Sustainability

Question 1

Corporate Social Responsibility (CSR)

What is CSR (2)

What is social accounting (3)

Answer 1

Got you — here are the Q and As, clean and structured.

Corporate Social Responsibility (CSR)

What is CSR

• CSR stands for Corporate Social Responsibility.
• It is the idea that businesses have an obligation to act in ways that reflect society’s values, not just pursue profit.

What is social accounting

• Social accounting is the process of communicating the social and environmental effects of a company’s activities.
• It extends accountability beyond financial reporting to shareholders.
• It is based on the belief that companies have wider responsibilities than simply making money.

Question 2

Corporate Social Responsibility (CSR)

What is economic CSR (3)

What is environmental CSR (3)

What is social CSR (3)

Answer 2

Corporate Social Responsibility (CSR)

What is economic CSR

• It focuses on balancing profit maximisation with sustainable and ethical practices.
• Examples include using efficient machinery, low‑emission vehicles, recycling, fair wages, and ethical supply chains.
• The principle: investing in sustainable behaviour increases long‑term profitability.

What is environmental CSR

• It aims to reduce the environmental impact of business activities.
• Covers energy use, water use, waste management, recycling, emissions, and travel policies.
• The principle: protecting the environment protects the company’s future.

What is social CSR

• It focuses on how a business treats people and communities.
• Includes improving labour practices, Fairtrade, charitable giving, volunteering, paying fair wages, and paying suppliers on time.
• The principle: investing in the community leads to the community supporting the company.

Question 3

Sustainability & Sustainable Development

What is sustainability (2)

What is sustainable development (2)

What are the Sustainable Development Goals (SDGs) (2)

How are the SDGs structured (Economy, Society, Biosphere) (3)

Why is the biosphere the foundation (2)

Answer 3

What is sustainability

• Sustainability means using resources at a rate that allows them to be naturally replenished.
• It is about avoiding long‑term depletion of environmental resources.

What is sustainable development

• Sustainable development is development that meets present needs without compromising future generations’ ability to meet their own needs.
• It balances economic growth, environmental protection, and social wellbeing.

What are the Sustainable Development Goals (SDGs)

• The SDGs are a set of global goals adopted in 2015 as part of the UN’s 2030 Agenda for Sustainable Development.
• They cover economic, social, and environmental objectives to guide sustainable global progress.

How are the SDGs structured (Economy, Society, Biosphere)

• The SDGs are shown in three layers:
  
  • Biosphere – environmental systems (e.g. climate, water, life on land and below water)
  • Society – social goals (e.g. poverty, health, education, equality, peace)
  • Economy – economic goals (e.g. growth, industry, inequality, responsible consumption)
• This structure shows that economy depends on society, and society depends on the biosphere.

Why is the biosphere the foundation

• Because all human life and economic activity rely on a healthy environment.
• Without a stable biosphere (climate, ecosystems, water, biodiversity), society and the economy cannot function.

Question 4

Paris Agreement – 2015

What is the Paris Agreement (2)

What temperature targets were set (2)

What is the net zero goal (1)

What does the agreement provide (1)

Answer 4

Paris Agreement – 2015

What is the Paris Agreement

• An international treaty focused on coordinated global action against climate change.
• Signed by 196 countries at COP21.

What temperature targets were set

• Limit global temperature rise to well below 2°C above pre‑industrial levels.
• Aim for a preferred limit of 1.5°C.

What is the net zero goal

• Achieve global net‑zero greenhouse gas emissions by 2050.

What does the agreement provide

• A framework for international cooperation on climate mitigation, adaptation, and climate finance.

Question 5

Sustainability Reporting

What is sustainability reporting (4)

What are the main areas covered in sustainability reporting (3)

What are the key drivers of sustainability reporting (3)

Answer 5

Sustainability Reporting

What is sustainability reporting

• A framework for companies to report on environmental, social, ethical and governance‑related risks and opportunities.
• Focuses on how these risks are managed and their impact on the business.
• Based on the idea that what gets measured gets done, especially when disclosed.
• Historically used multiple frameworks (e.g., GRI, Integrated Reporting, TCFD).

