Global ESG Disclosure: From Convergence to Data Readiness
- Kerstin Schmitz
- Jun 26
- 13 min read
For too long, the landscape of corporate sustainability disclosure resembled a patchwork quilt – a myriad of voluntary frameworks, regional preferences, and industry-specific guidelines. This often led to inconsistent data, duplicated efforts, and a profound limitation in true comparability, restricting informed investment decisions and masking genuine corporate environmental and social performance.
However, a fundamental and decisive shift is now underway. We are witnessing a powerful move towards convergence in global Environmental, Social, and Governance (ESG) disclosure. Driven by robust market forces, including urgent investor demand for comparable, reliable data, and a growing regulatory imperative for transparent accountability, leading jurisdictions and standard-setters are actively striving for greater alignment and interoperability. This revolution in corporate transparency goes beyond simply reporting more; it's about reporting with unprecedented precision, consistency, and verifiability. For industries like chemical, process, and pharmaceutical manufacturing, navigating this evolving transition requires a deep understanding of not just the regulatory text, but the practical implications for their complex value chains and product portfolios.
This article aims to clarify this converging landscape, highlighting the key frameworks driving this change and explaining why robust, granular data management is now the bedrock of compliant and credible ESG disclosure.
The Past: Navigating Diverse Approaches to Disclosure
Historically, ESG reporting largely relied on a mosaic of voluntary initiatives. Frameworks such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), while invaluable in their efforts to foster an initial understanding of ESG risks and opportunities, often allowed companies significant flexibility in what they chose to disclose and how they presented the information. The Carbon Disclosure Project (CDP) emerged as a leading platform for environmental data, and the Task Force on Climate-related Financial Disclosures (TCFD) provided a widely adopted structure for climate risk reporting.
While these voluntary efforts were foundational, their inherent flexibility inadvertently fostered variations, limiting cross-company comparisons for investors and other stakeholders. The absence of consistent standards often obscured genuine sustainability efforts, reducing confidence and making it difficult for capital to flow efficiently. For businesses, meeting multiple, often overlapping, frameworks also led to increased reporting effort and less optimal resource allocation.
In Europe, the Non-Financial Reporting Directive (NFRD), introduced in 2014, represented an early, albeit less prescriptive, attempt at mandatory non-financial disclosure for large public interest entities. While a crucial step forward, its flexible implementation resulted in varied reporting quality and content across member states, highlighting the critical need for more granular, standardized, and enforceable rules that would ultimately lead to its more robust successor.
The Catalyst for Change: Why Convergence is Now Essential
The push for convergence in ESG disclosure is not a coincidental phenomenon; it is a direct and forceful response to several critical, interconnected drivers:
Investor Demand for Decision-Useful Data:
Financial markets increasingly recognize sustainability as a fundamental driver of both risk and long-term enterprise value. Investors are demanding high-quality, consistent ESG data to assess resilience, identify opportunities, and integrate sustainability factors into capital allocation and portfolio strategies. The European Central Bank continues to emphasize the need for improved disclosures to address macro-financial risks from climate change. As stated in past Financial Stability Reviews, enhanced data quality and transparency are key to ensuring an orderly transition and financial system resilience. [1] This growing expectation for investor-grade sustainability information is a critical catalyst behind today’s regulatory transformation.
Regulatory Imperative for Accountability:
Regulators worldwide are intensifying efforts to ensure that corporate sustainability claims are backed by transparent and verifiable information. This commitment to robust disclosure is a key mechanism to foster market integrity and enhance stakeholder trust.
Global Challenges, Global Solutions:
Environmental issues such as climate change, biodiversity loss, and resource depletion transcend national borders. Addressing these global challenges effectively benefits from a common, globally recognized language for reporting on their impacts and the strategies to mitigate them. This shared understanding is essential for coordinated action and the efficient allocation of capital towards sustainable solutions.
Operational Efficiency:
While the initial effort to comply with new regulations can be substantial, businesses stand to benefit from clearer, more consistent reporting requirements. A harmonized approach can streamline internal processes, reduce redundancies, and lower the costs and complexity associated with navigating disparate regulatory regimes.
Strategic Risk Management: Greater consistency and granularity in sustainability data also improves the ability to identify and proactively address material sustainability risks—such as supply chain vulnerabilities, emissions hotspots, or resource inefficiencies—across complex global operations. This contributes to more informed strategic decisions and long-term resilience.
