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CDSB seeks views on updated environmental reporting framework

  • Leaf - sustainability (green) Image

20 Feb 2014

The Climate Disclosure Standards Board (CDSB) has published a consultation draft of the second edition of its 'CDSB Framework', which is designed to assist in the preparation and presentation of specific environmental information for the benefit of investors. Compared to the existing framework, the consultation draft proposes to extend the scope of environmental reporting beyond climate change to include natural capital information about water and forest commodities.

The draft framework outlines the preparation and disclosure of environmental information included in, or in conjunction with, 'mainstream reports'.  These are annual reporting packages prepared under jurisdictional laws and include financial statements and explanatory notes prepared in accordance with a financial reporting framework such as International Financial Reporting Standards (IFRSs). Other financial reporting, such as management commentary (often termed 'management discussion and analysis') are also included where relevant, and the framework is also considered suitable for small and medium sized entities.

Environmental information covered by the draft framework includes information about the following 'environmental elements': greenhouse gases, forest risk commodities (biofuels, cattle products, palm oil, soy and timber), water and fossil fuel energy resources. In summary terms, the framework is to require disclosure of environmental information that enable users of mainstream reports to assess:

  • How the organisation manages, uses and relies on the environmental elements
  • Which environmental elements are owned, used and consumed as inputs, together with their providence and measures of consumption
  • Outputs of or to environmental elements, including greenhouse gas emissions and discharge of water
  • The availability, quality, price of, and access to, environmental elements
  • Business risks and opportunities associated with each of the items above
  • The response to environmental challenges, e.g. degradation or depletion of environmental elements, climate change, regulatory restrictions and societal expectations.

The framework is structured into a number of sections, focusing on the identification and determination of information to report, an organisation's environmental information reporting practices, and guidance on how to report to ensure the quality of environmental information to investors. Each of these sections contain a number of requirements which have to be met in order to claim compliance with the framework. A separate section contains guidance on associated matters such as disclosure tools, standards and methodologies representing current practice.

The proposed framework notes that it has been developed to enhance and complement rather than to duplicate existing corporate reporting approaches that support disclosure of environmental information. This includes:

  • financial reporting pronouncements issued by the International Accounting Standards Board (including IFRS Practice Statement Management Commentary) and other bodies
  • legislation and guidance issued by regulators, such as the Australian Water Accounting Standard, and United Kingdom environmental reporting requirements on greenhouse gas emissions
  • developing and final voluntary frameworks such as the International Integrated Reporting Council (IIRC) International <IR> Framework, Global Reporting Initiative (GRI) G4 guidelines, OECD guidelines for multinational enterprises, United Nations Global Compact principles, and others
  • various other sources of specific guidance, such as the The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).

Consistent with the IIRC <IR> Framework, the proposed CDSB framework focuses on the needs of investors as the primary users of information. The consultation document notes that "organizations rely on continuing inputs of 'capital' from different sources including the financial system and the environment, which provides natural capital" and that the framework "enables investors to exercise their duty of stewardship in relation to both types of capital".

The proposed framework would apply on a voluntary basis. The consultation draft is open for comment until 19 May 2014. Click for more information (link to CDSB website).

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