Marybeth Collins
Integrating biodiversity, ecosystems, and human capital (BEES) into sustainability reporting is no longer a matter of if but when. As businesses grapple with the increasing demand for transparent, meaningful disclosures, regulators and standards boards are working to create frameworks that balance investor needs with broader environmental and societal responsibilities.
A recent survey by the International Sustainability Standards Board (ISSB) aimed to assess the current state of BEES and human capital disclosures globally. The survey’s findings provide a roadmap for future research and standard-setting efforts, signaling a new era in sustainability reporting.
Global Trends in BEES Disclosures
The ISSB survey, conducted in August 2024, gathered responses from 26 jurisdictions across five regions. These responses revealed that most participating jurisdictions have mandatory BEES-related disclosure requirements. This growing regulatory focus reflects biodiversity and ecosystems’ critical role in long-term economic resilience and corporate risk management. A few key themes emerged from the survey:
Water, Waste, and Biodiversity Lead the Way
- Water: Water-related disclosures are the most common globally, with nearly all jurisdictions requiring companies to report on water use, consumption, and recycling. For instance, South Korea, Hong Kong, and the EU have set strict guidelines on water usage and pollution, with the EU further requiring detailed metrics for water-stressed areas.
- Waste and Resource Use: Waste management is another critical area, with many jurisdictions demanding data on waste generation, recycling, and reuse. Some, like the UK, extend this to include raw material consumption, addressing the increasing importance of the circular economy.
- Biodiversity: Several regions, including the EU and China, mandate disclosures on biodiversity impacts, encouraging companies to report on their contributions to biodiversity conservation and restoration efforts. For example, the EU’s Corporate Sustainability Reporting Directive (CSRD) now covers biodiversity and ecosystems, enforcing detailed reporting on company impacts and mitigation efforts.
Jurisdictional Variations in BEES Reporting
While most countries share common themes in BEES reporting, significant variations exist. For example:
- Industry-specific Approaches: Chile's industry-specific standards based on the Sustainability Accounting Standards Board (SASB) framework highlight a tailored approach, aligning reporting with sector-specific risks and opportunities.
- Regional Differences: Countries like Japan and Australia are at different stages of BEES disclosure maturity. Japan focuses more on human capital reporting, while Australia begins developing biodiversity-specific regulations.
Upcoming Standards and International Initiatives
Many jurisdictions closely monitor global initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD), which is expected to play a significant role in future BEES reporting. The European Union’s Green Deal and similar initiatives in Asia and Latin America also signal a growing interest in aligning national regulations with international frameworks.
Human Capital: The Next Frontier of Sustainability Reporting
The survey also found that nearly all respondents have mandatory human capital-related disclosures. This aligns with the growing understanding that a company’s workforce is a critical asset, directly influencing its sustainability and long-term success. Here are the key themes:
Diversity, Inclusion, and Pay Transparency
- Diversity and Inclusion: Jurisdictions such as Australia, the EU, and Japan require companies to disclose workforce diversity metrics, focusing heavily on gender representation at both board and employee levels. Gender pay gap reporting is mandatory in countries like the UK, ensuring accountability in remuneration practices.
- Well-being and Safety: Jurisdictions like Brazil, Hong Kong, and India emphasize employee well-being and safety, requiring companies to disclose policies that ensure a safe working environment. This includes occupational health and the protection of workers from hazards, highlighting the importance of human capital management in risk mitigation.
Workforce Training and Development
With the rise of technology and automation, workforce development has become a key area of disclosure. Jurisdictions like Brazil, the EU, and India require companies to report on training programs, particularly those related to human rights and career development.
Labor Conditions in the Value Chain
Many jurisdictions are beginning to address labor conditions across the value chain. For instance, Australia and Canada require companies to disclose their efforts to combat modern slavery, child labor and forced labor in their supply chains. This trend points to a broader acknowledgment that companies are responsible for their direct employees and the conditions within their global supply chains.
The Road Ahead: ISSB’s Next Steps
In response to the survey, the ISSB has outlined a series of steps to further research and standard development in BEES and human capital reporting:
- Enhanced Investor Engagement: The ISSB will continue to engage with investors to understand better which disclosures are most decision-useful. This will help shape future reporting standards that are tailored to investor needs.
- Jurisdictional Research and Collaboration: The ISSB plans to conduct bilateral engagements with key jurisdictions to understand existing reporting frameworks better. This will allow for identifying gaps in current disclosures and help create a global baseline for sustainability reporting.
- Alignment with Global Initiatives: The ISSB will work closely with international bodies like the TNFD and the Global Reporting Initiative (GRI) to ensure their standards align with global best practices, enhancing the interoperability of sustainability-related financial disclosures across borders.
Additional Insights
- The Role of Technology: With AI and data analytics advancements, companies can track and report sustainability metrics more accurately than ever. These technologies could significantly improve real-time reporting on biodiversity impacts and workforce conditions, making disclosures more actionable for investors.
- Future of Regulations: As countries like the EU and the UK implement stricter sustainability standards, mandatory global disclosures may become the norm within the next decade. This will drive corporate transparency and create a level playing field for businesses worldwide.
