certain types of information and including they will have to report under scope one two and three emissions um so that's also one to watch um also the deadline for comments for that was actually the 13th of February so that um you know we should expect some movement on that rule shortly two other U.S um proposals actually which I haven't referenced here which might also be worth mentioning because both of these are fairly recent and they come out of the state of California are the uh climate corporate data accountability bill and the preparation of climate related Financial Risk reports Bill both of these bills I think um were proposed by by the same or at the same group of senators in California but the climate corporate data accountability ability Senate bill is one in particular that a lot of our customers are um are asking about because it would apply to not just um listed companies but it would apply to limited liability companies with revenues in excess of one billion dollars and that do business in California so if that rule is finalized it would require those companies to annually disclose their scope one two and three greenhouse gas emissions to um an emissions registry that will be set up so again that's that's certainly something to watch um one of the other um countries I wanted to focus on there also was the UK in April of last year they also published two rules one um is a climate related Financial disclosure rule which applies to listed companies and the other one is a climate related Financial disclosure rule that applies to limited liability Partnerships and both of those rules entered into force in April 2022 um and also um you know very very um interesting developments in in the UK they have set up a task force on transition plans also they've recently released a consultation um to try and publish a gold standard to help guide companies on on the the types of information that should be included in these transition plans so there's a lot of information coming out of the of the UK as well and then finally just on this list I wanted to touch upon the Australian consultation which was also um published in November as well they issued a consultation on mandatory climate closures which would be aligned with a lot of the um the reporting developments elsewhere um in the globe as well so again a lot of a lot of activity going on outside of the EU but as I said the EU are definitely leading leading the way here um so I suppose just to kind of uh if I just go oh hang on a second my slides seem to be going backwards sorry bear with me for one second here oh here we go apologies I'm going backwards instead of forwards so I suppose well one of my last slides here is um just to kind of I suppose bring together the three main proposals these are really The Big Three to keep an eye on at the moment um the draft EU reporting standards the issb proposals and the the US um security Exchange Commission climate proposal as well that I also mentioned so there's a lot of overlap and Alignment between these three proposals but there are also some notable differences between them as well um I'm not going to go into the real nitty-gritty of them um it's it's quite clearly set out in the table there but I guess one of the main differences is um that the a the European standards are obviously broader so they cover the E the S and the g the environmental the social and the governance um whereas the issb proposal is very much focused on environment at the moment um as is the the US SEC proposal um it's also worth noting that these are all still drafts um subject to change although I think as I mentioned earlier the European standards are probably less likely to change substantively then perhaps the the other two um all of these proposals as you can see at the bottom of the table they're all um they're all you know fairly well aligned with existing voluntary Frameworks particularly the the tcfd and I think that's really important to note because a lot of companies um are quite concerned about um about these mandatory reporting standards however if you are already already reporting to um using one of the voluntary Frameworks um you know there's a lot of um uh reporting and data collection that you're already doing that will definitely go towards you know your mandatory reporting obligations under one of these proposals here so I think it is important to note that these three proposals are very much um you know they draw upon and they are aligned with some of the existing voluntary reporting mechanisms um as well so as I said if you're already focusing on the tcfd for example for your ESG reporting you have a real advantage over over companies that that aren't doing that at the moment Joanne since you just brought up this alignment with voluntary standards what is uprep doing with regard to them you know where do gri and says V for instance fit in are they still here to stay as voluntary standards yeah I mean it's it's a good question um I think the um there's a lot of a lot of like progress and ongoing discussions between efrag and these various voluntary bodies at the moment and also between the the EU and these bodies as well I mean the aim particularly with regards to the EU is to try and maximize alignment and and interoperability and the the European Commission in particular has been really really vocal about not wanting to reinvent the wheel and to avoid these multiple reporting regimes so the the European commission and efrag have been working with all of these standards bodies to ensure Global comparability um the EU commission is also engaged with the issb and the gri um and on a recent webinar actually the EU commissioner representative noted that um the aim is to try and develop this sort of a mapping table um with all of these proposals one once they're finalized of course so this mapping table will basically set out the areas that each of these proposals have in common but also the areas that they they differ um so this will be really really important for companies that may be um you know maybe subject to all of them um it is important to note as well that the EU standards are very much largely aligned already with as I mentioned