The European Vanguard: CSRD and ESRS
At the forefront of this convergence push is the European Union's Corporate Sustainability Reporting Directive (CSRD). Entering into force in January 2023, the CSRD represents a monumental expansion in the scope and granularity of sustainability reporting compared to its predecessor, the NFRD. It impacts a vast array of companies operating in the EU – estimated at approximately 50,000 entities, including significant non-EU companies meeting certain thresholds – requiring a fundamental recalibration of their reporting practices.
The CSRD mandates reporting according to the European Sustainability Reporting Standards (ESRS), meticulously developed by the European Financial Reporting Advisory Group (EFRAG). The ESRS are comprehensive, detailed, and legally binding, covering a broad spectrum of environmental, social, and governance topics. Their foundational elements include:
Double Materiality:
Companies are required to report not only on how sustainability issues affect their financial performance ("financial materiality") but also on their own impacts on society, the environment, and their management practices ("impact materiality"). This dual perspective ensures a holistic and comprehensive view of a company's sustainability footprint and governance approach, and their implications.
Granular Data Points:
The ESRS specify hundreds of distinct data points, necessitating detailed disclosures on a wide array of topics. This ranges from specific Greenhouse Gas (GHG) emissions across Scopes 1, 2, and 3, to water usage, biodiversity impact, circular economy initiatives, human rights due diligence, workforce diversity, and anti-corruption measures. The ESRS also explicitly call for companies to apply a life cycle perspective where relevant, particularly for environmental topics—including upstream and downstream activities along the value chain—to ensure a comprehensive view of sustainability impacts. [2]
Required Assurance:
A critical new requirement is the mandatory assurance of reported sustainability information, starting with limited assurance and evolving towards reasonable assurance over time. [3] This elevates the stakes for data quality, requiring robust internal controls and audit-ready data trails.
Digital Tagging:
ESRS data will be required to be reported in a digital, machine-readable format (Extensible HyperText Markup Language (XHTML)), integrated directly into companies' management reports. This digital standardization significantly enhances comparability and facilitates more sophisticated analysis by stakeholders.
Crucially, EFRAG has actively collaborated with the International Sustainability Standards Board (ISSB) to ensure a high degree of interoperability between the ESRS and ISSB Standards. While the ESRS are broader in scope (reflecting the EU's double materiality approach and wider stakeholder focus), the deliberate efforts towards alignment aim to minimize additional reporting burdens for companies adhering to both frameworks, thereby reinforcing the broader convergence trend.
Recent Developments: ESRS Simplification
It’s important to note that the ESRS framework is not static. In response to implementation challenges and stakeholder feedback, EFRAG has advanced its “Omnibus Proposal” to simplify and enhance the usability of the ESRS. On June 20, 2025, EFRAG delivered a progress report to the European Commission outlining six key simplification levers—ranging from reducing required datapoints to improving interoperability and clarity. Based on data from early CSRD adopters, the proposal could result in a reduction of over 50% in mandatory datapoints for many companies.
Exposure drafts of the simplified standards are expected in mid-July, followed by a public consultation period in late July through September, with final technical advice to the Commission due in October 2025. [4]
These developments illustrate the EU’s responsiveness to practical challenges while reaffirming its strategic ambition. For companies, this underscores the importance of maintaining agile, future-ready data systems that can respond quickly to refinements in reporting requirements.
The Global Baseline: IFRS S1 and S2
Complementing regional efforts, the International Sustainability Standards Board (ISSB), operating under the International Financial Reporting Standards (IFRS) Foundation, has issued two foundational standards that mark a significant step towards global consistency in sustainability reporting:
IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information sets out how companies should disclose sustainability-related risks and opportunities that are relevant to investors, emphasizing connectivity with financial statements and decision-usefulness for capital markets. [5]
IFRS S2 – Climate-related Disclosures builds upon the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and requires companies to disclose climate-related risks and opportunities, including governance, strategy, risk management, and metrics and targets. [6]
According to the IFRS Foundation, the ISSB Standards—issued in June 2023 and effective for annual reporting periods beginning on or after 1 January 2024—represent the first globally accepted baseline for investor-focused sustainability disclosures. They are designed to improve trust and confidence in corporate sustainability reporting across capital markets worldwide. The ISSB developed them in close cooperation with jurisdictions and stakeholders to enable broad adoption and interoperability with local frameworks such as the ESRS.
This international baseline enables companies to streamline disclosure efforts, supports cross-border comparability, and creates a foundation for jurisdictions to build upon in accordance with local priorities. As the IFRS Foundation emphasized upon their release, these standards are “designed to be used in conjunction with any accounting requirements and to meet the information needs of investors globally”. [7]
Jurisdictions globally, including the UK with its Sustainability Disclosure Requirements (SDR), are actively exploring or have committed to incorporating ISSB Standards into their domestic regulatory frameworks. This growing international alignment highlights the ISSB’s role as a cornerstone of the global shift toward standardized, investor-focused sustainability reporting.
