Highlights from the COP28: The Future of ESG Reporting

Climate changes made sustainability the global catchphrase. However, the hope of reaching zero emissions and transitioning out of fossil fuels still stands reasonable and realistic. Recently, more than 2,400 individuals connected to fossil fuels registered for the 2023 United Nations Climate Change (COP28) in Dubai, UAE. The COP28 is one of the biggest global climate conferences attended by over 70,000 influential business, political, and financial leaders as a pre-competitive collaboration to address climate change. After an intense 12-day event, COP28 concluded with a final agreement called the UAE Consensus, outlining new ambitions to double and triple renewable and energy efficiency by 2030. It also includes new announcements to amplify business efforts for environmental, social, and governance (ESG) by standardizing and simplifying ESG reporting.

Thanks to COP28, ESG is Now a Serious Business!

The COP28 event is a curtain raiser to several new global climate initiatives and energy transition policies that were unimaginable several years ago. The discussions and explicit agreements also highlight the barriers to implementation and introduce new sources of public funding and institutional capital investments for vulnerable nations to protect against the irrevocable damage caused by climate change.  The COP28 event emphasized the role of public and private partnerships in democratizing sustainability innovations.

COP28 UAE Consensus includes all the action items at a global level in alignment with the Paris Agreement Global Stocktake,  based on 1,600+ documents and research observations from stakeholder communities worldwide. The key findings were released in a synthesis report in September to mark our current milestone towards meeting the Paris Agreement goals. The report also recommends more vital actions before the 2028 Global Stocktake to avoid the devastating impact of temperatures rising beyond 1.5 degrees Celsius.

ESG strategies emphasizing compliance requirements, best practices, and critical metrics are integral to helping businesses access equity financing and leverage their ESG scores for brand reputation, incentives, and competitive differentiation. ESG has captured significant attention from governments, banking and financial institutions, and business entities in the Middle East. As per the research by PricewaterhouseCoopers (PwC), 70% of UAE local organizations reported adopting formal ESG strategies over the last year. Almost 66% of the surveyed respondents expressed that corporate leadership must invest more time in ESG-related matters.

On the global investment front, 56% of investors are increasing their ESG investments for 2024. Between the recent inflation of energy prices and geopolitical conflicts, the U.S. and Europe have witnessed an uptick in ESG investments and initiatives. These events set the perfect stage for innovation and financing commitments by tech giants and corporations including AI (Artificial Intelligence) to the equation to curb climate challenges and carbon emissions.  IBM was one of the Associate Pathway Partner sponsors of the event, bringing its technology closer to the global government conversation on climate change.

COP28 announced foundation models as more sustainable forms of AI and core drivers for making research-backed progress on sustainability. The AI-powered OpenPages with Watson is already making waves for helping organizations prepare for the future with the extensible and scalable governance, risk, and compliance (GRC) solution. The OpenPages’ model risk governance solution empowers many modern banking and financial companies to demonstrate strong model risk management to accomplish their GRC objectives.  The company’s AI-infused sustainability software solutions are critical for organizations’ sustainability and operational efficiency with decarbonization, energy transition, transition to low carbon alternatives, and AI-powered, sustainable supply chain.

In the rest of this blog, let us unwrap the four major ESG-specific announcements from COP28 to simplify and streamline ESG reporting.

Four Major ESG Reporting Announcements from COP28

1. Supply Change for Immediate Action on the Supply Chain: The Science Based Targets Initiative (SBTi), call to action is a strategic partnership between global regulatory and research bodies such as the CDP, the United Nations Global Compact (UNGC), Worldwide Fund for Nature (WWF), as well as the World Resources Institute (WRI). The SBTi provides guidelines and targets with clearly mapped out scientific plans to reduce greenhouse gas (GHG) emissions and other objectives from the Paris Agreement. The SBTi introduced the ‘Supply Change: Take Action on Supply Chain Today’ for companies to proactively engage with their suppliers and commit to sourcing a certain percentage of goods and services to reduce scope 3 emission rates. The regulatory body also launched Supplier Engagement Guidance that was accepted by end users and raw material processors with key targets beyond emission reductions to nurture supply relationships to improve efficiency, transparency, and resiliency. The initiative’s aim is to incite a slew of reactions to kickstart corporate climate action. The SBTi has already been implemented by a global pharma company and retail fashion brand.
2. More than 400+ Companies and Investors Pledge to Adopt the ISSB Standards: The International Sustainability Standard Board (ISSB) built sustainability reporting standards to offer comprehensive guidelines to the corporates. The ISSB has published general requirements (S1) and climate (S2). Nearly 400+ companies across 64 jurisdictions have committed to implementing the ISSB standard. The participants actively expressed the need for global sustainability disclosure standards that are consistent and scalable. To this end, ISSB helps support stakeholders and companies worldwide to build the necessary infrastructure and empower them with a knowledge hub to help adhere to those standards. The collective pledge represents an opportunity to influence more businesses towards adopting reporting standards.
3. Taskforce on Net Zero Financial Policy: The COP28 also garnered attention with the exclusive launch of Net Zero Financial Policy Taskforce to convert net zero plans into real actions. It helps proceed beyond aspirational sustainability statements by matching global policies with the net zero objective. The task force was created by renowned experts, representatives, and international authorities from the global ESG landscape like the Principles of Responsible Investment (PRI), the United Nations Environment Program—Finance Initiative (UNEP FI), the United Nations Conference on Trade and Development (UNCTAD), and the International Financial Reporting Standards (IFRS). The objectives of the task force are to create a collaborative space for all the key players to work towards net zero plans, offer extensive research-backed guidance to transition to net zero and implement relevant regulatory recommendations of the High-level Expert Group (HLEG) from COP27.
4. New Sustainability Reporting Standards for Small and Medium Businesses: The newly introduced Corporate Sustainability Reporting Directive (CSRD) is applicable to all businesses in the EU region to comply with the European Sustainability Reporting Standards or the ESRS starting from 2024. This new standardization of corporate disclosure also includes the plan to create disclosure standards for small and medium-sized businesses and assistance from banks and larger industry counterparts for sustainability-related information.

Data and AI: A Prolific Combo to Simplify the Latest ESG Reporting Standards

Data is the starting point of every change initiative. Even with sustainability and climate change strategies, businesses need to get deep into the granular data of how their organization can deliver to the ESG commitments. AI is driving the discussion for building workflows and best practices to address the immediate challenge of climate change. Ethical and conscientious use of data fuels AI innovation. Together, they can be prolific catalysts for the desired change.

At iTech GRC, our experts empower businesses to stay compliant with the latest regulatory norms and holistically adapt to the changes with the AI capabilities of our integrated GRC solution. We strive to ease our customers’ challenges by removing the need to maintain multiple solutions while navigating the complex risk and compliance landscape. We would also love to dive deeper into the data-powering decisions, processes, and workflows to address the dynamic ESG reporting requirements established from COP28.

Connect with us to learn more about our integrated GRC solutions.