What are the main areas covered in sustainability reporting

• Environmental: resource use, biodiversity, waste, air quality, climate change.
• Social: labour standards, compensation, product responsibility, diversity, health & safety, human rights.
• Governance: board accountability, anti‑bribery, shareholder engagement.

What are the key drivers of sustainability reporting

• Regulatory pressure.
• Investor demands.
• Consumer awareness.

Question 6

Task Force on Climate‑Related Financial Disclosures (TCFD)

What is the TCFD (3)

What are impacts and dependencies (2)

What are transition risks (4)

What are physical risks (5)

Answer 6

Task Force on Climate‑Related Financial Disclosures (TCFD)

What is the TCFD

• Established by the Financial Stability Board.
• Provides recommendations focused on investors and lenders.
• Requires disclosure of climate‑related financial risks, opportunities, and business strategy resilience.

What are impacts and dependencies

• Impacts: how the business affects environmental, social, and governance issues.
• Dependencies: how those issues affect the business’s ability to create and maintain value.

What are transition risks

• Risks from moving to a low‑carbon economy.
• Includes policy, legal, technological, market, and reputational risks.
• Can increase operating costs or cause asset impairment due to new climate regulations.
• Financial performance may change due to shifting consumer demand or new technologies.

What are physical risks

• Risks from climate change itself, either acute or chronic.
• Acute: event‑driven (storms, floods, droughts).
• Chronic: long‑term shifts (sea level rise, biodiversity loss).
• Can cause direct damage costs or supply chain disruption.
• Financial performance may be affected by water availability, extreme temperatures, and impacts on operations, transport, and employee health.

Question 7

TCFD Recommendations

What are the TCFD governance recommendations (2)

What are the TCFD strategy recommendations (3)

What are the TCFD risk management recommendations (3)

What are the TCFD metrics and targets recommendations (3)

Answer 7

TCFD Recommendations

What are the TCFD governance recommendations

• Explain how the board oversees climate‑related risks and opportunities (CRROs).
• Explain management’s role in assessing and managing CRROs.
• This section is about accountability — who is responsible for climate oversight at the top of the organisation.

What are the TCFD strategy recommendations

• Identify CRROs across short, medium, and long term.
• Explain how CRROs affect the business model, strategy, and financial planning.
• Assess the resilience of the strategy under different climate scenarios, including a 2°C or lower scenario.
• This section is about how climate change affects the organisation’s future direction.

What are the TCFD risk management recommendations

• Describe processes for identifying and assessing climate‑related risks.
• Describe processes for managing those risks.
• Explain how these processes are integrated into overall risk management.
• This section is about embedding climate risk into the core risk management system, not treating it separately.

What are the TCFD metrics and targets recommendations

• Disclose the metrics used to assess CRROs.
• Disclose Scope 1, Scope 2, and (if appropriate) Scope 3 greenhouse gas emissions.
• Describe targets used to manage CRROs and performance against them.
• This section is about measurement and accountability, ensuring climate performance is tracked consistently.

Question 8

An Investor Perspective

Why do investors favour firms with strong ESG propositions (2)

Why do strong ESG firms have better long‑term growth potential (4)

Answer 8

An Investor Perspective

Why do investors favour firms with strong ESG propositions

• They are viewed as less risky because they manage environmental, social, and governance exposures more effectively.
• They offer greater value potential due to stronger long‑term positioning.

Why do strong ESG firms have better long‑term growth potential

• They can achieve revenue growth by entering new markets and strengthening existing ones.
• They benefit from cost savings, especially through energy efficiency.
• They gain access to cheaper borrowing, as lenders reward lower risk with a lower cost of capital.
• They attract and retain top talent, improving productivity and innovation.

