The global push for sustainability is accelerating, with many governments and organizations pushing for enhanced ESG (Environmental, Social, Governance) disclosures. Recent developments indicate significant updates on guidelines and regulations set to shape the corporate sustainability dialogue for 2024 and beyond.
On December 10, 2023, the Hong Kong government unveiled its roadmap for sustainability disclosures, mandATING publicly accountable entities (PAEs) such as listed companies to fully adopt the International Financial Reporting Standards' Sustainability Disclosure Standards (ISSB standards) by 2028. Christopher Hui, the Secretary for Financial Services and the Treasury, stated, "Hong Kong, as an international financial center, must lead by example, and the adoption of the ISSB standards is key to enhancing our leadership and supporting the green transition." The Hong Kong Institute of Certified Public Accountants (HKICPA) will be developing local standards aligned with the ISSB standards, set to come effective by August 1, 2024. Meanwhile, the Hong Kong Stock Exchange (HKEX) plans to consult on mandATING sustainability reporting by 2027, to be implemented by January 1, 2028.
Turning to Japan, multiple social challenges are being recognized within the broader ESG framework. The upcoming 2024 regulations addressing truck driver work hours are part of the so-called "logistics 2024 problem," which aims to improve labor conditions but raises concerns over potential shortages of transportation capacity. The Ministry of Economy, Trade and Industry anticipates significant declines in operational capabilities if no mitigation strategies are enacted.
Simultaneously, Japan is facing the "2025 problem"—a demographic crisis where one-fifth of the population will be elderly, exacerbated by issues like system obsolescence affecting economic sectors such as employment, healthcare, and welfare. The National Strategy Office's report delves deep, noting the challenges of increasing social security costs and the necessity for systemic reforms to manage these demographic shifts.
Beyond these issues lies the rising trend of impact investments, which seek to address social problems through business models. Many companies are pivoting their focus from traditional ESG metrics toward measurable impacts—an idea emphasized by the November launch of the Impact Consortium backed by the Japanese Financial Services Agency. This movement aims to integrate impact thinking as part of corporate strategies.
Outside Japan, many regions are preparing to implement strict ESG reporting frameworks. Europe will see the immediate activation of the European Sustainability Reporting Standards (ESRS) and the Corporate Sustainability Due Diligence Directive (CSDDD) by mid-2024, influencing both European and non-European companies engaged with EU borders.
Meanwhile, the U.S. Securities and Exchange Commission (SEC) has proposed rules for climate-related disclosures, but their effectiveness remains uncertain due to backlash and lawsuits from both sides of the spectrum. There’s increasing concern about potential inconsistencies between U.S. regulations and international standards, with many companies preparing for divergent compliance costs.
Another major trend for 2024 and beyond is the growing significance of ESG disclosures focusing on “impact”—a term used to describe the social and environmental changes resulting from corporate activities. More firms are likely to adopt these metrics as investment strategies pivot to benefit-focused models, reflecting the enduring evolution of ESG as not only compliance but also as strategic advantage.
Technological advancements like AI are also adding complexity to the sustainability discussion. Companies like Google and Microsoft have faced scrutiny due to the high energy demands associated with AI development, raising concerns over ethical and environmental responsibilities. Emerging legislation and frameworks will likely address AI’s sustainability footprint, forcing firms to rethink their operational approaches.
Finally, Taiwan has mandated all listed firms to submit sustainability reports beginning this year, with deadlines for completion set for August 2024, reflecting the growing global momentum toward transparency and accountability. This initiative invites businesses to gauge their ESG commitments seriously, aligning with the broader shift toward sustainable corporate practices.
These developments represent not only regulatory pressures but also signal opportunities for businesses to lead with innovation and responsibility. The trends for 2024-2025 promise to reshape corporate landscapes where sustainability becomes integral to strategy and performance, leveraging ESG as not just compliance but as pathways to growth and resilience.