Comparison of Significant Sustainability-Related Reporting Requirements
Background
After many years of voluntary reporting, various regulators and
standard setters around the world have established requirements for disclosures
of certain sustainability-related information. The most significant
sustainability-related reporting regulations and standards are those established
by the SEC and the state of California1 in the United States, the European Union via the Corporate Sustainability Reporting
Directive (CSRD), and the International Sustainability
Standards Board (ISSB) within the IFRS Foundation. The landscape is evolving
rapidly, as highlighted by the SEC’s recent withdrawal of its legal defense for
its currently stayed climate rule and the European Commission’s (EC’s) proposed
omnibus initiative that will delay and potentially modify certain reporting
requirements of the CSRD and other E.U. sustainability reporting
regulations.
This publication summarizes and compares the key
sustainability-related requirements issued by those bodies. It is intended to
help U.S.-based entities that might have to report under more than one
regulatory framework as well as entities that were preparing to adopt the SEC’s
climate disclosure rule or the CSRD and want to understand how to leverage such
preparation when applying other sustainability requirements (e.g., those issued
by the state of California or the ISSB). The complete requirements of each body
are not summarized or analyzed; instead, this publication focuses on key
similarities and differences between them. Note that although the disclosure
requirements under various frameworks may overlap, the information an entity
provides under one set of regulations may not necessarily be accepted as
sufficient by other regulators. Thus, an entity should assess whether it has met
the specific obligations of every framework under which it is required to
report. In addition, certain standard setters have issued guidance to help
entities prepare disclosures under multiple frameworks. For example, the
interoperability guidance issued jointly by
the ISSB, EC, and EFRAG summarizes interactions between the CSRD’s and ISSB’s
requirements, although this guidance may need to be updated as a result of
changes to the CSRD made by the EC's proposed omnibus legislation (see the
CSRD
Requirements section below). For links to Deloitte publications
that discuss these frameworks in greater detail, see the Other Resources
section.
Overview of Sustainability-Related Reporting Regulations and Standards
The SEC’s climate disclosure rule, California’s climate
legislation, the CSRD, and the ISSB standards (collectively, the “regulations
and standards”) are briefly summarized below. These regulations and standards
have incorporated, to varying degrees, the work of the Task Force on
Climate-Related Financial Disclosures (TCFD),2 whose recommendations were widely used for
voluntary reporting on climate-related risks and opportunities. The TCFD
recommendations are organized into four core elements: (1) governance, (2)
strategy, (3) risk management, and (4) metrics and targets. The regulations and
standards addressed in this publication reflect disclosure requirements related
to these four core elements. For reporting of greenhouse gas (GHG) emissions,
each regulator and standard setter refers to the GHG
Protocol, which provides broadly applied standards and
guidance on the disclosure of such emissions.
SEC Climate Disclosure Rule
On March 6, 2024, the SEC issued a final rule3 that requires registrants to provide climate disclosures, both within
and outside the financial statements, in their annual reports and
registration statements, including those for initial public offerings.
However, on April 4, 2024, the SEC voluntarily stayed the effective date of the final
rule pending judicial review by the Eighth Circuit Court of Appeals of
petitions challenging it. On March 27, 2025, the SEC voted to withdraw its legal defense of the final
rule. On April 24, 2025, the court issued an order pausing the case and
instructed the SEC to provide a status report within 90 days indicating
whether it intends to review or reconsider the rule. At the time of this
writing, it is uncertain how the litigation will move forward or whether the
SEC will amend or repeal the rule. However, it is unlikely that the final
rule will continue in its current form even if the court upholds it or the
litigation is dropped given that (1) the current SEC chairman co-authored an
opinion piece in 2022 questioning the
final rule’s legality and (2) two of the three other current SEC
commissioners voted against issuing the final rule.
California Climate Legislation
On October 7, 2023, California Governor Gavin Newsom signed
into law two state senate bills and one state assembly bill that
collectively require certain public and private U.S. entities that perform
various business activities in California to provide disclosures about their
GHG emissions, climate-related financial risks, voluntary carbon offsets
(VCOs),4 and specified climate-related emission claims. The two state senate
bills, SB-2535 and SB-261,6 establish industry-agnostic U.S. regulations that mandate the
corporate reporting of GHG emissions and climate risks in the United States.
Certain requirements of those bills were subsequently amended by
SB-219,7 which was signed into law on September 27, 2024. This publication
summarizes the key requirements of SB-253 and SB-261, as amended by SB-219.
The state assembly bill, AB-1305,8 establishes requirements for both U.S. and international entities that
market or sell VCOs within California as well as entities that operate in
California and make certain climate-related emission claims (whether or not
they purchase or use VCOs). The requirements of AB-1305 are not comparable
to the other regulations and standards addressed in this publication and are
therefore not included in the comparison summary below. For links to
Deloitte publications that discuss AB-1305, see the Other Resources
section.
CSRD Requirements
The Council of the European Union adopted the CSRD,9 effective January 2023, to support the European Green Deal — a package of
initiatives to cut GHG emissions, direct investment toward sustainability
initiatives, invest in research and innovation, and preserve Europe’s
natural environment. Each E.U. member state was required to incorporate the
CSRD into its national laws and establish regulations and administrative
provisions necessary for compliance with it by July 2024. However, as of the
date of this publication, not all E.U. member states have completed this
process. Upon adoption of the CSRD, E.U. member states are able to include
certain additional local requirements.
