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  • Writer's pictureKeith Phillips

It's the Biggest Shift in Reporting since Accounting was invented!

Updated: Mar 15, 2022

Climate change, pandemics, and the natural/green-age revolution, have forced a dramatic change in reporting requirements.

Throughout the last century the only reporting required were accurate financial statements. Now, there is a global awareness that everything is connected, and every organisation matters.

In response to global shifts in attitude, powerful consumer groups, and political movements are demanding new regulations, and conformance standards.

And as a result, there is a stream of capital moving into organisations that are reporting their ESG (Environmental, Social, Governance) practices.

Some of these changes are noted by the Harvard Law School:

In March 2021, a directive was adopted by the European Parliament which would require that companies undertake ongoing global due diligence on potential or actual adverse impacts on human rights, the environment, and good governance across their value chain, and require EU member states to ensure that companies can be held liable, and be required to remediate any harm arising out of such adverse impacts.

In April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) that would require substantially all large or listed companies, banks, asset managers and insurers in the EU to report in alignment with a new EU sustainability reporting standard.

The CSRD would also, for the first time, introduce an audit requirement for reported sustainability information.

The new reporting standard could be adopted as early as 2022, and companies would then be required to apply the standards beginning with reports covering financial year 2023.

On July 6, 2021, the European Commission adopted a new sustainable finance strategy aiming to channel private finance into economic activities relevant to the EU’s environmental, and sustainability goals.

Also in July, the European Commission adopted a delegated act under Article 8 of the EU Taxonomy Regulation to require disclosure by large companies, banks, asset managers, and insurers of certain KPIs, quantifying the proportion of environmentally sustainable economic activities in their business, investments, lending or underwriting activities.

The disclosure obligations will begin to be phased in from January 1, 2022 for the 2021 reporting period.

On July 28, SEC Chairman Gary Gensler noted that climate-related disclosures should be mandatory, and contain sufficient detail for investors to gain consistent, comparable, and “decision-useful” information on the climate risk of companies in which they might invest.

On June 16, 2021, the House passed H.R.1187, the 'Corporate Governance Improvement and Investor Protection Act', which would require SEC registrants to disclose information on climate risks, and GHG emissions, political activity expenditures, executive pay increases, board cybersecurity expertise, board and executive diversity, and other ESG-related metrics.

Note: Abridged comments.


ESG reporting encompasses both qualitative disclosures of topics as well as quantitative metrics used to measure a company’s performance against ESG risks, opportunities, and related strategies. In particular there is a growing requirement to report on processes, and system that may lead to better ESG.

It is not enough to report on what has happened, but also on what the organisation is consistently doing to improve their situation.

Accounting systems are not enough.

Understanding the numbers is not enough.

An ESG reporting system is needed that will reassure consumers and investors that organisations are doing the right thing for a sustainable future.

Those organisation’s that don’t, may have to fight for capital and consumers.

Keith Phillips, CEO - QLBS


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