· 9 min read
Ever feel like you're working in acronyms instead of policy? Worried you might be overlooking something crucial in your sustainability efforts?
Our guide is designed to demystify the acronyms that matter in your field. From legislation to regulations, standards to initiatives, we have organized the must-know terms into International and European categories, including the effective date, companies impacted, and legal requirement.
But let us start at the beginning. How does an initiative differ from legislation and standard from policy, and in which category do the acronyms belong to?
📃 Initiative
Definition: An initiative is a program or action typically started by organizations or a group of stakeholders to address certain issues. These are often voluntary and driven by collaborative efforts.
Examples: Principles for Responsible Investment (PRI), Taskforce on Nature-related Financial Disclosures (TNFD)
📃 Directive
Definition: A directive is a legislative act of the European Union that sets out a goal that all EU countries must achieve. However, it allows each country to devise its own laws on how to reach these goals.
Examples: Corporate Sustainability Reporting Directive (CSRD), Corporate Sustainability Due Diligence Directive (CSDDD)
📃 Regulation
Definition: A regulation is a binding legislative act. It must be applied in its entirety across the EU without requiring individual countries to pass their own implementing legislation.
Examples: Sustainable Finance Disclosure Regulation (SFDR), EU Taxonomy
📃 Standard
Definition: A standard is a set of guidelines and criteria against which organizations can measure the quality or performance of their activities, products, or services. Standards can be voluntary and developed by standard-setting organizations.
Examples: Global Reporting Initiative (GRI), International Sustainability Standards Board (ISSB), Sustainability Accounting Standards Board (SASB)
📃 Policy
Definition: A policy is a deliberate system of principles to guide decisions and achieve rational outcomes. A policy is typically adopted by a governance body within an organization.
Examples: Corporate Social Responsibility (CSR), Environmental, Social, and Governance (ESG)
Must-know for international operations and compliance
1. GRI (Global Reporting Initiative)
Effective since: 2006
Companies impacted: all sectors
Mandatory: no
The Global Reporting Initiative (GRI) is a non-profit organization that promotes sustainability reporting and corporate transparency. It provides a framework for organizations to voluntarily disclose their economic, environmental, social, and governance (ESG) performance. GRI's standards are widely used by businesses, governments, non-profits, and other organizations to measure and communicate their sustainability efforts and impacts. The aim is to increase transparency, accountability, and sustainability practices across various sectors globally.
2. ISSB (International Sustainability Standards Board)
Effective since: 2021
Companies impacted: all large companies initially
Mandatory: not yet, but various jurisdictions around the world are already actively considering pathways toward mandatory application of ISSB Standards
The International Sustainability Standards Board (ISSB) is an emerging global standard-setting body focused on sustainability reporting. It is being developed under the auspices of the International Financial Reporting Standards (IFRS) Foundation, with the aim of establishing a comprehensive set of globally recognized standards for corporate sustainability reporting. Addressing the call for globally comparable sustainability information, the ISSB aims to streamline reporting, reduce complexity, and enhance market efficiency.
3. PRI (Principles for Responsible Investment)
Effective since: 2006
Companies impacted: financial service companies
Mandatory: no
The Principles for Responsible Investment (PRI) is a global initiative that works to promote responsible investment practices among institutional investors. Launched by the United Nations in 2006, PRI encourages investors to integrate environmental, social, and governance (ESG) factors into their investment decisions and ownership practices. Signatories to the PRI commit to implementing principles that emphasize incorporating ESG considerations into investment analysis, decision-making processes, and ownership policies.
4. SASB (Sustainability Accounting Standards Board)
Effective since: 2011
Companies impacted: all sectors
Mandatory: no
The Sustainability Accounting Standards Board (SASB) is a non-profit organization focused on developing industry-specific sustainability accounting standards for use by publicly listed corporations in the United States. SASB's standards are industry-specific, reflecting the unique sustainability risks and opportunities faced by companies in different sectors, and are intended to complement financial reporting requirements such as those established by the Financial Accounting Standards Board (FASB).
5. TNFD (Taskforce on Nature-related Financial Disclosures)
Effective since: 2022
Companies impacted: all sectors
Mandatory: not widely. For example, the UK government formally endorsed the TCFD framework and has mandated TCFD-aligned disclosure for large entities in the private sector
The Taskforce on Nature-related Financial Disclosures (TNFD) is an international initiative established to develop a framework for assessing and disclosing the financial impacts of nature-related risks. Launched as a complement to the Task Force on Climate-related Financial Disclosures (TCFD), the TNFD aims to address the growing importance of biodiversity and ecosystem services to the global economy and financial markets. The TNFD framework provides recommendations for companies and financial institutions to disclose information on their dependencies and impacts on nature, as well as how they are managing these risks and opportunities.
