Evolving ESG Reporting Standards in the United States: Towards a Sustainable Future

loulou5817_corporate_abstract_fiber_optic_light_painting_upbe_c60ed2ad-1175-4b8f-b597-6202974ed556_3This article is the second in a three part series.


In recent years, Environmental, Social, and Governance (ESG) standards have gained significant traction in the corporate world as stakeholders increasingly recognize the importance of sustainability. As a result, companies in the United States have begun adopting voluntary ESG reporting standards to meet the expectations of investors, customers, and regulators. This article explores the current landscape of ESG reporting in the United States, highlights the key frameworks and standards utilized by companies, and delves into the future of ESG reporting in light of the proposed SEC disclosure requirements.


Current ESG Reporting Standards in the United States: 

In the United States, companies employ various approaches to voluntarily report on their ESG performance. Many choose to disclose ESG information through sustainability reports, integrated reports, or dedicated sections in their annual reports. These reports outline the company's ESG strategy, goals, and performance indicators. To ensure consistency and comparability across industries, companies often refer to widely recognized standards such as the Global Reporting Initiative (GRI) Standards, which provide comprehensive guidelines for sustainability reporting. Additionally, the Sustainability Accounting Standards Board (SASB) Standards offer industry-specific guidelines for disclosing financially material ESG information, enabling companies to communicate their ESG performance in a language that resonates with investors. A third standard commonly used is the Task Force on Climate-related Financial Disclosures (TCFD) framework, which assists companies in disclosing climate-related risks and opportunities, strategy, and metrics, facilitating informed decision-making by investors.


Voluntary frameworks and standards are consolidating as more regulators look to impose mandatory reporting:

While ESG reporting standards are currently voluntary in the United States, regulators are increasingly considering the imposition of mandatory reporting requirements. As a result, voluntary frameworks and standards are gradually consolidating. This consolidation reflects the growing recognition of sustainability's significance and the heightened demand for standardized ESG disclosures. Companies are proactively embracing these frameworks to align with global reporting guidelines and prepare for the anticipated SEC ESG disclosure requirements.


The “Big Three” ESG Reporting Frameworks:


The Future of ESG Reporting in the US: 

The SEC's proposed ESG disclosure requirements represent a crucial step towards standardized reporting in the United States. While the initial target for passing the rules was October 2023, ongoing debates on issues like Scope 3 disclosures and recent judicial decisions have delayed the finalization of the regulations. Nonetheless, industry experts expect that 2023 will witness the completion of the rules and the commencement of the implementation process. In preparation for this milestone, companies are advised to organize their data warehouses and ensure accurate reporting of figures when the new rules take effect.


Focus on the SEC: How Did We Get Here?


Key Focus Areas in ESG Reporting Efforts: 

Within the United States, companies are concentrating their ESG reporting efforts in several key areas. 

  • Greenhouse Gas Emissions Reporting: This takes precedence as the SEC prioritizes the disclosure of emissions to address climate change concerns. Companies will be required to quantify and report their emissions, establish reduction targets, and implement strategies to achieve them. 


  • Water Usage: The efficient management and conservation of water is another critical aspect of ESG reporting, necessitating the disclosure of water usage, the implementation of water stewardship practices, and reporting progress in reducing water-related risks. 


  • Diversity, Equity, and Inclusion (DEI): DEI reporting will aim to provide transparency regarding a company's efforts to promote diversity, inclusion, and equal opportunities within its workforce. The SEC's existing "Human Capital" disclosure requirements already incorporate aspects of DEI reporting, potentially leading to further prescriptive initiatives through this existing disclosure, even if delays occur in the passing of ESG disclosure regulations.

The Proposed SEC Climate-Related Disclosure Requirements Are Expansive:


Moving ESG Reporting Standards Forward

ESG reporting standards in the United States are rapidly evolving, driven by a growing recognition of sustainability's importance and the increasing demand for standardized disclosures. While current reporting is voluntary, the proposed SEC disclosure requirements signal a pivotal shift towards mandatory reporting in the very near future. As companies prepare for this transformation, focusing on areas such as greenhouse gas emissions, water usage, and diversity, equity, and inclusion will enable them to align with emerging reporting expectations and contribute to a more sustainable future.





Matthew Rinegar, Senior Corporate Counsel, iCertis Inc. (formerly Senior Corporate Counsel at Schlumberger Ltd and US Silica and Sr. Associate at Latham and Watkins)