The CSRD requires entities to report under the
European Sustainability Reporting
Standards10 (ESRS), which were adopted by the EC in July 2023 and published in the
Official Journal of the European Union in December 2023. Drafted
by EFRAG, the ESRS must be applied by entities within the CSRD’s scope.11
On February 26, 2025, the EC published its proposed omnibus
legislation package that aims to significantly reduce the sustainability
reporting and due diligence requirements for entities that are currently
within the scope of the CSRD, the E.U. taxonomy (EUT),12 and the Corporate Sustainability Due Diligence
Directive (CSDDD). Specifically, the EC published:
-
Omnibus I — COM(2025) 8013 (“Omnibus I”), which postpones (1) the application of the reporting requirements in the CSRD for waves 2 and 3 (see the effective date discussion for the CSRD below) by two years and (2) the transposition deadline and application of the CSDDD. Omnibus I became effective on April 17, 2025, and E.U. member states must incorporate its requirements into their national laws by December 31, 2025.
-
Omnibus I — COM(2025) 8114 (“Omnibus II”), which would modify the scope and reporting requirements of the CSRD, EUT, and CSDDD. Omnibus II content changes are currently undergoing public consultation related to potential revisions and will be submitted to the European Parliament and the EC in accordance with the European Union’s regular legislative process, with no set date for completion at this time.
The Detailed
Comparison section below includes discussion of the CSRD’s
original requirements as well as known key changes that would be made under
the omnibus legislation. See Deloitte’s March 7, 2025, Heads Up for
additional information about the omnibus legislation, and stay tuned for
further updates.
ISSB Standards
The IFRS Foundation established the ISSB to develop
consistent and comparable disclosure requirements that can enhance the
decision-usefulness of sustainability information for investors as well as
to improve the alignment and interoperability of global climate-related
guidance by reducing the reporting burden for preparers. In June 2023, the
ISSB issued its first two standards, IFRS S115 and IFRS S2.16 The ISSB reported in May 2024 that
“[j]urisdictions representing over half the global economy by gross domestic
product (GDP) have announced steps to use the [ISSB standards] or to fully
align their sustainability disclosure standards with those of the ISSB.”
These jurisdictions include Australia, China, Brazil, Canada, Japan, Mexico,
and the United Kingdom, among others. In a July 2023 media release, the International Organization of
Securities Commissions endorsed the ISSB standards and encouraged its member
jurisdictions — which regulate more than 95 percent of the world’s financial
markets — to consider how they “might adopt, apply or otherwise be informed
by the ISSB standards within the context of their jurisdictional
arrangements.” The IFRS Foundation maintains a list of open and completed
jurisdictional sustainability
consultations to track jurisdictional progress toward
adoption. Deloitte also maintains an ISSB adoption tracker.
Comparison Summary
The table below summarizes key aspects of the regulations and
standards and highlights requirements that overlap but are not necessarily
equivalent (see the legend below the table
for explanations of the symbols within it). The Detailed Comparison section provides
additional information about these requirements.
|
SEC Climate Disclosure Rule17
|
California Climate Legislation18
|
CSRD19
|
ISSB Standards
| |||||||
|---|---|---|---|---|---|---|---|---|---|---|
|
Scope, Effective Date, and Materiality
| ||||||||||
|
Public SEC registrants
|
U.S.-based public and private entities and U.S.-based
subsidiaries of non-U.S.-based entities doing business
in California, subject to revenue thresholds
|
Public and private entities in (or listed in) the
European Union, including subsidiaries or branches of
non-E.U. entities when certain criteria are met
|
Subject to jurisdictional mandate (or voluntary
adoption)
| |||||||
|
Climate disclosures
|
|
|
|
| ||||||
|
Nonclimate
disclosures (e.g., about other sustainability
topics)
|
|
| ||||||||
|
Starting with 2025 information (due in
2026)20
|
SB-253: 2025 information (due in 2026)
SB-261: first biennial report due by January 1, 2026
|
Starting with 2024 information (due in
2025), depending on entity structure and size
|
Effective January 1, 2024, subject to jurisdictional
mandate
| |||||||
|
Financial materiality
|
SB-253: not specified
SB-261: financial materiality
|
Double materiality
|
Financial materiality
| |||||||
|
Climate-Related Disclosure Requirements
| ||||||||||
|
Risks only
|
Risks only
|
Impacts, risks, and opportunities
(IROs)
|
Risks and opportunities
| |||||||
|
Governance
|
|
|
|
| ||||||
|
Strategy
| ||||||||||
|
Risk management
| ||||||||||
|
Scenario analysis
|
| |||||||||
|
Targets and
goals
| ||||||||||
|
Scope 1 and Scope 2 GHG
emissions
| ||||||||||
|
Organizational boundary
|
Policy choice
|
Policy choice
|
Financial control, with additional considerations
|
Policy choice
| ||||||
|
Treatment of carbon
offsets
|
| |||||||||
|
Scope 3 GHG emissions
| ||||||||||
|
GHG emission intensity
disclosures
| ||||||||||
|
| ||||||||||
|
Other Requirements
| ||||||||||
|
Registration statements and annual reports filed with the
SEC
|
Digital platform or entity Web site
|
Dedicated section of management report within annual
report21
|
General-purpose financial reports,
subject to individual jurisdictional mandate
| |||||||
|
| ||||||||||
| ||||||||||
Detailed Comparison
The tables below compare additional details about the requirements summarized in
the previous section related to the regulations and standards.
