This provides an introduction to leading ESG / Sustainability oriented standards as of August, 2023. The goal of the presentation is to show that "Double Materiality" and "Strong Sustainability" are critical to achieve Net Positive / Nature Positive goals for engineers, policy makers, and society at large.
Please note - while I prepared this in my role as Sustainability Practice Lead for the IEEE Standards Association, these ideas are my own and don't necessarily reflect those of my employer.
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ESG Standards and Regulations
An Introduction to Technologically Accountable Sustainability
John C. Havens
IEEE SA, Sustainability Practice Lead
Planet Positive 2030, Staff Lead
Founding Executive Director, The IEEE Global AI Ethics Initiative
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ESG Definition and History
• Environmental, Social and Governance issues were
formalized in 2006 with the United Nation’s
Principles for Responsible Investment (PRI) report
Who Cares Wins.
• This report established the requirement for “ESG”
Criteria to be included in Financial Reporting about
companies to their investors, employees,
stakeholders and the general public.
• Examples of broad categories for each area are
shown in the diagram to the left where a majority
of ESG metrics focus on “E” or “Environmental”
reporting and regulatory requirements.
Source: BerryDunn
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From Reporting to Regulations
Companies have been providing annual performance reviews discussing their financial
and philanthropic performance for years as part of their Corporate Social Responsibility
(CSR) reporting but now investors and shareholder are demanding more specific
information about Climate Risk due to Climate Change and key global regulations
emerging over the past few years, including:
• In March 2022 The US Securities and Exchange Commission (SEC) proposed rules to Enhance
and Standardize Climate-Related Disclosure for Investors. These rules pose a significant
challenge for companies as they must report on three ”Scopes” of their direct greenhouse gas
(GHG) emissions.
• In April 2022, The UK government enacted two new ESG laws affecting registered companies
and Limited Liability Partnerships (LLPs) that have over 500 employees and annual revenue of
more than £500 million.
• On July 31, 2023 The EU Commission adopted the European Sustainability Reporting Standards
(ESRS) for use by companies subject to the Corporate Sustainability Reporting Directive (CSRD.
Beginning in 2024, companies with more than 500 employees will have to provide this new
reporting.
Source: National Grid
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The Measure of Materiality
A key concept regarding any ESG or
Sustainability reporting has to do with the
concept of Materiality:
• ”Single” or “Financial” Materiality is due
diligence where companies tell investors how
climate related risk could harm profits or
operations.
• “Double” Materiality (like the EU’s CSRD
Regulations) mean companies have to
disclose how their operations and overall
actions affect the climate, nature, and society
overall.
• Double Materiality frames ideas from Natural
Capital Accounting to take a full measure of
climate and nature related issues.
Source: Anthesis
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Technologically Accountable Sustainability – “Strong Sustainability”
• Engineers recognize “boundary conditions” in their work, recognizing
scientific and academic parameters for holistic systems design.
• Most organizations choose elements from “E”, “S”, or “G” components
(see diagram) with their sustainability reporting. While laudable, this
does not represent systems thinking.
• The concept of “Strong Sustainability,” however, recognizes the
boundary conditions of our planet in terms of our climate, biodiversity
and overall resources.
• In other words, despite what Investors or Regulations may require,
Double Materiality and Strong Sustainability recognize the need to
prioritize the planet to avoid further climate and nature related risks.
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IEEE Standards Association: Strong Sustainability by Design
• New paper from the IEEE Standards Association
• Currently seeking global feedback
• Goal is to incorporate “Strong Sustainability” logic by 2030 to keep
global warming under 1.5 degrees (pre-industrial levels) and inspire
nature-positive solutions utilizing technology.
• ”Ecosystem” chapters include Forests, Rivers, Oceans
• Other chapters include Economics, Cultural / Indigenous Wisdom
• IEEE 7800 Standards Series inspired and is growing based on this work
• Please visit: sagroups.ieee.org/planetpositive2030