Voluntary disclosure policies lead global sustainability agenda

Source: Global Reporting Initiative (GRI), 18 March 2024

The post-SDG era saw a huge growth in voluntary sustainability disclosure policies: mandatory ones constituted 55.2% pre-2015, whereas post-2015, 64% of global policies are voluntary. According to the 2023 Carrots & Sticks (C&S) report, this global trend is part of a wider proliferation of ESG policies around the world, which includes steady growth in the use of the GRI Standards.

C&S 2023 tracks a four-fold increase in the number of sustainability policies since 2020, with the continued shift towards more responsible global governance going hand-in-hand with the rise in corporate disclosure and reporting policies for businesses.

C&S has been delivered since 2006 by GRI and the Stellenbosch University Business School, initially with support from the UN Environment Program. For 2023, the initiative saw the addition of two new partners: King’s College London and the University of Edinburgh. The Carrots & Sticks database now includes over 2,400 policies from 132 countries.

Peter Paul van de Wijs – Chief Policy Officer, GRI, said: “Disclosure policies are the most compelling instruments to drive change in corporate behavior. That is why we call on policymakers to adopt effective policies and regulatory frameworks that support the alignment of private sector disclosures with sustainable development. And as the 2023 Carrots & Sticks report reveals, there has been a proliferation of new ESG and sustainability related policies.”

Key findings of C&S 2023 include:

  • Voluntary policies have limited influence on private companies, with most regulations being restrictive and not specific.
  • Clear, jargon-free ESG policies are most effective – yet that is not the case for 75% of the policies tracked.
  • There is polarization in the SDGs most targeted by policies: SDG8 (Decent work and economic growth), SDG 12 (Responsible consumption and production) and SDG 3 (Good health and well-being). In contrast, SDG 17 (Partnership for Global Goals) and SDG9 (Industry innovation and infrastructure) are rarely addressed.

C&S 2023 finds that disclosure policies (the ‘sticks’) can help provide companies with clarity on required, permitted or prohibited actions because they are more likely to compel action. Companies perceive disclosure policies as two to three times more business-restrictive than other sustainability policies. Meanwhile, softer measures (the ‘carrots’), such as ESG-linked grants and effective public/private coalitions, can incentivize businesses to undertake sustainability reporting.

Adam William Chalmers – Associate Professor, Politics and International Relations, University of Edinburgh, commented: “Mandatory policies often lack the specifics on essential actions and behaviors. The clarity and simplicity of ESG and Sustainability policies also play a pivotal role, making a marked difference in how firms articulate sustainability in their CSR reports.”

The GRI Standards are now referenced or required in 259 policies of 85 countries around the world, more often than any other sustainability reporting framework, signaling the growing role of GRI as the enabler for businesses to provide complete, comprehensive and comparable reporting on their impacts.

Monitoring of ESG policies is pivotal in allowing effective policymaking, while it also supports better informed decision-making by companies and their stakeholders. As such the C&S is being improved to reflect new metrics, AI resources and updated comparative frameworks.

Download the report (pdf)