Scope, Effective Date, and Materiality
Scope
|
Affected Entities
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
All U.S. domestic and foreign registrants are
affected except for asset-backed issuers and Form
40-F filers. Disclosures are not required for
financial statements prepared under Regulation
S-X, Rule 3-05 (significant acquirees), or
Regulation S-X, Rule 3-09 (significant investees),
unless entities are already subject to such
disclosures.
|
|
California climate legislation
|
SB-253 and SB-261 apply to both
private and public U.S. entities (and U.S.-based
subsidiaries of non-U.S.-based entities) that do
business in California and exceed the annual
revenue thresholds defined in the bills. Entities
with over $500 million in annual revenues that do
business in California (“covered entities”) will
need to comply with SB-261. Entities with over $1
billion in annual revenues that do business in
California (“reporting entities”) will need to
comply with SB-253.
|
|
CSRD
|
The scope of the CSRD generally depends on how
many employees the entity has, its turnover
(revenue), and its total assets. The scope of the
CSRD includes:
|
|
ISSB standards
|
The standards apply to
jurisdictions that have adopted them or to
entities that voluntarily comply with them.
|
|
Type of Disclosures (Climate vs. Nonclimate)
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
Entities are required to disclose climate-related
matters only.
|
|
California climate legislation
|
Entities are required to disclose climate-related
matters only.
|
|
CSRD
|
The first set of ESRS contains
12 standards that apply to all sectors and cover
the sustainability matters specified in the CSRD.
ESRS 122 establishes principles and general
requirements for disclosure, and ESRS 223 establishes disclosure requirements that
apply to entities regardless
of materiality. The remaining 10 standards are
topical and address various environmental
(including climate), social, and governance
matters. As part of Omnibus II, the ESRS
requirements may be modified. The EC is expected
to adopt, by delegated acts, reporting standards
for non-E.U. entities and voluntary standards for
SMEs.
|
|
ISSB standards
|
IFRS S1 establishes principles and general
requirements for reporting information about
all relevant sustainability-related risks
and opportunities.
IFRS S2 establishes requirements for disclosing
information about climate-related risks and
opportunities.
The ISSB has embarked on a work plan to develop
further reporting requirements for
sustainability-related matters in addition to
climate, including industry-specific requirements
that leverage the standards issued by the
Sustainability Accounting Standards Board (SASB).
|
Effective Date
|
SEC climate disclosure rule
(stayed; see status above)
|
The SEC has voluntarily stayed
the final rule’s effective date (May 28, 2024)
pending judicial review and has withdrawn its
legal defense of the rule. On the basis of the
original effective dates, for registrants with a
calendar year-end, compliance would be required
beginning on January 1 of the following years:
In accordance with the rule’s transition
provisions, certain disclosure and assurance
requirements would be phased in later, and some,
depending on registrant type, would never apply.
See the Other Resources
section for more information.
|
|
California climate legislation
|
Under SB-253, entities would
report Scope 1 and Scope 2 GHG emissions starting
in 2026 by a date to be determined by the
California Air Resources Board (CARB). Entities’
reports furnished in 2026 would include 2025 GHG
emissions data. Entities would begin reporting
Scope 3 GHG emissions in 2027, on the basis of
2026 GHG emissions data, in accordance with a
schedule specified by CARB.
Under SB-261, an entity must post a
climate-related financial risk report on its Web
site on or before January 1, 2026, and biennially
thereafter. The report should include information
pertaining to the most recent fiscal year an
entity would need to use to meet the deadline
(e.g., entities with a calendar year-end may
prepare a report as of December 31, 2024, to
comply with the January 1, 2026, due date).
|
|
CSRD
|
The date on which an entity is subject to the
CSRD depends on its structure and size.
Accordingly, the CSRD is effective in financial
years beginning on or after:
In addition, certain disclosure
requirements in the ESRS are phased in for all
entities, but some phase-ins depend on an entity’s
size.
In addition to the reporting delay under Omnibus
I, Omnibus II would (1) simplify the scope of
waves 1–3 to include “large undertakings”26 with more than 1,000 employees thus
eliminating wave 3, and (2) increase the
thresholds for wave 4 to €450 million of net
turnover in the European Union and €50 million of
net turnover by an E.U. branch.
|
|
ISSB standards
|
IFRS S1 and IFRS S2 are effective for annual
reporting periods beginning on or after January 1,
2024; however, the specific effective date for
jurisdictions that adopt the ISSB standards
depends on the jurisdiction.
|
Materiality
In the SEC climate disclosure rule and ISSB standards, a financial
materiality concept is applied, whereas the ESRS are viewed through a
“double materiality” lens that encompasses both impact materiality and
financial materiality.
|
SEC climate disclosure rule
(stayed; see status above)
|
Materiality is defined in accordance with the
definition established by the U.S. Supreme Court;
that is, “a matter is material if there is a
substantial likelihood that a reasonable investor
would consider it important when determining
whether to buy or sell securities or how to vote
or such a reasonable investor would view omission
of the disclosure as having significantly altered
the total mix of information made available.” In
addition, materiality is based on facts and
circumstances and takes into account qualitative
and quantitative factors.
