An Introduction to the Sustainability Reporting Landscape

21 February 2022 17:55 RaboResearch

Sustainability reporting is becoming more important, but the different goals, frameworks and regulations create confusion. This introduction to sustainability reporting outlines the important points that companies should pay attention to.

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Environmental, Social and Governance (ESG) reporting has received considerable attention in the past few years, which has in turn contributed to a ‘boom’ in sustainability reporting standards, goals and regulations being published. This has created an overpopulated sustainability standards environment, which has been unofficially dubbed as ‘the alphabet soup’. Navigating through this ‘alphabet soup’ has made it difficult for companies to identify which standards are most applicable to their specific sustainability reporting needs. The aim of this brief article is to create some clarity about the interconnections between the different standards.

Goals, Reporting and Regulations Pyramid

To understand how these standards and regulations are connected the different acronyms are grouped into three categories and seen as a pyramid, with the foundation being Global Goals, followed by Reporting Frameworks, and Regulations (see Figure 1).

Figure 1: Goals, Reporting and Regulations Pyramid

Note: This list of standards is not complete, as there are many different standards in the world, which differ per region. The infographic aims to help understand the underlying connections and principles in the sustainable reporting environment. Source: Rabo Carbon Bank and Rabobank Sustainable Business Advisory

The reporting frameworks are derived from the global goals, and the regulations are the result of several frameworks merged together. The core principles embedded within the global goals are therefore the red thread that moves up through the pyramid. A practical example of this red thread is where the Sustainable Development Goals (SDG) were used to develop the Taskforce of Climate-related Financial Disclosures (TCFD) framework, which in turn is the fundamental base of the regulatory Corporate Sustainability Reporting Directive (CSRD) prototype.


To better understand sustainability regulations, at the top of the pyramid, three out of the four regulatory standards were selected to illustrate the sustainable reporting landscape. These are:

    The EU Taxonomy; The Corporate Sustainability Reporting Directive (CSRD); and the International Sustainability Standards Board (ISSB).

The relevance of the EU Taxonomy in this article relates to the fact that it is the most recent regulation to be put into effect. It is moreover a critical cornerstone incorporated into the CSRD prototype that includes further sustainable reporting disclosure requirements. The CSRD is therefore a more comprehensive and significant regulation to include in this article. Due to the fact that both the EU taxonomy and the CSRD are only EU related, we have also included the ISSB prototype regulation for comparison. It was selected as it is the first global sustainability reporting standard. The Sustainable Finance Disclosure Regulation (SFDR) will not be discussed in this article as its scope is limited exclusively to the financial sector.

EU Taxonomy

The EU Taxonomy is a new green language developed by the European Commission and was implemented on 1 January 2022. The goal of the EU Taxonomy is to help identify economic activities that substantially contribute to one of six EU environmental objectives, while not harming the other five. For all listed and large companies that are in the scope of the CSRD requirements (see Table 1), disclosures on the extent to which their revenue, operating and capital expenditure activities contribute to the six environmental objectives are mandatory.

Corporate Sustainability Reporting Directive (CSRD)

The European Commission tasked the European Financial Reporting Advisory Group (EFRAG) to develop the EU Sustainability Reporting Standards. These standards fall within the scope of the Corporate Sustainability Reporting Directive (CSRD) that will become mandatory to implement for an estimated 50,000 companies, starting in 2023. The CSRD also requires companies to implement sustainability information in their management reporting. In addition, companies will need to tag their sustainable information digitally to make it available in the upcoming European Single Access Point (ESAP) database.

The goal of implementing these standards is to help investors, civil society organisations, consumers, policy makers and other stakeholders to evaluate the non-financial performance of companies. It is also intended to encourage these companies to adapt their business models and operations to a sustainable economy and to limit global warming to 1.5 °C.

International Sustainability Standards Board (ISSB)

International Financial Reporting Standards (IFRS) is the set of globally accepted financial reporting standards which are currently required in more than 140 jurisdictions, including EU countries and the UK. On 3 November 2021, the IFRS Foundation announced the formation of the International Sustainability Standards Board (ISSB). The ISSB will develop standards that result in a comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets. The intention is for the ISSB’s standards to cover important sustainability topics (environmental, social, governance – ESG) on which investors want information and to create a globally accepted standard which will make sustainable information comparable and transparent.

Differences and Similarities in Standards

The most noteworthy differences between the standards mentioned above are: the geographical scope of applicability (EU vs global), the fact that the EU Taxonomy is included in the CSRD standard and the ISSB is not, and that the ISSB standard does not yet incorporate the double materiality method. The CSRD and ISSB standards however focus on the same reporting elements, for instance disclosing governance, strategy, risk management and targets set to show alignment with the Paris Agreement and Sustainable Development goals.

More details on these standards can be seen in the Sustainability Reporting Landscape (see Table 1).

Table 1: Sustainability Reporting Landscape – Selected examples

Source: Rabobank Sustainable Business Advisory and Raboresearch


Materiality is the concept that defines whether certain issues and information are important for a company and its stakeholders to take into account.

Figure 2: Materiality visual

Source: Rabo Carbon Bank and Rabobank Sustainable Business Advisory

With financial materiality, only the effects of climate change on the business model and strategy of a company are taken into account (see Figure 2). But with environmental and social materiality, the impacts of a company’s business model and strategy on climate change are also considered. This is important to note as it immediately increases the scope of stakeholders that are affected by the companies and their activities. Something that companies must keep in mind is that the company impact on climate can also become financially material the more regulations are tightened.

A difference between CSRD and ISSB requirements is that CSRD uses the double materiality method, and ISSB only uses financial materiality. An example of this in practice is:

Box 1

A large manufacturing company conducts a risk analysis and decides that the increase in water prices due to a drought in the area are not financially material (climate impact on company). However, when they apply the double materiality method and look at their impact on the climate, they realize that their water usage has a material effect on the surrounding environment and that certain communities in the area are suffering due to their usage of large amounts of water for manufacturing.

This example illustrates the importance of not just considering financial materiality but also applying environmental and social materiality to get an accurate and complete view of all the risks the company and its operating ecosystem face.


The current challenges most companies face with regards to sustainability reporting are mainly access to data and sustainability expertise. Market participants find it difficult to gather the specific internal and external data necessary to create a clear overview of their exposure to climate risks. This access to data gap is also apparent in the small- & medium-sized enterprises (SME) who may lack the sustainability expertise to know what data will be necessary to submit in the future and what needs to be done to comply with regulations.


The sustainability reporting landscape is still young and everchanging, but by navigating through the global goals, frameworks and regulations, a fundamental structure is becoming clear. Governance, strategy, risk management and targets with regards to sustainability reporting are becoming increasingly important. Companies should start with this basic agile structure of sustainability reporting and evolve from there. This will allow them to absorb regulatory and other changes over the next years. An example of this is the ongoing development of biodiversity and water standards.

This indicates that requirements are only going to become stricter, and the sooner companies start looking at all of their risks and mitigating them, the less of an obstacle it will be when it eventually becomes mandatory.