Must-know for EU-related operations and compliance
1. CSRD (Corporate Sustainability Reporting Directive)
Effective since: 2024
Companies impacted: all organizations listed in an EU-regulated market with 250 or more employees
Mandatory: yes, for companies already subject to NFRD. However, other large companies not subject to the NFRD must start reporting from 2026 on the financial year 2025
The Corporate Sustainability Reporting Directive (CSRD) is a legislative proposal by the European Commission aimed at enhancing corporate transparency and sustainability reporting within the European Union (EU). Building on the existing Non-Financial Reporting Directive (NFRD), the CSRD seeks to expand the scope and improve the quality, comparability, and reliability of sustainability information disclosed by companies.
Under the CSRD, large companies and all listed companies in the EU will be required to report on a broader range of sustainability matters, including environmental, social, and governance (ESG) factors, using standardized reporting requirements. The CSRD aims to provide investors, stakeholders, and policymakers with better access to reliable and relevant sustainability information to support informed decision-making and drive sustainable investments and business practices across the EU.
2. CSDDD (Corporate Sustainability Due Diligence Directive)
Effective since: enforcement will begin in 2027, with a phased implementation for other firms over the following two years, 2028 and 2029
Companies impacted: From 2027, EU-based companies with more than 5000 employees and a turnover exceeding €1500M
Mandatory: no
The Corporate Sustainability Due Diligence Directive (CSDDD) is a proposed legislative initiative by the European Commission aimed at strengthening corporate accountability and responsibility throughout global supply chains. The CSDDD seeks to establish mandatory due diligence requirements for companies operating within the European Union (EU) to identify, prevent, mitigate, and account for human rights abuses, environmental harm, and other sustainability risks associated with their business activities and supply chains. The directive aims to promote responsible business conduct, protect human rights and the environment, and contribute to achieving the EU's sustainability goals and commitments, such as the United Nations Sustainable Development Goals (SDGs) and the Paris Agreement.
3. EET (European ESG Template)
Effective since: 2022
Companies impacted: financial services
Mandatory: no
The European ESG Template (EET) is a standardized reporting framework designed to facilitate the disclosure of environmental, social, and governance (ESG) information by asset managers and institutional investors operating within the European Union (EU).
Developed by the European Fund and Asset Management Association (EFAMA) in collaboration with other industry stakeholders, the EET aims to streamline ESG reporting practices and improve the comparability, consistency, and transparency of ESG data across the investment industry. The template provides a structured format for reporting on a wide range of ESG factors, including climate-related risks, diversity and inclusion, and corporate governance practices.
4. EU Taxonomy (European Union Taxonomy)
Effective since: 2020 (partial)
Companies impacted: financial market participants, including occupational pension providers
Mandatory: yes, but only for companies that fall within the scope of the CSRD (see above)
The EU Taxonomy guides sustainable finance in the European Union by setting clear criteria for environmentally sustainable economic activities. It combats greenwashing, covering sectors like energy and transport. To qualify, activities must meet technical screening criteria and social safeguards. This clarity helps investors find sustainable projects, aids companies in disclosing their environmental impacts, and assists policymakers in shaping green regulations for a low-carbon economy.
5. PAI (Principal Adverse Impact Indicators)
Effective since: 2023
Companies impacted: financial services
Mandatory: yes, for financial market participants with 500 or more employees
Principal Adverse Impact Indicators (PAI) are key metrics under the European Union's Sustainable Finance Disclosure Regulation (SFDR), revealing investment impacts on sustainability. They cover areas like carbon emissions and human rights violations, aiding investors in understanding negative ESG effects. Financial institutions use PAIs to identify and address adverse impacts, align investments with sustainable goals, and meet ESG disclosure rules, promoting responsible investing and transparency in the financial sector.
6. SFDR (Sustainable Finance Disclosure Regulation)
Effective since: 2021
Companies impacted: financial services (asset managers and other market participants)
Mandatory: yes, for the above companies
The Sustainable Finance Disclosure Regulation (SFDR) is a regulatory framework established by the European Union (EU) to promote transparency and sustainability in the financial sector. Introduced in March 2021, SFDR aims to integrate environmental, social, and governance (ESG) considerations into investment decision-making processes and enhance the flow of capital towards sustainable activities.
SFDR requires financial market participants, including asset managers, investment firms, and financial advisors, to disclose information on how they integrate sustainability risks and factors into their investment processes, as well as the adverse impacts of their investment decisions on sustainability. The regulation establishes specific disclosure requirements for financial products, including the publication of sustainability-related information in pre-contractual documents and periodic reporting to investors.
7. TSC (Technical Screening Criteria)
Effective since: 2022
Companies impacted: all companies classified as sustainable under the EU Taxonomy
Mandatory: mandatory for the above companies
Technical Screening Criteria (TSC) are a set of standardized criteria used to assess the sustainability performance of investment products and determine their eligibility for classification as environmentally sustainable under the European Union's Sustainable Finance Disclosure Regulation (SFDR). The TSC framework defines specific thresholds and benchmarks for various sustainability factors, such as climate change mitigation, adaptation, and biodiversity protection. TSC plays a crucial role in promoting green finance, driving capital towards sustainable activities, and facilitating the transition to a more sustainable economy.
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