As pressure for the corporate world to contribute to social and environmental goals increases, the measurement of that contribution has become more pressing to ensure that everyone is ‘doing their bit’ and ‘playing by the same rules’. As a result, sustainability reporting standards, conventions and benchmarks are a growth area.
There are a wide range of global sustainability reporting standards with different purposes, scope and ambition. Standards may be voluntary or mandatory to follow. They may focus on reporting ‘enterprise value’ (to the firm doing the reporting) or reporting the firm’s contribution to society, or both. They may focus only on climate change; or only on environmental sustainability; or encompass all ESG issues.
The range of available standards, of varying scope and detail, can be confusing and make it difficult for real estate decision-makers to decide which standards they should use both for their own decision-making and brand positioning.
There is clear evidence, however, of convergence and collaboration in the existing patchwork of global and European standards. The longstanding non-profit bodies that have developed many of the existing voluntary sustainability reporting standards have recognised the need to work together – we suspect increasingly under the influence of IFRS, the major global accounting standards body.
Meanwhile, the likes of the G20 and the EU have been developing their own approaches to reporting through initiatives like the G20’s Task Force on Climate-Related Financial Disclosures (TCFD) and the EU Taxonomy. Because of their political origins, these initiatives are likely to lead the debate on mandatory reporting requirements.
Mandatory reporting is not new. However, the scope and depth of mandatory reporting are likely to increase, to reflect recommendations like those of the TCFD. Certain G20 nations – most notably the UK – have already said they will make the TCFD requirements mandatory. Many, but not all, of the other existing global voluntary standards seem likely to form the basis for mandatory standards in due course.
The EU Taxonomy goes further than simply requiring corporate reporting on sustainability. It aims to discriminate between economic activities that contribute to sustainability and those that do not. This provides a clear dividing line for investors and consumers to use in deciding where to allocate money.
By 2030, at CBRE we expect that TCFD will be the leading framework for reporting climate change impacts. However, we suggest that TCFD-style reporting will increasingly rely on IFRS standards rather than the existing voluntary global standards. In Europe, we expect that the EU Taxonomy will act as a leading vehicle for describing what counts as a ‘green’ economic activity.
At CBRE, we think the UK will act as a leading regulator and influencer on these issues. The UK’s decision to back the TCFD’s recommendations, its decision to introduce its own Green Taxonomy, its prominence in global financial services and the fact the IFRS is headquartered in London all suggest that the debate on sustainability standards in the UK will likely foreshadow the global debate.
Julie Townsend is head of environmental consultancy at CBRE