The Make-or-Break Decade for the SDGs has begun

Governance and Sustainable Supply
Chains for the second half of 2021. The
legislative package is completed with
an amendment to the directive on nonfinancial
reporting. This legislative initiative
is to be seen in the context of the
European Green Deal and the (Covid-19)
Recovery Plan, and it aims to anchor
sustainability even more firmly in corporate
governance.
The push for a global ESG standard
Ever since a European task force was
created for Europe to define its own ESG
reporting standards, the momentum
toward the standardization of sustainability
or non-financial reporting has
been building fast. The push toward a
global ESG standard will bring together
the existing frameworks.
Even those responsible for creating the
big standards have recognized the signs
of the times and are relying now more
strongly on “cooperation” instead of the
previous language of “interoperability,”
“complementarity,” and “concurrence.”
WEF Chair Klaus Schwab says: “We are
working together with standard-setting
agencies and governments, not to create
a competition, but to create a generally
accepted common framework of metrics.
It needs a key number of companies
to report, but to then integrate this in
standard-setting.”
At the content level, therefore, no major
surprises are to be expected. With areas
such as climate change, environment,
labor rights, health and safety, as well
as human rights due diligence, central
topics are already clearly identified. The
real game changer, however, lies in the
field of materiality: Materiality is an ambiguous
concept. In the end, it is always
a question of the observer. Different
stakeholder groups perceive the materiality
of sustainability items differently.
Investors, for example, have a narrower
view than those who examine the SDGs.
THE MATERIALITY DISCUSSION
ENCOMPASSES AT LEAST THREE
DIMENSIONS:
1. Materiality referring to reporting
standards
The reporting specialists at Datamaran
rightly pointed out in their blog recently
that we need to distinguish at least three
levels in each company case: There are
general questions, sector-specific questions,
and company-specific questions.
Only when we interpret the requirements
in such a tailor-made way do we
get a meaningful reporting architecture.
Datamaran writes: “Looking at sectorspecificity,
EU standards should cover
three layers: sector-agnostic (applicable
across sectors), sector-specific (ensuring
the necessary level of detail per sector),
and entity-specific (depicting the entity’s
unique situation). The third layer
TARGET ARCHITECTURE
3 L A Y E R S
1. SECTOR-SPECIFIC
2. SECTOR-SPECIFIC
3. ENTITY-SPECIFIC
SUSTAINABILITY REPORTING
Sustainability Statements
demands that reporting entities ‘own’
their double materiality assessment
process. Hence, the sector-agnostic and
sector-specific standards do not replace a
materiality assessment, which companies
will be required to conduct.”
2. Materiality referring to issues
Traditionally, materiality is defined by
issues that are material to a company
and other issues that are subordinate.
But this is only the internal view. From
an outside perspective, the question is:
Who defines materiality? The investor?
That is the classic ESG lens. Or is it about
the interaction between the influence
the company has on its environment
and the environment on the company?
This means that all sustainability-related
facts that are necessary to understand
the company’s business performance,
situation, and results must be published,
but also information that is necessary
to understand the company’s impact on
society. This is the current perspective
3 REPORTING AREAS
Strategy, Implementation,
Performance measurement
3 TOPICS
Environmental, Social,
Governance
Source: Sustainable Finance Research Platform, Mercator Stiftung
22 Global Goals Yearbook 2021