All disclosures are subject to an entity’s
materiality assessment.
|
|
California climate legislation
|
SB-253 does not mention the concept of
materiality.
SB-261 also does not mention the
concept of materiality; however, it requires an
entity to disclose its climate-related financial
risk report in accordance with the recommendations
of the TCFD, which note that “in determining
whether information is material, the Task Force
believes organizations should determine
materiality for climate-related issues consistent
with how they determine the materiality of other
information included in their financial
filings.”27 While SB-261 refers to the TCFD, it also
states that ISSB reporting would satisfy these
requirements. See the ISSB standards discussion
below.
|
|
CSRD
|
The ESRS require entities to
apply a “double materiality” concept. Under this
approach, a sustainability matter is material for
entities when it meets one of the following
criteria related to impact materiality, financial
materiality, or both:
All entities must apply the
requirements of ESRS 1 and ESRS 2. Disclosures
required under the 10 topical ESRS are subject to
an entity’s double materiality assessment. See the
Climate-Related Risks and
Opportunities section for discussion of
the disclosures required when an entity determines
that climate-related IROs are not material. When
releasing the omnibus legislation, the EC
confirmed its intent to maintain the “double
materiality” concept.
|
|
ISSB standards
|
An entity must disclose material
information about the sustainability-related risks
and opportunities that could reasonably be
expected to affect its prospects. Information is
material if omitting, misstating, or obscuring it
could reasonably be expected to influence
decisions that primary users of general-purpose
financial reports make on the basis of those
reports, which include financial statements and
sustainability-related financial disclosures. All
disclosures are subject to an entity’s materiality
assessment.
In November 2024, the ISSB released
educational material describing
the characteristics of material information in the
context of sustainability reporting.
|
Climate-Related Disclosure Requirements
This section compares the climate-related disclosure requirements under the
regulations and standards, which frequently overlap.
Climate-Related Risks and Opportunities
Building on the TCFD’s recommendations, the regulations and standards
include disclosure requirements associated with climate-related risks
and opportunities, with certain exceptions. Climate-related risks
represent potential negative effects associated with climate change and
are typically categorized as either physical risks or transition risks.
Climate-related opportunities, on the other hand, represent potential
positive effects associated with efforts to adapt to or mitigate climate
change.
|
SEC climate disclosure rule
(stayed; see status above)
|
Entities are required to disclose material
climate-related risks only; disclosure of
climate-related opportunities is optional.
|
|
California climate legislation
|
Under SB-261, an entity must
prepare and post on its Web site a report that
discloses the entity’s material “climate-related
financial risk” in accordance with the TCFD
recommendations or any successor or equivalent
reporting requirements, including the ISSB
standards. Although SB-261 does not specifically
require disclosure of climate-related
opportunities, reporting under the TCFD
recommendations would be expected to include
disclosures of the entity’s climate-related risks
and opportunities. This may be clarified by future
guidance issued by the state of California.
|
|
CSRD
|
Entities must disclose climate-related IROs.
If an entity determines that its
climate-related IROs are not material and
therefore omits all of the disclosures required
under ESRS E1, the entity must provide a detailed
explanation of the conclusions of its materiality
assessment associated with climate change,
including a forward-looking analysis of the
conditions that could lead the entity to determine
that climate change is material in the future.
|
|
ISSB standards
|
IFRS S2 requires entities to disclose material
information about their climate-related risks and
opportunities.
|
TCFD-Aligned Disclosures
To provide information about climate-related risks and
opportunities, the regulations and standards have incorporated, to
varying degrees, the core elements of the TCFD recommendations related
to governance, strategy, risk management, and metrics and targets. For
example, each regulation and standard requires an entity to disclose:
-
The role (or roles) of the entity’s governing body (or bodies) in overseeing and managing climate-related risks and opportunities.
-
How climate-related risks (and opportunities, if such disclosure is required) affect the entity’s strategy, results of operations, and financial condition, including details of the entity’s:
-
Transition plan, if one exists, for shifting its operations to a lower-carbon economy.
-
Scenario analysis, if used, for assessing the business implications of climate-related risks and opportunities.
-
-
The entity’s climate risk management process, including the identification, assessment, and response to identified climate-related risks.
-
The details of the entity’s material climate-related targets or goals (e.g., GHG emission reduction targets), and how the entity intends to meet such targets or goals.
In addition, the regulations and standards specify disclosure
requirements associated with climate-related metrics, the most
significant of which is GHG emission disclosures (for more information,
see the GHG Emissions section below).
However, each regulation and standard also includes certain unique or
exclusive TCFD-aligned disclosure requirements. Some important
considerations are summarized below.
|
SEC climate disclosure rule
(stayed; see status above)
|
In an entity’s disclosures about strategy:
In addition, entities must disclose information
about their climate-related targets or goals
only if they materially affect or are
reasonably likely to materially affect the
business, results of operations, or financial
condition.
|
|
California climate legislation
|
While the California bills do
not include specific disclosure requirements
related to the core elements of the TCFD
recommendations, entities within the scope of
SB-261 are expected to report climate-related
financial risks in accordance with the TCFD
framework (or any successor or equivalent
reporting requirements, such as the ISSB
standards). The report would be expected to
include disclosures about an entity’s governance,
strategy, risk management, and metrics and
targets. In accordance with the TCFD’s
recommendations, an entity would disclose the
details of its transition plan, if one exists, in
connection with emission reduction targets as well
as its scenario analysis, only if used, to assess
the resilience of its strategy and business model
to climate change (climate resilience).
