Hello everybody, welcome to another edition of C&F Talks. It's a great pleasure to have with me today, David Fatscher, who's the Interim Head, Sustainability and ESG Standards at the British Standards Institution. David's going to be joining us on the 6th of November, to speak at our fourth annual Sustainability Reporting Summit.

Maurice, hello.

Very good to have you with us.

Now, the reform of the sustainable reporting landscape is gathering pace, obviously, with major recent announcements from the FCA, from EFRAG and the TNFD. What is that role of the BSI in sustainable reporting? How does it fit with these various initiatives?

I think the most important thing probably to stress is the fact that what you're talking about there is very much ESG sustainability reporting disclosures, which is often laid down by voluntary frameworks or increasingly by regulation. The world of BSI and more importantly, the fact that BSI is the UK member of ISO, which is the International Organisation for Standards, is more about providing organisations with the how-to, which then can help them, enable them to report when it comes to those disclosures down the line. So, I would probably say that it's more a case of our role being rather complementing what are the kind of the alphabet suit, which I think everyone obviously refers to and is a source of concern, I think, for organisations trying to navigate what they're now being obliged to do.

It's not a case of ISO in the same exact space. It's about, like I said, providing that kind of guidance on what data you might, how to collect data that you might then use later on with some of those reporting disclosure requirements.

Okay.

And I suppose that looking at what's going on generally, both in the UK with the FCA updating its sustainability reporting requirements page, which in essence is saying that they're going to try and simplify sustainability reporting, and then with EFRAG launching a consultation on its plans to streamline the European sustainability reporting standards, you know, there's a general trend towards simplification. And do you think that this trend may undermine the entire original purpose of sustainability reporting, or do you think it's something that's to be welcomed?

I don't think anybody was setting out previously to make sustainability reporting complicated, so I think arguably anything that moves towards simplification is probably going to be a good thing. Certainly a couple of years ago, the phrase that kept coming up a lot was about interoperability, making sure that if there are going to be multiple different reporting frameworks, at least can they be interoperable so that an organisation saying, well, we have the data we need to report under X, oh, that also means because there's a lot more interoperability, we now know we can report if needs be under Y and Z. I think also there was a lot of references previously to how these need to be harmonised, and again that's speaking to the interoperability piece. You're obviously, yes, you're picking up on the fact that simplified, and there's been some more, you know, loaded and quite emotional language about rollbacks and watering down.

I think that certainly to your question though, there's a concern that what the ambition, for example, of the EU was in terms of putting out the markers regarding the Corporate Sustainability Reporting Directive, have been then moved around so much that organisations are, you know, their heads are spinning in terms of what they do have to do, whether they're even within scope of it. So, that's one thing I think that's been a concern of organisations, and I think to your point about the ambition, yeah, it was always about trying to, in a way, I guess make organisations more accountable for their ES and G performance, and I think possibly what's happened is that the efforts to simplify have led to a general sense, perhaps in the business world, that perhaps, you know, regulators' hearts aren't really in this because they're pushing back and moving goalposts, and it's just become quite a confusing mess, as I'm sure you're aware, and those of your audience are very familiar with the kind of the challenge that's in front of us.

Yeah, yeah. I suppose it reflects the political reality of how things are.

But turning to another subject entirely, the Task Force on Nature-Related Financial Disclosures, the TNFD, just issued a discussion paper on the challenges investors face in identifying, assessing, and disclosing nature-related dependencies and impacts at the portfolio level. Is the BSI involved in giving advice to UK companies in this area within its standards?

Yeah, so again, as I said before, BSI is the UK member of ISO, and there is actually an ISO standard on biodiversity net gain, which certainly can be considered as being a tool that organisations can use as they then seek to manage and assess, for example, the risks and opportunities that they need to become familiar with and take actions in order to address with regard to reporting under TNFD. So, I think in that sense, again, it's back to this idea of there being a complementary relationship. And in fact, actually, the ISO standard that's publishing on biodiversity net gain towards the end of this year is based in itself on a British standard that came out about five years ago.

The other thing to probably highlight, again, I keep talking about complementary nature and the fact that when an ISO standard is published, it's very much about good practice on how to do something, which can then set up an organisation well for when they therefore have to maybe report in a mandatory sense or an involuntary sense. It's giving them the processes, the practices, the controls and systems they need. But within that ISO ecosystem, like I say, you have national representation from an organisation like BSI, the UK member of ISO, but there are various liaisons as well.

