Environmental and Sustainability Frameworks in Global Policy and Business

Why are world resources and the environment under increasing pressure?

Because world population, per-capita consumption, and energy use are all growing.

What does China's energy consumption illustrate?

Energy use in developing nations can grow much faster than population.

What are fossil fuels?

Coal, oil, and gas, including derivative products such as gasoline, diesel, and jet fuel.

Why do fossil fuels continue to dominate world energy supply?

Growth in energy demand is outpacing additions of renewable and other non-fossil energy such as nuclear.

Which fossil fuel has the highest emissions relative to energy content?

Coal.

Which fossil fuel has the lowest emissions relative to energy content?

Natural gas.

What is the sustainability ecosystem?

The various parties interested in providing, using, and facilitating sustainability information.

What sustainability issues did McDonald's face?

Disposable-package litter, polystyrene clamshells, animal treatment, Happy Meal nutrition/advertising, and deforestation risks tied to beef, soy, palm oil, coffee, and paper.

How did McDonald's often approach sustainability problems?

It worked with NGOs to analyze problems and develop solutions that would gain broader acceptance.

Which NGO worked with McDonald's on replacing polystyrene foam containers?

Environmental Defense Fund.

Why were some McDonald's sustainability issues considered upstream?

Some issues occurred at suppliers or even suppliers of suppliers.

When was the League of Nations established?

following World War I.

What was the League of Nations' mission?

Maintain peace through collective security and disarmament and provide a forum for resolving disputes through negotiation and arbitration.

Why did the United States not join the League of Nations?

The U.S. Congress would not ratify participation.

When was the United Nations established?

June 1945, following World War II.

What organization did the UN replace?

The League of Nations.

Why do human rights feature prominently in the UN Charter?

Worldwide attention and outrage over the atrocities of World War II.

What did the 1972 Stockholm Conference help create?

The United Nations Environment Programme (UNEP), environmental principles, and an environmental action plan.

What was the Brundtland Commission?

An independent organization created to analyze and propose strategies for sustainable development.

What report did the Brundtland Commission publish in 1987?

Our Common Future.

How did the Brundtland Report define sustainable development?

Development that meets present needs without compromising the ability of future generations to meet their own needs.

What are the three pillars of sustainability?

Environmental, Social, and Economic.

Which sustainability pillar includes education?

Social.

What is the Triple Bottom Line?

A concept similar to the three pillars that uses People, Planet, and Profit—the 3 Ps.

People corresponds to which sustainability pillar?

Social.

Planet corresponds to which sustainability pillar?

Environmental.

Profit corresponds to which sustainability pillar?

Economic.

What does ESG stand for?

Environmental, Social, and Governance.

What does governance mean in ESG?

The responsibility and efforts of a business's management and board to manage sustainability issues.

When were the UN Sustainable Development Goals adopted and what is their target year?

Adopted in 2015, with goals to be achieved by 2030.

How do the SDGs affect business reporting?

They influence the structure and content of some reporting standards, including GRI and the EU CSRD.

What was Adam Smith's 'invisible hand' idea?

Markets with limited regulation can channel self-interested behavior toward efficient resource use and market equilibrium.

Did Adam Smith believe no regulation was needed?

No, he recognized needs such as preventing fraud and monopolies and providing public goods, legal systems, and national defense.

What is the tragedy of the commons?

When individuals pursuing their own advantage overuse or degrade a shared resource, harming everyone.

Who popularized the term 'Tragedy of the Commons' in 1968?

Garrett Hardin.

What was Elinor Ostrom's main challenge to Hardin's view?

Humans are not always doomed to overuse common resources; communities can develop effective systems for managing them.

What are regulations?

Government requirements imposed on businesses, individuals, and organizations to achieve public purposes and generally protect the public interest.

What is economic regulation?

Rules limiting who can engage in an activity or enter a business and what prices they can charge.

What is social regulation?

Rules governing how individuals or businesses carry out activities to mitigate market failures.

What is a market failure/externality?

When a business or individual does not take responsibility for costs imposed on others.

What type of regulation are CPA state licensing requirements?

Economic regulation.

What type of regulation are CPA integrity, objectivity, independence, confidentiality, and due-care rules?

Social regulation.

What does the Legislative Branch generally do?

Makes laws.

What does the Executive Branch generally do?

Enforces laws.

What does the Judicial Branch generally do?

Interprets laws and rules on constitutionality.

Name the Executive Branch departments listed in the review.

Agriculture; Commerce; Defense; Education; Energy; Health and Human Services; Homeland Security; Housing and Urban Development; Interior; Justice; Labor; State; Transportation; Treasury; Veterans Affairs.

What are basic functions of the Department of Agriculture?

Food safety, food availability, and environmental conservation, including animal/plant health, product standards, nutrition programs, sustainable farming, and management of U.S. Forest Service resources.

What does the FDA regulate?

Food safety, pharmaceuticals, medical devices, and cosmetics; it also addresses sustainability issues in food systems and packaging.

Which department contains the FDA?

Department of Health and Human Services.

What are basic functions of the EPA?