|
|
CSRD
|
In its disclosures about strategy, an entity that
does not have a transition plan must indicate
whether and, if so, when it will adopt a
transition plan. Further, an entity must disclose
the details of its scenario analysis, only if
used, to assess its climate resilience.
|
|
ISSB standards
|
An entity’s disclosures about strategy
must include a discussion of its use of
scenario analysis to assess its climate
resilience.
|
GHG Emissions
California’s SB-253, the CSRD, and the ISSB standards
require entities to consider the principles, standards, and guidance in
the GHG Protocol when reporting GHG emissions. The SEC climate
disclosure rule does not require entities to use a specific method for
calculating GHG emissions, but it does contain references to the GHG
Protocol. Although there are some similarities among these rules and
standards, the nature of the required GHG disclosures also differs.
As noted in the Climate-Related Risks and
Opportunities section above, California’s SB-261 requires
entities to prepare a climate-related financial risk report that
discloses such risks in accordance with the TCFD recommendations or with
any successor or equivalent reporting requirements (including the ISSB
standards). Both the TCFD recommendations and the ISSB standards require
entities to disclose GHG emissions; accordingly, entities subject to
SB-261 may need to report GHG emissions even if they are not subject to
the requirements of SB-253. This may be clarified in future guidance
issued by the state of California. The table below discusses only the
requirements of SB-253 (which addresses GHG emission reporting), not
SB-261.
For additional information and comprehensive guidance on the GHG
Protocol, including discussion of the concepts of organizational and
operational boundaries, see the Other Resources
section.
|
Scope 1 and Scope 2 GHG Emissions
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
Large accelerated filers and
accelerated filers (other than SRCs and EGCs) must
separately disclose gross Scope 1 and Scope 2 GHG
emissions in metric tons of carbon dioxide
equivalent (CO2e) if such disclosures
are material. Nonaccelerated filers, SRCs, and
EGCs are exempt from this requirement. The rule
contains references to, but does not require
entities to apply, the GHG Protocol.
|
|
California climate legislation
|
SB-253 requires reporting
entities to disclose Scope 1 and Scope 2 GHG
emissions in accordance with the GHG Protocol.
|
|
CSRD
|
Entities must separately disclose their gross
Scope 1 and Scope 2 GHG emissions in metric tons
of CO2e and consider the principles,
requirements, and guidance in the GHG Protocol.
|
|
ISSB standards
|
IFRS S2 requires an entity to
separately disclose its gross Scope 1 and Scope 2
GHG emissions in metric tons of CO2e.
Such amount must be measured in accordance
with the GHG Protocol unless the entity is
required by a jurisdictional authority or an
exchange on which it is listed to use a different
method for measuring its GHG emissions.
|
|
Organizational Boundary
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
A method for measuring GHG emissions (financial
control, operational control, or equity share) is
not prescribed, but entities must disclose the
measurement method used and explain any material
differences resulting from the organizational
boundaries used and “the scope of entities and
operations included in [their] consolidated
financial statements.”
|
|
California climate legislation
|
SB-253 does not prescribe a method for measuring
GHG emissions; however, it notes that GHG
emissions should be calculated in accordance with
the GHG Protocol, which allows entities to select
whether to use the financial control, operational
control, or equity share consolidation approach
and thus establish and consistently apply a policy
for measuring GHG emissions.
|
|
CSRD
|
ESRS E1 requires entities to use
the financial control approach for calculating the
GHG emissions for the consolidated accounting
group (i.e., the same organizational boundaries as
the consolidated financial statements). The
operational control approach must also be applied
for all other entities, assets, and sites
(including associates, joint ventures, or
unconsolidated subsidiaries) over which the
reporting entity does not have financial
control.
|
|
ISSB standards
|
Under IFRS S2, an entity may use any method to
measure GHG emissions that is in accordance with
the GHG Protocol (financial control, operational
control, or equity share). However, IFRS S2
requires entities to disclose the method used and
to separately disaggregate the emissions between
the consolidated accounting group and other
investees excluded from the consolidated
accounting group.
|
|
Treatment of Carbon Offsets
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
Carbon offsets must be excluded from GHG emission
calculations and disclosures (i.e., gross emission
presentation). In addition, entities are required
to include certain disclosures about carbon
offsets (see the Climate-Related
Financial Effects section below).
|
|
California climate legislation
|
SB-253 requires reporting
entities to disclose GHG emissions in accordance
with the GHG Protocol. Accordingly, entities must
report GHG trades (purchases or sales of
allowances, offsets, and credits) separately and
independently of the entity’s GHG emission
calculations (i.e., gross emission
presentation).
|
|
CSRD
|
Entities are required to separately disclose
information about carbon offsets, if used.
