Increasingly companies are turning their attention to environmental, social, and corporate governance (ESG) reporting. In response to market and shareholder demands, companies are making commitments to address issues such as climate change, diversity and inclusion, and ethical governance. ESG reporting is used to evaluate the non-financial performance of companies with the aim of encouraging the development of responsible business practices.[1] Previously companies viewed these initiatives as voluntary with low legal risk. However, there is growing pressure on companies to adopt ESG frameworks and report on corporate sustainability.

The demand for sustainable investing is on the rise with investors looking to contribute investment capital to companies promoting corporate responsibility. Assets under management that are invested globally in sustainable funds and portfolios have the potential to reach over $50 trillion in value by 2025.[2] Influenced by ESG metrics, consumers are also looking for ethical and sustainable products and brands. Sustainability is marketed in brand messaging and displayed prominently on product packaging. Additionally, companies are under greater regulatory pressure as there has been a push by governments to regulate ESG data collection and create mandatory disclosure obligations.[3] A number of jurisdictions have started developing reporting and disclosure requirements concerning ESG-related data. Due to this increasing scrutiny and legal risk, ESG performance and disclosure is becoming an essential part of the long-term business strategy of companies. 

Although the regulatory developments at this time do not expressly set out data retention requirements, there is a clear need to maintain certain records and data as part of the due diligence required to ensure corporate compliance with ESG commitments and disclosure requirements. Companies that address ESG in their information governance programs are better positioned to ensure compliance with these laws and regulations. Compliance and due diligence reporting in this area can be addressed from a record-keeping and data management perspective under legal and compliance categories in a retention schedule. A comprehensive data retention program is essential to demonstrating compliance with due diligence requirements and providing evidence in response to potential claims and litigation. As this is an evolving area, companies can expect new and updated regulations to be created concerning the collection and reporting of ESG-related data.

In the European Union (EU), large public-interest companies with more than 500 employees are required to disclose information regarding the way they operate and manage social and environmental challenges. This includes publishing regular reports on the social and environmental impacts of their activities and covers information relating to:

  • environmental matters;
  • social matters and treatment of employees;
  • respect for human rights;
  • anti-corruption and bribery; and
  • diversity on company boards (in terms of age, gender, educational and professional background).[4]

On 21 April 2021, the European Commission adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) which will amend existing reporting requirements. This will extend the scope to all large companies and all companies listed on regulated markets. The amendments also introduce more detailed reporting requirements in accordance with mandatory EU sustainability reporting standards and require the audit of reported information.[5] The final text of the CSRD is expected to be adopted by the end of 2022 with an anticipated effective date of 1 January 2024.

In the United Kingdom (UK), effective 6 April 2022, all registered companies and LLP’s with over 500 employees having an annual revenue of more than 500 million pounds must disclose climate-related financial information in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations. This makes the UK the first G20 country to require the disclosure of climate-related risks and opportunities in line with the TCFD recommendations.[6] The TCFD is the most widely adopted international standard for ESG disclosure and sets out 11 recommendations to assist companies in effectivity disclosing climate-related financial information. These recommendations aim to ensure the reporting of clear, comparable, and consistent information.[7] Companies in the UK are now required to produce sustainability statements on climate-related disclosures in their annual strategic or energy and carbon reports. This includes details of a company’s governance arrangements in relation to assessing and managing climate-related risks and opportunities. The HM Treasury roadmap towards mandatory climate-related disclosures sets out a timeframe to make TCFD aligned disclosures fully mandatory across the economy in the UK by 2025.[8]

On 21 March 2022, the Securities and Exchange Commission (SEC) of the United States (US) proposed rule changes that would require public companies to include climate-related disclosures in their registration statements and periodic reports.[9] Currently, the SEC requires few companies in the US to disclose ESG performance. The proposed rules are intended to enhance and standardize climate-related disclosures to address investor concerns about sustainable investing. These rules generally follow the TCFD guidelines and would require domestic and foreign registrants to disclose information about:

  • climate-related risks and their actual or potential material impacts on the registrant’s business, strategy, and outlook;
  • the registrant’s governance of climate-related risks and relevant risk management processes;
  • the registrant’s greenhouse gas emissions;
  • certain climate-related financial statement metrics and related disclosures; and
  • information about climate-related targets, goals, and transition plans.[10]

These SEC rule changes are expected to be effective in 2023.  

In this evolving area, a number of governments have announced intentions to introduce legislation requiring mandatory ESG disclosures. The federal government of Canada is planning to implement legislation requiring financial institutions to publish climate disclosures that are aligned with the TCFD framework. These requirements will be implemented using a phased approach starting in 2024.[11] Other jurisdictions that have implemented some form of TCFD framework into their climate disclosure policies include Brazil, the EU, Hong Kong, Japan, New Zealand, Singapore, and Switzerland. As concerns around corporate responsibility continue to grow, companies should watch for new and updated regulations concerning ESG data collection and disclosure reporting, and adjust their compliance policies and record-keeping practices accordingly.

[1] European Commission. Corporate Sustainability Reporting.

[2] Braun, P. (2021, August 3) Why Global Investors Need Sustainable Investing Standards. Forbes.

[3] Hackett, D., Demas, R., Sanders, D., Wicha, J., and Fowler, A. (2020) Growing ESG Risks: The Rise of Litigation. Environmental Law Reporter.

[4] European Commission. Corporate Sustainability Reporting; Non-Financial Reporting Directive (NFRD) amending Directive 2013/34/EU.

[5] European Commission. Corporate Sustainability Reporting; Corporate Sustainability Reporting Directive (CSRD).

[6] Department for Business, Energy & Industrial Strategy, HM Treasury, John Glen MP, and The Rt Hon Greg Hands MP (2021, October 2021) UK to enshrine mandatory climate disclosures for largest companies in law; The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022.

[7] Task Force of Climate-Related Financial Disclosures. (2017, June) Recommendations of the Task Force on Climate-related Financial Disclosures. Final Report.

[8] HM Treasury. (2020, November) A Roadmap towards mandatory climate-related disclosures.

[9] U.S. Securities and Exchange Commission. (2022, March 21) SEC Proposes Rules to Enhance and Standardize Climate-Related Disclosures for Investors; The Enhancement and Standardization of Climate-Related Disclosure for Investors.

[10] U.S. Securities and Exchange Commission. (2022) Enhancement and Standardization of Climate-Related Disclosures. Fact Sheet.

[11] 2022 Budget – A Plan to Grow Our Economy and Make Life More Affordable


Lisa Douglas is a member of Baker McKenzie’s Technology Practice. She currently focuses on information governance, drawing on a rich background in knowledge management, legal research, and library science to provide compliance advice on the enterprise information lifecycle.


Sarah Nagy is an Information Governance Specialist with the global Information Governance group within Baker McKenzie’s Information Technology & Communications Practice in Canada. She has a background in records and information management, corporate archives, and knowledge management. She supports clients in the management of their information governance programs by advising on records and data retention matters.