Safeguarding air, water, and land through environmental regulations; enforcing major environmental laws; monitoring pollution; and overseeing Superfund cleanups.

Is the EPA inside an Executive Branch department?

No, it is an independent agency that reports to the President.

What are examples of regulatory inadequacies?

Poor design, lobbying/political influence, weak enforcement, regulatory capture, late implementation, stale rules, circumvention, inadequate penalties, and low public buy-in.

Is company opposition by itself evidence that a regulation is inadequate?

No.

What was Milton Friedman's view of corporate purpose?

A corporation should focus on making money for shareholders while complying with laws/regulations and basic social and ethical norms.

What is a social license to operate?

Ongoing public/stakeholder acceptance of a company's activities.

How did the Business Roundtable's stated corporate purpose change?

It moved from emphasizing a paramount duty to stockholders to a broader commitment to stakeholders.

What did BlackRock's 2020 letters ask CEOs to use for sustainability reporting?

SASB and TCFD standards/frameworks.

What actions did BlackRock say it could take when companies made insufficient sustainability progress?

Vote against management/board directors and reallocate capital away from inadequately managed sustainability risks.

What is greenwashing?

Representing a business, product, or fund as more sustainable than it truly is.

What is greenhushing?

A company's reluctance to publicize ESG information because it fears stakeholder or investor pushback.

What is shareholder capitalism?

A model focused on complying with regulations while pursuing profit for shareholders.

What is stakeholder capitalism?

A model that goes beyond pure profit and serves a broader range of stakeholders.

What are examples of stakeholders?

Local community, employees, customers, suppliers, and the affected public.

What is impact materiality?

A focus on material impacts a business has on people, the environment, and economies.

What is financial materiality?

What does the SEC do in traditional U.S. financial reporting?

Controls financial reporting for U.S. public companies, primarily through Regulation S-K and S-X.

What does FASB do?

Supports the SEC in establishing U.S. Generally Accepted Accounting Principles (GAAP).

Where is U.S. GAAP contained?

FASB's Accounting Standards Codification (ASC).

What does the IFRS Foundation do in traditional financial reporting?

Oversees the establishment of accounting practices used by most non-U.S. companies.

What does the IASB do?

Develops IFRS accounting/reporting standards.

How does the IASB issue standards?

In the form of IFRS pronouncements.

What is GRI?

A widely used voluntary sustainability reporting standard covering environmental, economic, and social topics, with a focus on impact materiality.

What materiality focus does GRI use?

Impact materiality.

What is CDP?

A nonprofit disclosure system originally created to encourage climate reporting; it later expanded to water security, forests, plastics, and biodiversity.

What materiality focus does CDP have according to the review?

Double materiality.

What was the International Integrated Reporting Council (IIRC) intended to do?

Encourage integration of financial and non-financial information in corporate reporting.

What materiality focus did integrated reporting emphasize?

Financial materiality for use by investors.

What is SASB?

Sustainability Accounting Standards Board standards targeted toward investors and organized by industry to improve comparability.

What materiality focus does SASB use?

Financial materiality.

What is TCFD?

Task Force on Climate-Related Financial Disclosures, a climate-reporting framework established by the Financial Stability Board.

What materiality focus does TCFD use?

Financial materiality for investors.

What is the GHG Protocol used for?

Guidance to measure and report greenhouse-gas emissions.

How does the GHG Protocol categorize emissions?

Scope 1 = own/direct emissions; Scope 2 = emissions from electrical supply; Scope 3 = supply-chain and product-user/value-chain emissions.

When did the IFRS Foundation announce the ISSB?

November 2021.

What is the ISSB's purpose?

To help strengthen and consolidate sustainability reporting standards.

Which organizations/frameworks did ISSB take over according to the review?

SASB, IIRC, CDSB, and TCFD.

What two sustainability standards did ISSB issue in 2023?

IFRS S1 and IFRS S2.

What is the Taskforce on Nature-related Financial Disclosures (TNFD)?

A taskforce launched that released nature-related financial disclosure recommendations in 2023.

What did the EU issue in 2023 for sustainability reporting?

The Corporate Sustainability Reporting Directive (CSRD).

What standards are used under CSRD?

European Sustainability Reporting Standards (ESRS).

Who developed ESRS?

EFRAG.

What materiality approach does ESRS use?

Double materiality.

What is the IFRS definition of material information?

Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence investor decisions.

What are SASB's five broad sustainability dimensions?

Environment; Social Capital; Human Capital; Business Model & Innovation; Leadership & Governance.

How many SASB General Issue Categories are there?

26.

How many SASB industry standards are there?

77 industry standards grouped into 11 sectors/categories.

What is the SASB Materiality Map?

A diagram showing sustainability dimensions and General Issue Categories that SASB considers likely to be material for each industry.

Are the same SASB issues material for every industry?

No, material issues vary by industry.

What do material SASB General Issue Categories lead to?

Industry-specific disclosure topics with detailed quantitative and/or qualitative information and metrics.

How does SASB differ from traditional financial reporting?

It extends reporting beyond traditional financial statements but remains limited to financially material sustainability information.