However, carbon offsets must be excluded from GHG
emission calculations and disclosures (i.e., gross
emission presentation).
|
|
ISSB standards
|
IFRS S2 requires an entity to
disclose its planned use of carbon offsets to
achieve any net GHG emission targets that the
entity has set, or any that it is required to meet
by law or regulation, to allow users of
general-purpose financial reporting to understand
the extent to which the entity relies on these
carbon offsets to achieve the net GHG emission
targets. In addition, carbon offsets must be
excluded from GHG emission calculations and
disclosures (i.e., gross emission presentation).
|
|
Scope 3 GHG Emissions
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
Disclosure of Scope 3 GHG emissions is not
required.
|
|
California climate legislation
|
SB-253 requires the disclosure of Scope 3 GHG
emissions in accordance with the GHG Protocol.
|
|
CSRD
|
Entities must disclose (1) total gross Scope 3
GHG emissions in metric tons of CO2e,
including significant Scope 3 categories, in
accordance with the categories described in the
GHG Protocol and (2) disaggregated emissions by
each significant category.
|
|
ISSB standards
|
IFRS S2 requires entities to disclose total gross
Scope 3 GHG emissions in metric tons of
CO2e, including which of the Scope 3
categories are contained in the calculation, in
accordance with the categories described in the
GHG Protocol.
Further, IFRS S2 requires the disclosure of
additional information about the entity’s Category
15 GHG emissions or those associated with
investments (financed emissions) if the
entity’s activities include asset management,
commercial banking, or insurance as well as
additional information necessary to ensure that
material information is not obscured, which may
include disaggregated information about
individually significant categories included in
Scope 3.
|
|
GHG Emission Intensity Disclosures
| |
|---|---|
|
SEC climate disclosure rule
(stayed; see status above)
|
GHG emission intensity disclosures are not
required.
|
|
California climate legislation
|
GHG emission intensity disclosures are not
required.
|
|
CSRD
|
Entities must disclose GHG emission intensity,
which represents total GHG emissions, including
Scope 1, Scope 2, and Scope 3 emissions, per unit
of net revenue.
|
|
ISSB standards
|
GHG emission intensity disclosures are not
required.
|
Climate-Related Financial Effects
The SEC climate disclosure rule, the CSRD, and the ISSB standards require
entities to disclose the effects of climate-related matters on the
financial statements. However, the extent and location of the
disclosures under those rules and standards differ.
|
SEC climate disclosure rule
(stayed; see status above)
|
Entities must disclose within the audited
financial statements:
Outside the audited financial statements, the
rule requires entities to disclose quantitative
and qualitative information about material
expenditures and impacts on financial estimates
and assumptions that are the direct result of (1)
mitigation of or adaptation to climate-related
risks, (2) disclosed transition plans, or (3) the
disclosed targets or goals, or actions taken to
achieve or progress toward those targets or
goals.
|
|
California climate legislation
|
SB-261 requires an entity to
disclose its climate-related financial risk report
in accordance with the recommendations of the
TCFD. Although SB-261 does not specifically
require disclosure of climate-related
opportunities, the TCFD framework recommends
disclosure of the actual and potential effects of
climate-related risks and opportunities on an
entity’s financial performance and position.
|
|
CSRD
|
Entities must disclose within
their management report how material risks and
opportunities identified affect their financial
position, financial performance, and cash flows
for the reporting period as well as over the
short-, medium-, and long-term. In addition,
entities should disclose reconciliations of the
referenced assets, liabilities, and net revenue
amounts to the financial statements.
|
|
ISSB standards
|
IFRS S2 requires entities to
provide, within the sustainability disclosures,
information about the effects of climate-related
risks and opportunities on the entity’s financial
position, financial performance, and cash flows
for the reporting period as well as the
anticipated effects on the entity’s financial
position, financial performance, and cash flows
over the short-, medium-, and long-term.
|
Industry- or Sector-Specific Information
|
SEC climate disclosure rule
(stayed; see status above)
|
No industry-specific disclosures are
required.
|
|
California climate legislation
|
No industry-specific disclosures are
required.
|
|
CSRD
|
Currently, ESRS do not contain
industry- or sector-specific standards. While
EFRAG was expected to publish such standards (see
EFRAG’s sector-specific
ESRS workstreams), Omnibus II
would eliminate the requirement for them.
|
|
ISSB standards
|
IFRS S2 requires entities to disclose
industry-based metrics that are associated with
particular business models, activities, or other
common features that characterize participation in
an industry. The ISSB has also published
industry-based guidance on implementing IFRS S2
that is derived from the standards issued by the
SASB (which are maintained by the ISSB). Entities
must consider such guidance when identifying and
disclosing material information about
climate-related risks and opportunities associated
with their industry. The industry-based guidance
does not establish additional disclosure
requirements.
|
Other Requirements
Location of Disclosures
|
SEC climate disclosure rule
(stayed; see status above)
|
Annual disclosures, other than
Scope 1 and Scope 2 GHG emissions, must be
provided in registration statements and annual
reports in Form 10-K for U.S. registrants and in
Form 20-F for foreign private issuers (FPIs) at
the time of the original filing, and certain
information must be presented in the audited
financial statements. U.S. registrants may provide
annual GHG emission disclosures (1) in their
second-quarter Form 10-Q for the annual period
after the year to which the emission disclosures
are related or (2) by amending their Form 10-K by
the due date of their second-quarter Form 10-Q.
FPIs may provide the GHG emission disclosures in
an amendment to their annual report on Form 20-F
due 225 days after the end of their fiscal
year.
Further, entities must electronically tag the
required financial statement disclosures as well
as those provided outside the financial
statements, including material expenditures and
impacts and GHG emissions.
|
|
California climate legislation
|
SB-253 requires reporting
entities to provide their annual disclosures to
California’s emission reporting organization via a
digital platform that will be established by
CARB.
