Sustainable Business & Reporting
CHAPTER 1 – INTRODUCTION TO SUSTAINABILITY
The objective of this course is to understand what sustainability is, the role that companies play
in the sustainability landscape as well as the regulations that will apply to them in terms of non-
financial information disclosures.
Deloitte’s ESG activities focus on three domains: ESG assurance services, ESG reporting
advisory services, and ESG due diligence services.
1.1 Sustainability
Sustainability = meeting the needs of the present without compromising the ability of future
generations to meet their own needs
Climate change
• Most urgent crisis of unprecedented scale with irreversible impact
• Human activities caused the planet to warm at a faster rate and will keep on rising
• Heatwaves, storms, ice melting
• Increase in frequency & intensity
Paris Agreement = legally binding international treaty on climate change, 196 nations adopted
since 2015
Objective = limit temperature increases by 1.5°C above pre-industrial levels
How?
- Countries submit national climate action plans = Nationally Determined Contributions
(NDCs) in which they outline the actions they will take to achieve this
- Businesses contribute through climate actions and reporting
Every 5 years: global stock take to assess the progress and inform the next round of NDCs (due
in 2025). Findings of the last one in 2023:
• Emissions: currently too high to stay within the 1.5°C target
=> countries need to increase ambition and implement commitments faster
• Adaption: more countries are planning adaption, actual implementation still limited
• Loss and damage: urgent action is needed
Where are we now?
According to the Intergovernmental Panel on Climate Change (IPCC), climate change is caused
by human activities, mainly through greenhouse gas (GHG) emissions.
Global surface temperature already +1.1°C above pre-industrial levels & likely that warming will
exceed 1.5°C and make it harder after 2030 to limit warming below 2°C
=> in order to meet the Paris agreement goals, we would need to cut GHG emissions by 43%
Social impact
Climate change also has major social impacts, which will get worse as climate change
progresses:
• Poverty: 1.1 billion people in the world
• Prosperity: Africa and the Middle East
o Socio-economic development: human health (COVID), vulnerable areas
o Inequality
=> Interactions between climate change, people and nature
1
,1.2 The Role of Business in Sustainability
Business plays a crucial role in sustainability:
• they use and profit from natural & human resources
• they impact livelihoods of their employees and communities
• they are a source of investment that can drive sustainable transformation
• however, they also face considerable risks
o cost of living: energy prices
o natural disasters
o geoeconomic confrontation
o failure to mitigate climate change
Drivers for sustainability
• society – consumers are willing to change behaviours
• policy – able to unlock funds for change
• regulators – push businesses to comply
• investors & banks – sustainable businesses are doing better in the LT
Sustainability opportunities for businesses
1. Low-carbon goods and services
e.g. Decathlon: products with recycled material
2. Circular economy = produce and consume to minimize waste
e.g. refurbished phones
3. Sustainable and climate-smart agriculture
e.g. start a business from waste, use waste as a product
4. Social finance = giving access to communities who don’t have access to basic financing
e.g. Kiva: giving loans to individuals
1.3 Sustainability Reporting Initiatives
Sustainable Development Goals (SDGs) = collection of 17 interlinked global goals designed to
be a blueprint to achieve a better and more sustainable future for all
Set up by the United Nations in 2015,
intended to be achieved in 2030
• Targets and indicators
o Each goal has 8-12 targets
o Each target has 1-4 indicators
o Outcome targets or means of
implementation targets
• Review of indicators
o Reviewed every 5 years (2020,
2025)
o 4.2 trillion dollars = the cost to
achieve the goals
Environment, Social & Governance (ESG)
Businesses are invited to report on these three pillars:
• Environment
e.g. emissions, energy, resources, product innovation
2
, • Social impacts
= information about the company’s values and social business relationships
e.g. employment quality, health & safety, diversity and inclusion
• Governance practices
= information about policies and practices concerning governance
e.g. vision and strategy, management, ethics
• ESG reporting:
o Increases transparency on non-financial performance
o Supports stakeholder engagement and reputation
o Influences investor decision-making
Frameworks
Global Reporting Initiative (GRI)
GRI is an independent, international organization that provides widely used standards for
sustainability reporting focused on a company’s impacts.