So, the ISO committee that is developing that biodiversity net gain standard has a liaison with TNFD. So again, there's a real concerted effort here, back to my previous point about harmonisation, interoperability to make sure that international standards published by ISO are not seen as being another exam question that companies have to get their head around alongside everything else. It's more about how these ISO standards can enable better performance, management, measurement of performance that then set them up well to be more report ready.

Yeah, so more of the how-to and all very joined up, which is very good to hear.

Another difficult area in disclosure is obviously Scope 3 GHG emissions. For large companies in particular, they can have thousands of suppliers. It's a huge undertaking to keep track of emissions in their supply chain. What are your thoughts on the best way of doing this?

I think again, yeah, this has become something that, given that, as you said before, the complexity of global supply chains, it's a real challenge for organisations to feel that they are on top of not only their own data, but the data that goes down through the different tiers of their business operations. I think, again, I would probably point to the fact that consistency is obviously important. If organisations are managing and measuring the same thing in the same way, then that means they have more confidence in the downstream output of that in terms of the reporting.

Again, there are international standards that have been designed, have already been developed and published, but BSI actually, again, is very much a pioneer in this space. Apart from, as I said, being the UK member of ISO, we develop our own standards for a UK audience and recently published guidance for net zero transition for SMEs, for example, a freely available standard from BSI called Flex 3030. Again, the idea then is recognition of the fact that it's SMEs that are really at the downstream coal face of how to get started on this, because typically they might be part of the Scope 3 emissions of a larger global corporate, and yet their heads are turning in terms of what they have to do.

Does SBTI apply to them? What's this thing called the greenhouse gas protocol? Where to get started is, I think, the big ask of SMEs and hopefully something like BSI Flex 3030 will get them pointing in the right direction. So, to your point about Scope 3 emissions, they're better able to respond to that and in a more consistent way that helps all of their clients.

Great, that's good to hear.

Obviously, the whole purpose, or the primary purpose at least, of sustainability reporting is to enable investors to make informed decisions, thereby holding companies and organisations to account and pushing the pushback against climate change. Given the amount of detail that's required under various sustainability reporting standards, notwithstanding the simplification that we discussed earlier, do you think there's a danger sometimes that investors will get bogged down in the detail and, as it were, not see the wood for the trees?

Yeah, I mean, as you said before, really the ambition of something like CSRD in the EU was very much to make sure there is a kind of a level playing field in terms of the type of information that investors would need from companies in their sustainability statements. And I think we could be at that point inevitably where a lot of activities happening and maybe the information that's being pulled out of companies and then landing in these sustainability statements is perhaps not being utilised in quite the most effective way. I think to try and be positive about that, I'd like to think that a few years down the line when the actual process of having standardised sustainability statements such as under CSRD is more mainstream and more business as usual, then I think maybe to your point, investors will be able to make that comparability between company A and company B.

I think we're probably in that kind of slightly sort of transition stage there with a lot of companies still viewing reporting as being a little bit of a tick box exercise because it's like we need to get to this point within our calendar year where we get all of our reporting ducks in a row and they themselves, the companies themselves, are maybe not able to draw any great insight from that. It's a little bit of a seen as more of a burden than a benefit and I suspect on the other side it's probably seen maybe because of that as not being something that's particularly decision useful but I think over time as that process at both ends of the equation become a little bit more as I say baked into operations, I think that's when we'll see that turning point or tipping point rather and that's why I think maybe the gold within the data I think will then sort of start to come through.

Yeah, and hopefully as people increasingly become aware of the dangers of climate change and its very real impacts, economic impacts that will encourage companies and investors to use this type of reporting to guide their strategic decision making and I agree with you David, maybe that's a couple of years off, yeah.

David thank you very much for your time today, really interesting. Looking forward to taking forward this discussion and discussion on related issues at the conference itself. That's the fourth annual Sustainability Reporting Summit in London on the 6th of November, further information available at the website: www.cityandfinancial.com. David, thank you very much, see you on the 6th of November.

See you then Maurice, thanks for inviting me.