Regional Responses and Interconnections: Navigating Nuance
While convergence is a powerful driving force, the inherent complexities of regional legal systems and existing policy priorities mean that complete, identical uniformity across all frameworks may remain a distant goal. However, what is clear is that regional frameworks are increasingly being designed with global interoperability and mutual recognition in mind.
In the United States, the U.S. Securities and Exchange Commission (SEC) finalized its climate-related disclosure rules in March 2024. These rules, though currently navigating a dynamic legal landscape, represent a significant stride towards mandatory climate-related financial reporting for public companies. They require disclosures on climate-related risks that are reasonably likely to have a material impact on the company’s business, strategy, and outlook, along with details on governance, strategy, and risk management concerning these risks. Furthermore, larger filers are mandated to disclose their Scope 1 and Scope 2 Greenhouse Gas (GHG) emissions, with required assurance. While the final rule notably omitted the initially proposed Scope 3 GHG emissions reporting, indicating some divergence from the broader scope seen in frameworks like the CSRD/ESRS, the SEC's initiative nonetheless signals a strong governmental push for standardized climate disclosure in the world's largest economy, aligning with the global trend towards mandatory, auditable data. The SEC's rule also draws heavily from the TCFD framework, thereby implicitly aligning with the ISSB's foundational principles.
The UK's Sustainability Disclosure Requirements (SDR) further exemplify a regionally tailored yet globally-aware approach. While initially broad in scope, the UK is progressing towards adopting ISSB Standards for company-level reporting, demonstrating a commitment to aligning with the global baseline. This, alongside specific anti-greenwashing rules for financial products, showcases a concerted effort to enhance transparency while addressing market-specific concerns.
To clearly illustrate how key global ESG disclosure frameworks compare across jurisdictions, the infographic below summarizes their essential similarities and differences. This visual reinforces the broader convergence trend, while also highlighting key nuances in scope, materiality, assurance, and implementation timelines.
The Data Foundation: Translating Disclosure Mandates into Actionable Data
The ambition of "fragmentation to convergence" on paper is immense and transformative. However, for companies, particularly those operating in the chemical, process, and pharmaceutical industries, the practical reality of achieving this convergence hinges entirely on the quality, granularity, and scalability of their underlying data infrastructure. These sectors face unique and heightened data management considerations:
Intricate Product Portfolios and Value Chains:
Managing hundreds to thousands of complex product formulations, involving numerous raw materials, and operating within global supply chains, presents a monumental data undertaking. While precise Product Carbon Footprints (PCFs) aren’t explicitly required by all regulations, the ESRS's life-cycle perspective and Scope 3 requirements implicitly support them.
Intense Regulatory Focus and High Interdependency:
Beyond ESG, these sectors already operate under stringent regulations concerning product safety, environmental impact, and public health. Their products often serve as critical ingredients for other industries, making the accurate calculation and reporting of Scope 3 emissions (particularly Scope 3.1: purchased goods and services) an exceptionally involved and data-intensive undertaking, as widely acknowledged by expert bodies like the GHG Protocol. [8] (This foundational standard remains the authoritative guide referenced by current frameworks; its involved nature is a persistent topic of attention, as recent PwC insights highlight challenges in data types, approaches, and audit readiness. [9])
Meeting the converging demands of CSRD (with its exhaustive ESRS data points, life cycle perspective, and mandatory assurance requirements), ISSB (with its investor-focused climate disclosures), and regional SEC rules (if applicable) necessitates the development of robust approaches for:
Higher-Quality, Auditable Data:
Assurance requirements—CSRD Article 34 and the SEC’s climate rule for Scope 1 and 2 emissions—have raised the bar for data integrity. ESRS 1 §63 mandates that companies use “reasonable and supportable information,” making primary data collection the preferred approach. This is a significant undertaking, with a PwC Luxembourg report indicating that over half (55%) of companies preparing for CSRD compliance report areas for improvement in data quality and consistency. [10] Furthermore, a Deloitte report found that 57% of executives cite data quality as their top area for focus in ESG reporting. [11]
Systematic LCA and PCF Calculation:
Manually calculating the environmental impacts for vast, intricate product portfolios at the required level of granularity presents limitations for efficient scalability or auditability for large enterprises. For product-related impacts, the CSRD and ESRS strongly underscore the importance of granular data through their life cycle perspective and comprehensive Scope 3 requirements. While neither ISSB nor the SEC currently mandate product-level PCFs, adherence to international standards such as International Organization for Standardization (ISO) 14067 (Carbon Footprint of Products) [12] and relevant industry-specific guidelines like the Together for Sustainability (TfS) PCF Guideline [13] becomes a practical imperative for businesses seeking to provide credible and comparable product-level data, or to fulfill CSRD's broader environmental reporting demands.
