Introduction
The first article on ESG and sustainability reporting gave an overview of world, continental, regional and national status quo on environment, social and governance issues as well as initiatives being done to ensure sustainability given legal and regulatory standards, at both international and local level. Part 2 focused on IFRS S1 which provides for general disclosure of sustainability related financial information in view of ZSE Practice Note No. 16, outlining the minimum requirements for an organisation to comply with the standard and regulatory provisions. The theme for part 3 was climate related disclosures and what it entails as well as linkage to local regulatory requirements. Part 4 is the last instalment of the 4 part series which will outline the approaches that can be used by large corporates and small and medium enterprises (SMEs) to ensure compliance with ESG and sustainability reporting.
Large corporates – International Standards
Greenhouse gas (GHG) emissions are now analysed under various standards such as United Nations Framework Convention on Climate Change (UNFCC), the Intergovernmental Panel on Climate Change (IPCC) Methodology Reports, the GHG Protocol Corporate Standard of the World Business Council for Sustainable Development (WBCSD), and the European Union Greenhouse Gas Emissions Trading System (EU ETS). Organisations may choose to align with any of the standards as this helps establish adequate guidelines and procedures which will make it easy to meet requirements of IFRS S1 and S2 as well as ZSE Practice Note No. 16. The International Standards Organisation (ISO), an independent, non-governmental international organisation with 166 national standards bodies as if October 2022 of which the Zimbabwe Standards Organisation is a member, has developed numerous standards under ISO 1406X series as well as ISO/TC 207 which ensure transition to zero carbon economy and provides management tools and techniques to meet general disclosure requirements of sustainability related financial information as well as disclosures related to climate change.
It is therefore imperative that large corporates review their strategy, board charter, committee terms of references (ToRs) and standard operating procedures (SOPs) to align with IFRS S1 and S2 as well as ZSE Practice Note No. 16. Appointment of an ESG Officer and/or Consultant may help steer the company to compliance.
SMEs – ESG and Sustainability Checklist
Small and Medium Enterprises (SMEs) may lack capacity to align with international standards and may opt for alignment through a formal checklist which starts with reviewing the Strengths, Weaknesses, Opportunities and Threats (SWOT Analysis) incorporating Environment, Social, Governance and Sustainability aspects. Initiatives and action plans can be developed for each ESG aspect. Initiatives for governance as an example, may include adoption of modern business governance practices which cover issues of board composition, diversity, organisational chart, authorisation matrix, drafting sustainability policies and training of board, management and employees as well as linking remuneration to sustainability metrics. Initiatives of each ESG aspect should have action plans to ensure achievement within a prescribed timeframe. The checklist help SMEs to meet ESG and sustainability reporting requirements.
Conclusion
ESG and sustainability reporting are the future of business and both large corporates and SMEs should comply with IFRS S1 and S2 as well as ZSE Practice Note No.16 with effect from January 2024.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