• Developed in 1997 as an accountability mechanism
• Now, most used sustainability standards standard globally
o How to report on SDGs in collaboration with UN
• Universal standards
o Reporting principles: accuracy, balance & verifiability
o Structure
o Materiality
• Topic standards: deep dive on specific issues
• Sector standards: likely material topics per sector
Task Force on Climate-Related Financial Disclosures
Framework that focusses on climate and financial materiality: financial risks and opportunities
related to climate change
• Established by the Financial Stability Board
• Focuses on market transparency and financial relevance of climate risks
• Structured around four pillars, recommendations on disclosures
o Governance
o Strategy
o Risk management
o Metrics and targets
• Structure has influenced the ESRS
United Nations Guiding Principles on Business and Human Rights (UNGP)
Guidelines for companies to report on their respect for human rights based on the “Protect,
Respect and Remedy” framework
1. Respect human rights
2. Avoid harming human rights & prevent and mitigate impacts
3. Policies and practices in place
OECD Guidelines for Multinational Enterprises on Responsible Business Conduct
A list of acceptable ‘behaviours” for companies operating in third countries, e.g.:
• Contribute to sustainable development
• Respect human rights of those affected by activities
• Abstain from improper involvement in political activities
3
, Sustainability Accounting Standards Board
SASB provides industry-specific standards for reporting sustainability issues that are could
affect the entity’s cash flows, access to finance or cost of capital
• Focus on finance
• Three guiding principles
o Global applicability
o Financial Materiality: investor driven
o Approach to Standard Setting
§ Industry specific: standards for 77 industries across 11 sectors
§ Evidence based
§ Market informed
Principles for Responsible Investment (PRI)
UN-supported principles to guide investors on how to take ESG into account when taking
decisions
1. Incorporate ESG in investment analysis and decision-making
2. Incorporate ESG issues into ownership policies and practices
3. Seek appropriate disclosure on ESG issues by entities we invest in
4. Promote acceptance and implementation of the Principles
5. Enhance our effectiveness in implementing the Principles
6. Report on activities and process towards implementing the Principles
Sustainable Investment Strategies
Different levels at which you can take sustainability into account when making a decision
• Responsible investment
focused on screening and excluding investments in certain countries or sectors
• ESG integration
integrating ESG factors in the decision process
• Impact investing
investments made with the primary goal of achieving positive social or environmental
benefits, while also delivering financial return
ESG Data Challenges
Users of sustainability information face difficulties in accessing and comparing ESG data.
Key challenges faced to get reliable ESG data for decision-making:
• Defining ESG metrics
o Many frameworks and metrics
o Difficult to track and verify disclosures
• ESG scores & ratings
o ESG ratings vary widely across rating agencies
o Hard to compare companies, sectors and internal vs. external data
• Data quality
o ESG data increasingly used by investors, companies and customers
o Regulatory pressure increases the need for reliable and consistent data
Risk of greenwashing = where companies present themselves as more environmentally or
socially responsible than they actually are
• Transparency and good quality data are key in supporting the transition towards a more
sustainable economy with the right amount of accountability and comparability
4
CHAPTER 1 – INTRODUCTION TO SUSTAINABILITY
The objective of this course is to understand what sustainability is, the role that companies play
in the sustainability landscape as well as the regulations that will apply to them in terms of non-
financial information disclosures.
Deloitte’s ESG activities focus on three domains: ESG assurance services, ESG reporting
advisory services, and ESG due diligence services.
1.1 Sustainability
Sustainability = meeting the needs of the present without compromising the ability of future
generations to meet their own needs
Climate change
• Most urgent crisis of unprecedented scale with irreversible impact
• Human activities caused the planet to warm at a faster rate and will keep on rising
• Heatwaves, storms, ice melting
• Increase in frequency & intensity
Paris Agreement = legally binding international treaty on climate change, 196 nations adopted
since 2015
Objective = limit temperature increases by 1.5°C above pre-industrial levels
How?
- Countries submit national climate action plans = Nationally Determined Contributions
(NDCs) in which they outline the actions they will take to achieve this
- Businesses contribute through climate actions and reporting
Every 5 years: global stock take to assess the progress and inform the next round of NDCs (due
in 2025). Findings of the last one in 2023:
• Emissions: currently too high to stay within the 1.5°C target
=> countries need to increase ambition and implement commitments faster
• Adaption: more countries are planning adaption, actual implementation still limited
• Loss and damage: urgent action is needed
Where are we now?
According to the Intergovernmental Panel on Climate Change (IPCC), climate change is caused
by human activities, mainly through greenhouse gas (GHG) emissions.