Scalable Scope 3 Data Management:
The sheer volume and distributed nature of data involved in Scope 3 emissions, particularly for intricate value chains, makes manual collection and aggregation infeasible for large organizations. Both ESRS E1, paragraphs 28-30, and IFRS S2, paragraph 29, mandate Scope 3 GHG emissions disclosure, referring to the GHG Protocol which outlines extensive data collection across the value chain. This highlights the need for a scalable approach to efficiently manage primary supplier data alongside high-quality, relevant secondary data from reputable databases to ensure both accuracy and a pragmatic approach to disclosure, a common area for development consistently highlighted in recent industry surveys. PwC notes key areas for focus in Scope 3 data as distinguishing between static vs. dynamic data, over-reliance on spend-based approaches, unreliable extrapolation from small samples, and ensuring trust & audit readiness. [9]
Seamless Data Integration and Harmonization:
ESG data needs to move beyond isolated silos. For consistent, accurate, and auditable reporting across both financial and sustainability disclosures, companies must integrate ESG data with existing business processes and enterprise systems.
Digital tagging plays a key role here: Under CSRD, companies are required to prepare their sustainability disclosures in XHTML format with embedded digital tags—a structured, machine-readable format that facilitates automated processing and comparability through the European Single Access Point (ESAP). While ISSB and SEC frameworks currently do not require digital tagging by default, jurisdictions may introduce similar requirements over time.
Additionally, CSRD Article 19a (1) requires sustainability information to be included in the management report, and IFRS S1, paragraph 4, emphasizes that sustainability disclosures should be “connected to the entity’s financial statements”—reinforcing the move towards fully integrated, transparent corporate reporting.
The scale of this transformation is significant: CSRD includes over 1,100 data points—many of which must be disclosed based on a materiality assessment. [14] This vast requirement presents considerable data management challenges for companies, especially in the chemical, process, and pharmaceutical sectors. As a result, many firms are investing in enhanced data systems—comparable to those used in financial reporting—to address gaps in data quality, availability, and staff capacity for effective CSRD implementation. [15]
This deep dive into data management and its inherent considerations for specific industrial sectors is where genuine expertise comes to the fore. It highlights that realizing the promise of convergence hinges on robust, scalable, and specialized data infrastructures capable of handling the intricacies of modern value chains and product lifecycles with precision and reliability.
Beyond Compliance: Turning ESG Disclosure into Strategic Value
While compliance is the starting point, forward-looking companies recognize that converged ESG disclosure unlocks far-reaching business advantages:
Investor Trust and Capital Access:
Providing consistent, comparable, and assured ESG data builds credibility with investors increasingly prioritizing sustainable portfolios.
Resilience and Risk Reduction:
Transparent disclosures reduce legal, regulatory, and reputational risks—while strengthening overall risk management capabilities.
Smarter, Data-Informed Decisions:
Reliable sustainability data drives operational improvements, identifies emission reduction opportunities, and fosters innovation.
Market Differentiation:
As transparency becomes the norm, companies that lead on ESG credibility are better positioned to attract customers, partners, and top talent.
The Path Forward Demands Data and Specialized Expertise
The shift from fragmented to converged ESG disclosure is not just a regulatory trend—it marks a fundamental transformation in corporate transparency. Frameworks like CSRD, ESRS, ISSB, and the SEC climate disclosures are collectively raising the bar for accountability and comparability. Meeting these expectations requires data that is not only reported, but deeply understood, accurately measured, and independently assured.
For companies in the chemical, process, and pharmaceutical sectors, the urgency and complexity of this transition are even more pronounced. Intricate value chains, circular production flows, multi-output processes, and extensive product portfolios demand robust, scalable solutions. Navigating this new environment requires more than compliance knowledge—it calls for strategic investments in data infrastructure that can process, validate, and scale granular sustainability information across the entire product lifecycle.
This is where industry expertise meets technological enablement. Turning operational complexity into auditable, decision-useful insights is not just about systems—it’s about applying the right knowledge to the right data.
Those who embrace this transformation proactively will go beyond compliance: they will unlock new sources of value, reinforce stakeholder trust, and lead with credibility in an increasingly transparent world.
References:
[5] IFRS - IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information
[10] PwC Luxembourg via FinTech Global. (2024). '55% of firms face challenges with CSRD data quality'
