Policies and regulation should address both sustainability disclosure as well as sustainability-related financial disclosure, hence including risks, opportunities, dependencies, and impacts of the organization on the economy, people and planet. Disclosure requirements should address the broad environmental spectrum, as it is not possible to tackle climate change without looking at the environment at large.

To allow companies to operate in a global market, it is crucial that disclosure policy and regulation adopted by different jurisdictions, as well as disclosure standards those policies rely on, are consistent and interoperable. National disclosure policies should lean on a ‘building-block’ approach, using the global baseline offered by the IFRS standards developed by the ISSB for capital markets and the GRI Standards developed by the GSSB for broader impact disclosure. Other frameworks such as the TNFD align with and build on the global baseline to provide recommendations and guidance on how to align corporate disclosure with the GBF. Frameworks such as this can inspire standards’ development and the most innovative policies. Should specific regional standards and disclosure regimes be developed, such as the recent developments in the EU with the ESRS or the US with the SEC climate disclosure rule, they should build upon these global baseline standards, while addressing jurisdictional needs. This approach will ensure the interoperability of standards across different markets and jurisdictions.

Policy coherence is essential to ensure a consistent and coordinated approach to environmental disclosure requirements within jurisdictions and avoid conflicting requirements. Policymakers should aim to foster coherence of disclosure obligations to create a unified and integrated disclosure regime. By promoting coherence within single jurisdictions, policymakers enable businesses and stakeholders to navigate the landscape of disclosure with clarity and efficiency. Coherent policies promote better transparency and drive meaningful and efficient action toward sustainability, by facilitating comparability and avoiding fragmentation.

It is crucial that environmental disclosure is firmly grounded in the latest scientific evidence, to ensure it unleashes its transformative potential. Such an approach strengthens the credibility and relevance of reported data, fosters informed decision-making, and drives meaningful action to address all environmental challenges, so that policymakers can ensure companies and financial institutions operate within a credible framework aligned to global environmental goals of halting and reversing nature loss by 2030 and limiting warming to 1.5°C. This is also in line with the recommendations of the UN HLEG.

To facilitate a system change, it is paramount that disclosure requirements cover all private sector entities, both businesses and FIs. Aligned with growing consensus, the value chains of businesses should be included to ensure that risks, opportunities, dependencies and impacts are assessed beyond direct operations. An incremental approach could start from large listed companies and aim over time to include the broader economy actors. Transnational businesses must clearly state the scope of their disclosure coverage, which should include parent, subsidiary companies, and franchisees, with a clear differentiation as to which disclosures apply to which piece of the business. By expanding disclosure requirement to FIs, governments can ensure that environmental aspects within portfolios are fully covered and factored in, and sustainability information can be accessed by financial markets regulators. For SMEs, regulators might also consider an incremental approach to reduce regulatory burden at first, or indicate specific SME dedicated standards, in transitioning toward full disclosure requirements.

Governments should include robust time-bound transition plans in disclosure requirements, outlining how companies and FIs will transition to business models with a 1.5°C trajectory and nature-positive outcomes. These plans are essential for fostering a global economic response to challenges of climate change, nature loss, water depletion, pollution and use of resources in a credible, accountable and resilient manner. Such plans are also essential for the effective exercise of market discipline, and investors’ ability to hold investee company boards and management to account that a company’s business model is poised to thrive in a 1.5°C-aligned and nature-positive economy.

Disclosure policies should require external verification. Third-party verification of the disclosed data enhances the reliability of information, instilling greater trust among stakeholders who rely on the disclosed data. Assurance over processes and governance oversight is critical to giving confidence in the completeness and accuracy of reported data. The scope of external assurance can vary from limited assurance for certain aspects to more rigorous levels as ‘reasonable’ or ‘full’ for critical areas, ensuring that disclosure policies remain up-to-date and effectively address the evolving landscape of environmental concerns and business practices. The scope of external assurance can vary from ‘limited’ assurance to more rigorous levels as ‘reasonable’ or ‘full’ assurance. For critical disclosure topics and metrics full external assurance should be mandated as they are developed. Especially where the materiality assessment is left to the companies, reasonable assurance of the process and the outcome of this assessment is key.

To facilitate corporate accountability and the creation of a level playing field for reporting entities, relevant authorities should put in place measures and financial resources to address non-compliance and ensure enforcement. Governments should strive to create a policy environment where non-disclosure is not allowed. As an incremental approach towards achieving comprehensive disclosure, ‘comply or explain’ mechanisms can serve as valuable steppingstones. These mechanisms prompt reporting entities to either comply with the disclosure requirements or provide a valid explanation for non-compliance, promoting transparency and accountability. To successfully implement regulatory requirements, relevant agencies should endeavour to develop internal expertise in the specific topics covered by the regulations.

It is vital policies address governance oversight of environmental disclosure and require disclosure on how businesses and FIs manage and assess environmental risks, opportunities, dependencies and impacts. Such information provides stakeholders with a clear understanding of the company’s expertise and top-level oversight. At the same time it ensures visibility of environmental issues by the highest decision-making bodies and the inclusion of sustainability into business models and operations. Disclosure on governance should include a comprehensive description of the board and management’s responsibility in overseeing disclosure, transition plans, scenario utilisation, financial planning, risk management and metrics and targets. Lastly, shareholders should be provided the opportunity to vote on transition plans via well-defined feedback mechanisms, for example through shareholder votes at annual general meetings.

Regulations should not be viewed as limiting or reduced to a mere checklist; instead, they should be regarded as foundation or minimum requirement that empowers organizations to surpass expectations and pursue an iterative, more ambitious, comprehensive and impactful disclosure and action. Embracing this perspective can facilitate organizations in gaining a deeper understanding of their own business and foster a culture of continuous improvement.