5 Trends That Corporates Need To Be Aware Of: The Social Disclosures Edition

5 Trends That Corporates Need To Be Aware Of: The Social Disclosures Edition

ESG disclosures are an indispensable step towards integrating sustainability practices in everyday business decision-making. In an ever-evolving regulatory landscape, firms must not only stay informed about developments in disclosure regulations, but also anticipate upcoming trends (see Strategic Focus: ESG Regulations Around The Globe).

Globally, social disclosures and regulations for business – which have long been overshadowed by environmental and governance concerns (see Placing The ‘S’ Firmly At The Heart Of ESG) – are slowly but surely growing in prominence. According to Verdantix research, there are five trends that firms need to be aware of:

• Growing scrutiny of human rights in supply chains. With the looming confirmation of the EU’s Corporate Sustainability Due Diligence Directive (CSDDD), the 2023 enforcement of the German Supply Chain Due Diligence Act and the UK government’s intent to tighten reporting requirements under the Modern Slavery Act, the global crackdown on human rights abuses is set to build more momentum (see Best Practices: Improving ESG Performance In The Supply Chain).
• Higher penalties for poor quality disclosures and for bad social performance. There is a move towards greater transparency of disclosures through mandated assurance requirements, and increased penalization for non-compliance. Verdantix is witnessing a stronger ‘show, don’t tell’ data credibility movement, as evidenced by the forecasted expansion of the ESG assurance market, which is set to grow to over $5.89 billion by 2028, at a CAGR of 27% (see Market Size And Forecast: ESG Assurance Services 2022-2028 (Global)).
• Enhanced voluntary reporting and social disclosure frameworks, supporting regulatory movement. Firms are increasingly focusing on social elements in their sustainability reports – voluntarily. The third sector is also nudging organizations towards stronger and more transparent social disclosures (see Strategic Focus: The Future Of Voluntary Sustainability Reporting).
• Impact of US affirmative action lawsuit on diversity policies and disclosures. In a concurring opinion to the US Supreme Court’s ruling against race-conscious university admission policies, Associate Justice of the Supreme Court Neil Gorsuch noted that the federal law banning race bias in federally funded programmes was "essentially identical" to the law prohibiting workplace discrimination. Such a statement has the potential to spur legal challenges to corporate diversity initiatives that take race into account (see The Legal Issues Surrounding Diversity, Equity And Inclusion Programmes).
• Increased ethnic diversity disclosures. Many firms, especially in the UK and EU, are voluntarily taking steps to monitor and report on ethnic diversity and associated pay gaps. We expect this trend to increase in the short term, with regulatory development in the medium term.

If you are interested in the changing social regulatory environment, please read Strategic Focus: Unpacking The S In ESG Regulations. To find out more about the major trends that we expect to influence firms’ ESG and sustainability strategies and investments in 2023, please read Market Insight: 10 Predictions For ESG & Sustainability In 2023 – and keep watching this space for our 2024 refresh.