SB-261 requires covered entities to make
available on their Web sites their climate-related
risk report, which they would provide
biennially.
|
|
CSRD
|
Entities must present information about
sustainability matters in a dedicated section of
their annual management report or consolidated
management report. No disclosures are required
within the financial statements. The management
report is submitted on the basis of the
requirements of the relevant regulator and E.U.
member state and must be filed together with the
financial statements.
Non-E.U. parent entities with E.U.-based
subsidiaries that are within the scope of the CSRD
have the following sustainability reporting
options under the CSRD:
To avoid duplication of
information, entities may provide cross-references
in specified locations, subject to certain
conditions, including cross-references by an E.U.
subsidiary to a non-E.U. parent entity’s
CSRD-compliant consolidated sustainability report.
The CSRD also requires entities to electronically
tag the sustainability statements.
|
|
ISSB standards
|
An entity must disclose the
information required under the IFRS Sustainability
Disclosure Standards as part of its
general-purpose financial reporting package. The
entity’s disclosures must be provided at the same
time as its related financial statements and must
cover the same reporting period. Jurisdictions
that adopt the ISSB standards may establish more
detailed requirements related to the location of
the disclosures.
An entity may provide
cross-references to information required by ISSB
standards that is included in other reports
published by the entity as long as such reports
are available at the same time and on the same
terms as the sustainability reporting. The ISSB
has also published the IFRS Sustainability Disclosure
Taxonomy, which an entity can
apply to electronically tag the sustainability
statements. Jurisdictions that adopt the ISSB
standards may mandate electronic tagging.
|
Comparative Information
The SEC climate disclosure rule, the ESRS, and the ISSB standards require
entities to disclose comparative information from the previous year(s)
reported, but entities may omit comparative information in the first
year of adoption. The California climate legislation does not contain
specific requirements related to comparative information.
Assurance Requirements
|
SEC climate disclosure rule
(stayed; see status above)
|
Required financial statement disclosures would be
subject to reasonable assurance (as part of the
audited financial statements) in the first year of
application. Scope 1 and Scope 2 GHG emission
disclosures are subject to limited assurance for
large accelerated filers and accelerated filers
(other than SRCs and EGCs) beginning in fiscal
years 2029 and 2031, respectively. Large
accelerated filers that report Scope 1 and Scope 2
GHG emissions are subject to reasonable assurance
beginning in fiscal year 2033. Large accelerated
filers (but not accelerated filers) that report
Scope 1 and Scope 2 GHG emissions are subject to
reasonable assurance beginning in fiscal year
2033. Nonaccelerated filers, SRCs, and EGCs are
not required to disclose Scope 1 and Scope 2 GHG
emissions and thus are not subject to limited or
reasonable assurance requirements.
|
|
California climate legislation
|
Limited assurance is required under SB-253 for
Scope 1 and Scope 2 emissions from the first year
of reporting, followed by reasonable assurance
beginning in 2030. On or before January 1, 2027,
CARB may establish an assurance requirement for
Scope 3 emissions, which would be performed at a
limited assurance level beginning in 2030.
SB-261 does not have any specific requirements
related to assurance.
|
|
CSRD
|
Limited assurance is required
starting from the first year of reporting.
Further, the EC had planned to (1) conduct a
feasibility assessment for a potential transition
to reasonable assurance and (2) adopt standards
related to limited assurance and (potentially)
reasonable assurance no later than October 1,
2026, and October 1, 2028, respectively. However,
Omnibus II would eliminate the option for a
transition to reasonable assurance and would
remove the obligation to introduce European
sustainability assurance standards by 2026. In
Omnibus II, the EC has also committed to
publishing targeted guidelines by 2026 that would
clarify the procedures that should be performed
during limited assurance engagements. Assurance
should be provided related to the following:
|
|
ISSB standards
|
As an independent standard setter, the ISSB
cannot mandate assurance. Instead, the assurance
requirements for disclosures prepared under the
ISSB standards will be established by the relevant
jurisdictional regulatory bodies upon adoption of
such standards.
|
Conclusion
The landscape of sustainability-related reporting regulations
and standards is rapidly evolving. While the regulations and standards discussed
in this publication share common elements rooted in the TCFD recommendations,
such as governance, strategy, risk management, and metrics and targets, they
also contain unique requirements that entities must navigate when preparing
their disclosures. As entities prepare to comply with one or more of the
reporting standards and regulations, understanding the significant similarities
and differences between them will help entities assess whether they have
provided comprehensive and coherent disclosures that meet the expectations of
various stakeholders.
Other Resources
The following additional Deloitte sustainability reporting resources
may be helpful as entities assess their approach to climate-related
disclosures:
-
Heads Up newsletters:
Contacts
|
|
Eric Knachel
Audit & Assurance
Partner
Deloitte &
Touche LLP
+1 203 761
3625
|
|
Laura McCracken
Audit &
Assurance
Partner
Deloitte &
Touche LLP
+1 212 653
5738
|
|
|
Kristen Sullivan
Audit & Assurance
Partner
Deloitte &
Touche LLP
+1 203 708
4593
|
|
Doug Rand
Audit & Assurance
Managing Director
Deloitte & Touche LLP
+1 202 220 2754
|
|
|
Mark Strassler
Audit & Assurance
Managing Director
Deloitte & Touche LLP
+1 415 783 6120
|
|
David Wrobbel
Audit &
Assurance
Senior Manager
Deloitte &
Touche LLP
+1 702 893
4200
|
|
|
Cody Yettaw
Audit &
Assurance
Senior Manager
Deloitte &
Touche LLP
+1 313 394
5505
|
Footnotes
1
Other U.S. states are also considering legislation that
would require entities to provide sustainability-related
disclosures.
