KUALA LUMPUR (March 10): Malaysian companies that report according to the Global Reporting Initiative (GRI) standards are likely to comply with the upcoming European Sustainability Reporting Standards (ESRS), said Eelco van der Enden, CEO of GRI.

Van der Enden was recently visiting Kuala Lumpur and spoke at a press conference and dinner talk organised by a local GRI-certified training partner, ESGright.com.

The ESRS will impact large and listed European Union (EU) companies of a certain size and that generate a certain level of revenue. But it will also affect non-EU companies that have securities listed in EU markets or have a combined group turnover of more than €150 million (RM718 million) in the EU. The ESRS is expected to be finalised by June this year.

These companies will have to report on matters related to climate change, pollution, workers in the value chain and business conduct, among other things under the umbrella of ESG. It introduces the concept of double materiality, where companies do not only have to report on how the environment is impacting their bottom line but also how it is impacting the environment and communities.

“It’s not only about the effects the environment has on the profitability or value creation [capability] of the reporting entity. It is also about the effects the business has while pursuing their strategic objectives on the environment and socio-economic topics,” said Van der Enden.

GRI, which was incepted 25 years ago, is already widely used by companies globally to measure their impact in non-financial topics, he said.

“GRI is by far the largest used standards on the impacts of sustainability in the world. More than 11,000 multinationals use GRI…. We are a voluntary standard. But an IFAC (International Federation of Accountants) report last week showed that although we are a voluntary standard, businesses are investing in us and use our standards to report. Forty percent of [reports using our] standards are accompanied by external assurance, which provides credibility to the reports.”

The global non-profit organisation is striving to enable comparability of sustainability data across companies and countries. This is so investors and other stakeholders can make informed decisions when looking at the sustainability performance of companies.

That’s also why GRI has partnered with the European Financial Reporting Advisory Group and International Sustainability Standards Board (ISSB) as these organisations come up with sustainability reporting standards.

It is also working closely with the Task Force on Climate-related Financial Disclosures (TCFD) and Taskforce on Nature-related Financial Disclosures, which develop sustainability reporting frameworks.

Standards provide the methodology for the collection of data or for reporting, while frameworks are broad and highlight the principles that guide understanding of a topic.  

The ISSB was established in 2021 by the International Financial Reporting Standards (IFRS) Foundation to create a comprehensive global baseline of sustainability disclosures. It builds on recommendations of the TCFD and incorporates industry-based disclosure requirements from the SASB Standards, which is widely used in the US.

“The ISSB is pushing for the mandatory adoption of their standards in all the countries that have the International Accounting Standards [by IFRS]. As their preferred partner for the impact reporting side, together with ISSB, we drive [efforts] towards [creating] a global comprehensive baseline,” said Van der Enden.

“If there is a global baseline and everyone is using it, it will greatly reduce the cost of compliance for businesses and increase the comparability of the data. If we have that, it will be far easier for auditors to assess the quality of the data.”

This initiative can hopefully address the confusion that many companies face now due to the plethora of sustainability reporting frameworks and standards. Van der Enden hopes to set up more offices in Asia to help local businesses understand how they can utilise GRI’s standards and navigate the landscape of sustainability reporting.

“If we get all things ready, we want to open up an office in Kuala Lumpur, depending on how we will be able to fund it, what the demands are and also what the local regulators [need that] we can do in the field of standard setting, training and education. [We] also [want to] look at supporting small and medium sized enterprises in the just transition,” he said.