Environmental, Social, and Governance (ESG) and non-financial reporting regulations in the United States are evolving as stakeholders increasingly demand transparency and accountability from companies regarding their impact on the environment, society, and corporate governance. While the US still needs a unified federal framework for ESG reporting akin to the European Union's Corporate Sustainability Reporting Directive (CSRD), various regulatory bodies and initiatives guide companies in disclosing their ESG practices and metrics.
Securities and Exchange Commission (SEC)
The Securities and Exchange Commission (SEC) plays a pivotal role in ESG and non-financial reporting by requiring publicly traded companies to disclose specific ESG-related information material to investment decisions. Although historically focused on financial risks, the SEC has been moving towards more comprehensive ESG disclosures, including climate risks and human capital management, reflecting their impact on a company's performance and long-term value.
Sustainability Accounting Standards Board (SASB)
The Sustainability Accounting Standards Board (SASB) provides industry-specific standards that help companies disclose material, financially relevant sustainability information to investors. While not mandatory, SASB's guidelines are increasingly recognised and adopted by US corporations aiming to meet investor demands for ESG data that can inform investment decisions.
Challenges and opportunities
One of the main challenges in the US ESG and non-financial reporting landscape is the need for standardised regulations, leading to a diverse and sometimes confusing array of disclosures. However, this also presents an opportunity for companies to lead in transparency and innovation, leveraging ESG reporting as a strategic tool for risk management, investor relations, and competitive advantage.
The future of ESG reporting in the US
As stakeholder pressure mounts and the global emphasis on sustainability grows, the US will see more defined and possibly mandatory ESG reporting requirements in the future. Companies proactively embracing detailed ESG and non-financial disclosures will stay ahead of regulatory curves and contribute positively to their brand reputation, investor attractiveness, and overall sustainability performance.
To learn more about ESG reporting regulations in the US, read the following articles:
This evolving landscape indicates a shift towards a more sustainable and transparent business ecosystem, emphasising the importance of ESG factors in creating long-term value for companies and society.
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