Question 9

ISSB – IFRS S1 & IFRS S2

What is the ISSB and how was it formed (3)

What is IFRS S1 (3)

What is IFRS S2 (3)

What metrics and targets must be disclosed under IFRS S2 (7)

What is financial materiality under IFRS S1 (1)

What is impact materiality under the EU CSRD (1)

Answer 9

ISSB – IFRS S1 & IFRS S2

What is the ISSB and how was it formed

• Created by the IFRS Foundation in 2021 to develop global sustainability disclosure standards.
• Consolidated SASB, CDSB, and the Integrated Reporting Council into one body.
• Standards are built on the TCFD framework and are being adopted by leading jurisdictions.

What is IFRS S1

• Sets the general requirements for sustainability‑related financial disclosures.
• Provides the core content needed for a complete set of sustainability‑related information.
• Establishes a baseline for consistent, comparable sustainability reporting across entities.

What is IFRS S2

• Focuses specifically on climate‑related disclosures.
• Requires disclosure of how climate risks and opportunities are managed.
• Requires disclosure of climate‑related targets, progress, and business model resilience.

What metrics and targets must be disclosed under IFRS S2

• Scope 1, Scope 2, and (where relevant) Scope 3 GHG emissions.
• Exposure to transition risks (amount/percentage of assets or activities vulnerable).
• Exposure to physical risks (amount/percentage vulnerable).
• Climate‑related opportunities (amount/percentage aligned).
• Capital deployment towards climate‑related risks and opportunities.
• Internal carbon pricing used and the price per tonne.
• Whether climate considerations are included in director remuneration.

What is financial materiality under IFRS S1

• Information is material if omitting, misstating, or obscuring it could influence decisions made using general‑purpose financial reports.
• Focuses on impact on the business.

What is impact materiality under the EU CSRD

• Information is material if the business has (or could have) significant impacts on people or the environment.
• Focuses on impact of the business.

Question 10

FRC Thematic Reviews: Key Themes

What are the themes (5/3,3,3,3,5)

Answer 10

FRC Thematic Reviews: Key Themes

What are the themes

Progress but patchiness:

• The FRC has seen steady improvement since 2020.
• But disclosures remain inconsistent, with recurring weaknesses.
• Weak areas include metrics, scenario analysis, and linkage to financial numbers.

“Less can be more”:

• High‑quality disclosures prioritise clarity over volume.
• Use of tables, diagrams, and cross‑references improves readability.
• Long reports are not automatically better — conciseness is valued.

Financial connectivity is now non‑negotiable:

• Boilerplate statements about climate considerations are no longer acceptable.
• Companies must show how climate assumptions affect financial statements.
• This includes impacts on cash flows, impairments, and useful lives of assets.

Scenario analysis maturity is the next frontier:

• Qualitative scenario analysis is tolerated for now.
• But the FRC expects quantified, company‑specific resilience testing over time.
• External reference scenarios are available and should be used appropriately.

Assurance transparency:

• If information is labelled “verified,” companies must specify:
  
  • The scope of assurance.
  • The level (reasonable or limited).
  • The provider.
• Vague or misleading assurance labels must be avoided.

Question 11

Benefits of Sustainability Reporting

What are the internal benefits of sustainability reporting (4)

What are the external benefits of sustainability reporting (4)

Answer 11

Benefits of Sustainability Reporting

What are the internal benefits of sustainability reporting

• Helps the business understand sustainability‑related risks and opportunities, enabling better mitigation and value creation.
• Allows benchmarking and performance assessment against laws, norms, codes, and voluntary initiatives.
• Improves compliance with laws and regulations through stronger reporting systems.
• Reduces the risk of being implicated in ESG failures by increasing awareness of risks and ensuring compliance.

What are the external benefits of sustainability reporting

• Improves understanding of the company’s environmental and social impacts, helping plan how to reduce or reverse negative impacts and contribute to sustainable development.
• Builds investor confidence through transparent disclosure of risks, opportunities, and long‑term value creation plans.
• Enhances stakeholder engagement by involving stakeholders in the reporting process and demonstrating the company’s values and value‑creation ability.
• Strengthens reputation and trust through visible commitment to transparency.