the tcfd um the issb and and the gri and when the draft standards were submitted to the EU Commission in in December efrag also released two additional documents there are two appendices to the draft one of them Maps the existing tcfd recommendations um with the European Standard do you think the climate change standard and then the other document Maps the issb proposals with the European standards so again the idea is to illustrate how these Europeans have integrated you know to the maximum extent possible the content of both the um the issb and the tcfd because I know a lot of a lot of companies find I find us this quite confusing understandably and Austin obviously you're a very mature reporting company will voluntary standards continue to play a role in your mobile reporting approach um and also of course thinking about regions that are less regulated uh than the EU on the reporting front yeah thanks um well I think one thing just to build off prior confidence is so just for clarification says we is now part of the IFRS so the sasbi standards as well as integrative reporting framework both ruled forward to the value reporting foundation and then that rolled into the issb um so the issb will carry forward with the sasbian use those that is kind of like the basis moving forward for the topic specific standards uh phrase proposals so if you're if you're already responding to sasby you're very well positioned in turn eventually respond to tie and 6p as well um but to your question um I think for us it's still a lot to be decided um a lot of the considerations are really centering around future regulatory developments um as well as the fact that we are a U.S solicited company so our annual management report takes the form of annual report on our form 10K and that's really subject to SEC requirements uh very much focused on financial materiality or this inward impact with targeting the financial Community including investors and also Regulators so for us a kind of a fairly narrow subset of this sort of sustainability related information can really be included in our annual report and so like you know many other U.S solicit companies we have to figure out how and where to report sustainability related information that is sort of of interest to this broader range of stakeholders employees and Civil Society ngos agents is you know among others um so considering for artists that csrd won't really impact or Consolidated group level reporting at least on mandatory basis until until fiscal year 28 data and fiscal year 29. safe to say voluntary reporting kind of Consolidated the group level it kind of goes beyond these regulatory requirements we'll continue for subtown I did say some factors we are considering is the extent to which her voluntary integrated report will eventually align with these issp standards that their work mentions uh assuming voluntary application sort of non-regulated filings will be allowed for U.S listed companies that pose kind of a point of contention initial proposals um so I mean even if these standards are unlikely to become regulatory requirements in the U.S because of the US's particularly kind of narrow scope of information that can be included in a management report uh at least in the shorts medium term we we kind of anticipate sufficient investor interest to adjust to align our disclosures with the issb standards kind of to the extent possible um pretty quickly you know pretty early on and that as I said that that does cover essentially the the SB standards which are already reported against voluntarily so there will be some little overlap some level of decision making how to Target them yeah that definitely makes sense we have about a minute left so I'll just quickly say that we do have some great questions in Q a and we will get those answers to you um and uh Joanne I'll let you wrap up the presentation sure so I guess and just to wrap up you know what's in store for the rest of the year again keeping an eye on those three key draft proposals the European standards the issb and the SEC the exposure drafts for the sector-specific um esrs standards um they're definitely going to be released this year um and those sectors in scope will typically include I think textiles jewelry um some of the energy sector as well so definitely something to keep an eye on um the exposure draft for the unlisted smes also want to keep an eye on and again the modified set of disclosure standards for non-eu groups and scope of the csrd um the issb also recently announced um that it will be potentially pulling together a draft disclosure standard on natural ecosystems in the just transition so that's something to keep an eye on and then obviously greenwashing and climate change litigation risks there's been such a huge increase um in this space that that is something to definitely be aware of as we move forward into 20 into the rest of the year climate transition plans I've touched upon those already um the corporate sustainability due diligence directive and all of the requirements that that will contain once that is finalized um including the human rights and environmental due diligence requirements definitely a big one to watch in the EU and then finally I guess the increased alignment and cooperation between the standards bodies as we've discussed as well so there's a lot in scope I mean there's going to be a lot more regulation in this space as well I think in 2023 so my advice really for companies is you know just to stay um you know stay on on top of the regulations that are coming out um to make sure that you're monitoring and tracking all of these regulatory developments you know particularly the ones that are coming down the line so keep on top of the proposals um because there's a lot more happening in this space and there'll be a lot more later this year as well wonderful thank you so much Joanne and Austin for sharing your time and insights and and providing such useful information to our particip participants and thank you to our participants for spending a good hour with us today to learn about this important and complex topic and I hope you all have a wonderful day thank you thank you so much thank you thank you