Other Notable Developments

UN Report: On June 26, United Nations experts participating in the Working Group on human rights and transnational corporations and other business enterprises published a report calling on investors to consider human rights in all their decision-making, in order to align their ESG and sustainability approaches with the UN Guiding Principles on Business and Human Rights.

Labor Rights Reporting: On June 23, the Global Reporting Initiative published a proposal, titled “Topic Standard Project for Human Rights,” that would require companies to report on labor rights issues, including hiring and payment data and related welfare data. Stakeholders in Africa have until October 2024 to submit responses.

Canada: New Corporate Greenwashing Rules Passed into Law 

On June 20, 2024, Canada passed amendments to the Competition Act that, among other changes, introduce “anti-greenwashing” rules. The rules classify as deceptive marketing practices  environmental claims about a product or business that are not substantiated by an “adequate and proper test” or internally recognized methodology. Penalties for companies that engage in such deceptive practices can reach the greater of CAD 10 million (and for each subsequent penalty an amount not exceeding CAD 15 million), or three times the value of the benefit derived from the deceptive conduct (or, if that amount cannot be reasonably determined, 3% of the company’s annual worldwide gross revenues). The rules also relax the criteria for private parties to bring greenwashing claims before the competition authority in Canada. 

The rules do not lay out the type of tests or methodologies that would substantiate environmental claims. In the absence of guidance, companies making such representations about their products or businesses would need to assess their existing and future statements to ensure compliance with the new rules. 

Link:
Rules (Bill C-59)

On June 27, 2024, the Swiss Federal Council opened a consultation on proposed amendments to the Code of Obligations that would subject a greater number of companies to its corporate sustainability reporting requirements.

Under the current Code, companies with 500 employees, CHF 20 million in assets and CHF 40 million in revenue are required to disclose environmental, human rights and corruption risks and steps taken to minimize those risks. Under the proposed rules, companies must meet two of three criteria—250 employees, CHF 25 million in assets and CHF 50 million in revenue—for two years to be subject to reporting requirements. The proposed rules would increase the number of companies subject to reporting requirements nearly twelvefold, from 300 companies under the existing Code to 3,500 under an amended Code. Furthermore, the proposed rules would require all company disclosures to be certified by an auditor or a conformity assessment body.

The proposed rules are part of a push by the Swiss government to align with similar requirements in the EU, which launched the Corporate Sustainability Reporting Directive (CSRD) in 2023. Like the proposed rules, the CSRD greatly increased the number of companies subject to sustainability disclosure requirements from what existed previously, and introduced a third-party auditing requirement for such disclosures. 

Link:
Swiss Federal Council press release 

On June 20, 2024, the European Financial Reporting Advisory Group (EFRAG) and the Taskforce on Nature-related Financial Disclosures (TNFD) published a mapping of the correspondence between the European Sustainability Reporting Standards (ESRS) and TNFD’s recommended disclosures. The ESRS were issued in July 2023 and the TNFD recommendations were issued in September 2023. In December 2023, EFRAG and TNFD signed a Memorandum of Understanding to continue their collaboration to ensure maximum consistency between the ESRS and the TNFD recommendations. The mapping underscores the alignment between the two standards. 

The mapping highlights five key areas of common ground between the ESRS and TNFD. First, the mapping demonstrates alignment on high-level concepts and definitions, such as reporting on nature-related impacts, risks, opportunities, and dependencies. The mapping also highlights overlap in the materiality principles between the ESRS and TNFD. The ESRS requires disclosure based on the double materiality principle, while TNFD permits multiple approaches, including double materiality. The mapping further indicates alignment on the Locate, Evaluate, Assess, Prepare (LEAP) approach for market participants to identify and assess their nature-related issues. The mapping also demonstrates that the ESRS adheres to TNFD’s four disclosure pillars, including governance, strategy, risk management, and metrics and targets. Finally, the mapping confirms that all fourteen TNFD disclosures are integrated into ESRS.

The mapping will facilitate companies’ compliance with the CSRD and ensure that reporting is consistent and standardized. EFRAG and TNFD will continue to work closely together on the development of upcoming guidance and tools to support disclosure under the CSRD. 

Links:
TNFD – ESRS Correspondence Mapping
TNFD Press Release
EFRAG Press Release

On June 24, 2024, the International Sustainability Standards Board (ISSB) of the International Financial Reporting Standards (IFRS) Foundation announced new measures as part of the ISSB’s latest work plan that will streamline sustainability disclosure requirements and ensure consistency across various reporting initiatives.

Under the first measure, the IFRS Foundation will assume leadership of the Transition Plan Taskforce (TPT) disclosure framework. Launched in October 2023, the TPT disclosure framework established a “gold standard” for the creation and disclosure of net zero transition plans, providing companies with best practices to mitigate potential greenwashing.

Under the second measure, the IFRS Foundation will align its GHG reporting standards with those of the GHG Protocol, by tasking the ISSB with updating the Protocol on any changes made to the Foundation’s reporting standards and appointing an ISSB representative to the Protocol’s Independent Standards Board. Launched in 1998, the GHG Protocol established a series of frameworks for GHG emissions reporting by companies across various sectors.

Links:
ISSB Press Release
The Greenhouse Gas Protocol