2
Having fulfilled its mission, the TCFD disbanded on
October 12, 2023. The Financial Stability Board transferred
responsibility for monitoring climate-related disclosure progress from
the TCFD to the IFRS Foundation from 2024 onward.
3
SEC Final Rule Release No. 33-11275, The
Enhancement and Standardization of Climate-Related Disclosures
for Investors.
4
The state assembly bill defines a VCO as “any
product sold or marketed in the state that claims to be a
‘greenhouse gas emissions offset,’ a ‘voluntary emissions
reduction,’ a ‘retail offset,’ or any like term, that connotes that
the product represents or corresponds to a reduction in the amount
of greenhouse gases present in the atmosphere or that prevents the
emission of greenhouse gases into the atmosphere that would have
otherwise been emitted.”
5
SB-253, Climate Corporate Data Accountability
Act.
6
SB-261, Greenhouse Gases: Climate-Related
Financial Risk.
7
SB-219, Greenhouse Gases: Climate Corporate
Accountability: Climate-Related Financial Risk.
8
AB-1305, Voluntary Carbon Market
Disclosures.
9
Directive (EU) 2022/2464 of the European Parliament
and of the Council.
10
Commission Delegated Regulation (EU) 2023/2772 of 31
July 2023 Supplementing Directive 2013/34/EU of the European
Parliament and of the Council as Regards Sustainability Reporting
Standards.
11
The CSRD also allows for reporting under standards
deemed to be equivalent by the EC; however, as of the date of this
publication, no other standards have been deemed equivalent. In
addition, specific ESRS are expected to be adopted by the EC for
voluntary sustainability reporting for small and medium-sized
entities (SMEs) and non-E.U. entities.
12
Regulation (EU) 2020/852 of the European Parliament
and of the Council of 18 June 2020 on the Establishment of a
Framework to Facilitate Sustainable Investment, and Amending
Regulation (EU) 2019/2088.
13
Directive (EU) 2025/794 of the European
Parliament and of the Council of 14 April 2025 Amending
Directives (EU) 2022/2464 and (EU) 2024/1760 as Regards
the Dates From Which Member States Are to Apply Certain
Corporate Sustainability Reporting and Due Diligence
Requirements.
14
Proposal for a Directive of the European
Parliament and of the Council Amending Directives
2006/43/EC, 2013/34/EU, (EU) 2022/2464 and (EU)
2024/1760 as Regards Certain Corporate Sustainability
Reporting and Due Diligence Requirements.
15
IFRS S1, General Requirements for Disclosure of
Sustainability-Related Financial Information.
16
IFRS S2, Climate-Related Disclosures.
17
While this publication addresses
the requirements of the SEC’s climate disclosure
rule, which is currently stayed, and the SEC has
withdrawn its legal defense of the rule,
registrants should be aware of other relevant SEC
guidance on sustainability matters (e.g.,
Regulation S-K, Item 101, which requires
disclosure of material information about an
entity’s human capital resources, and Regulation
S-K, Item 105, which requires disclosure of
material factors that make an investment in an
entity speculative or risky, including, for
example, environmental risk factors).
18
Compared topics reflect the
requirements of SB-253 and SB-261, as amended by
SB-219, and not the guidance in AB-1305. See the
Detailed Comparison section for
specific reporting requirements under the
California senate bills.
19
The requirements of the CSRD
include those of the ESRS, both of which are
likely to be affected by the omnibus legislation.
The Detailed
Comparison section includes discussion
of the CSRD's original requirements as well as
those in the omnibus legislation. Note, however,
that the ESRS and EUT are currently going through
public consultation related to potential revisions
and therefore certain simplification efforts are
not known at this time.
20
The SEC has voluntarily stayed
the final rule’s effective date (May 28, 2024)
pending judicial review and has withdrawn its
legal defense of the rule.
21
The CSRD permits non-E.U. parent entities to
disclose required information within their
consolidated sustainability reports.
22
ESRS 1, General
Requirements.
23
ESRS 2, General
Disclosures.
24
Large undertakings are E.U.
entities with at least two of the following: (1)
more than 250 employees on average, (2) a balance
sheet of more than €25 million, and (3) a turnover
of more than €50 million.
25
SMEs that have at least two of
the following and can therefore choose to defer
reporting for two years until 2028: (1) 11–250
employees on average, (2) a balance sheet of
€450,000–€25 million, and (3) a turnover of
€900,000–€50 million. Entities whose numbers are
lower (e.g., that have fewer than 11 employees)
are considered micro-undertakings and are not
within the CSRD’s scope.
26
See footnote 24.
27
From page 33 of the TCFD
recommendations.
28
Deloitte’s October 2024
iGAAP in
Focus addresses implications
associated with the preparation of sustainability
statements in light of recent developments,
including the publication of question 70 in the
EC’s draft FAQs on the implementation of the E.U.
corporate sustainability reporting rules, which
indicates that assurance should consider fair
presentation.