Global surface temperature already +1.1°C above pre-industrial levels & likely that warming will
exceed 1.5°C and make it harder after 2030 to limit warming below 2°C
=> in order to meet the Paris agreement goals, we would need to cut GHG emissions by 43%
Social impact
Climate change also has major social impacts, which will get worse as climate change
progresses:
• Poverty: 1.1 billion people in the world
• Prosperity: Africa and the Middle East
o Socio-economic development: human health (COVID), vulnerable areas
o Inequality
=> Interactions between climate change, people and nature
1
,1.2 The Role of Business in Sustainability
Business plays a crucial role in sustainability:
• they use and profit from natural & human resources
• they impact livelihoods of their employees and communities
• they are a source of investment that can drive sustainable transformation
• however, they also face considerable risks
o cost of living: energy prices
o natural disasters
o geoeconomic confrontation
o failure to mitigate climate change
Drivers for sustainability
• society – consumers are willing to change behaviours
• policy – able to unlock funds for change
• regulators – push businesses to comply
• investors & banks – sustainable businesses are doing better in the LT
Sustainability opportunities for businesses
1. Low-carbon goods and services
e.g. Decathlon: products with recycled material
2. Circular economy = produce and consume to minimize waste
e.g. refurbished phones
3. Sustainable and climate-smart agriculture
e.g. start a business from waste, use waste as a product
4. Social finance = giving access to communities who don’t have access to basic financing
e.g. Kiva: giving loans to individuals
1.3 Sustainability Reporting Initiatives
Sustainable Development Goals (SDGs) = collection of 17 interlinked global goals designed to
be a blueprint to achieve a better and more sustainable future for all
Set up by the United Nations in 2015,
intended to be achieved in 2030
• Targets and indicators
o Each goal has 8-12 targets
o Each target has 1-4 indicators
o Outcome targets or means of
implementation targets
• Review of indicators
o Reviewed every 5 years (2020,
2025)
o 4.2 trillion dollars = the cost to
achieve the goals
Environment, Social & Governance (ESG)
Businesses are invited to report on these three pillars:
• Environment
e.g. emissions, energy, resources, product innovation
2
, • Social impacts
= information about the company’s values and social business relationships
e.g. employment quality, health & safety, diversity and inclusion
• Governance practices
= information about policies and practices concerning governance
e.g. vision and strategy, management, ethics
• ESG reporting:
o Increases transparency on non-financial performance
o Supports stakeholder engagement and reputation
o Influences investor decision-making
Frameworks
Global Reporting Initiative (GRI)
GRI is an independent, international organization that provides widely used standards for
sustainability reporting focused on a company’s impacts.
• Developed in 1997 as an accountability mechanism
• Now, most used sustainability standards standard globally
o How to report on SDGs in collaboration with UN
• Universal standards
o Reporting principles: accuracy, balance & verifiability
o Structure
o Materiality
• Topic standards: deep dive on specific issues
• Sector standards: likely material topics per sector
Task Force on Climate-Related Financial Disclosures
Framework that focusses on climate and financial materiality: financial risks and opportunities
related to climate change
• Established by the Financial Stability Board
• Focuses on market transparency and financial relevance of climate risks
• Structured around four pillars, recommendations on disclosures
o Governance
o Strategy
o Risk management
o Metrics and targets
• Structure has influenced the ESRS
United Nations Guiding Principles on Business and Human Rights (UNGP)
Guidelines for companies to report on their respect for human rights based on the “Protect,
Respect and Remedy” framework
1. Respect human rights
2. Avoid harming human rights & prevent and mitigate impacts
3. Policies and practices in place
OECD Guidelines for Multinational Enterprises on Responsible Business Conduct
A list of acceptable ‘behaviours” for companies operating in third countries, e.g.:
• Contribute to sustainable development
• Respect human rights of those affected by activities
• Abstain from improper involvement in political activities
3
, Sustainability Accounting Standards Board
SASB provides industry-specific standards for reporting sustainability issues that are could
affect the entity’s cash flows, access to finance or cost of capital
• Focus on finance
• Three guiding principles
o Global applicability
o Financial Materiality: investor driven
o Approach to Standard Setting
§ Industry specific: standards for 77 industries across 11 sectors
§ Evidence based
§ Market informed
Principles for Responsible Investment (PRI)
UN-supported principles to guide investors on how to take ESG into account when taking
decisions
1. Incorporate ESG in investment analysis and decision-making
2. Incorporate ESG issues into ownership policies and practices
3. Seek appropriate disclosure on ESG issues by entities we invest in
4. Promote acceptance and implementation of the Principles
5. Enhance our effectiveness in implementing the Principles
6. Report on activities and process towards implementing the Principles
Sustainable Investment Strategies
Different levels at which you can take sustainability into account when making a decision
• Responsible investment
focused on screening and excluding investments in certain countries or sectors
• ESG integration
integrating ESG factors in the decision process
• Impact investing
investments made with the primary goal of achieving positive social or environmental
benefits, while also delivering financial return
ESG Data Challenges
Users of sustainability information face difficulties in accessing and comparing ESG data.
Key challenges faced to get reliable ESG data for decision-making:
• Defining ESG metrics
o Many frameworks and metrics
o Difficult to track and verify disclosures
• ESG scores & ratings
o ESG ratings vary widely across rating agencies
o Hard to compare companies, sectors and internal vs. external data
• Data quality
o ESG data increasingly used by investors, companies and customers
o Regulatory pressure increases the need for reliable and consistent data
Risk of greenwashing = where companies present themselves as more environmentally or
socially responsible than they actually are
• Transparency and good quality data are key in supporting the transition towards a more
sustainable economy with the right amount of accountability and comparability
4
