What gets measured gets managed — or so the mantra goes. Yet after three decades of increasingly widespread and sophisticated sustainability reporting, the world continues to face intensifying socio-environmental pressures.
Flooding, fires and extreme weather events grow
It would be easy to conclude that reporting is at fault — another well-intentioned initiative producing more paperwork than progress. But that conclusion misunderstands the nature of systemic change.
History teaches us that major shifts rarely follow a straight line. The agricultural revolution, the industrial revolution, the rise of modern capital markets — each encountered resistance from those who feared disruption to established livelihoods and economic structures. Yet the overall direction of travel, once set, ultimately proved irreversible.
Sustainability reporting is part of a similar transition. Pushback, in various forms, should not surprise us. Increased transparency challenges business models, incentive systems and short-term performance metrics. Some argue that standards are too complex, too costly, or too burdensome — particularly across global supply chains where data collection, verification and audit can be difficult.
These concerns are not without merit. Implementation can be demanding. Verifying environmental and social impacts is more complex than traditional financial accounting. But complexity is not a reason for retreat. It is a signal that the underlying issues matter and a challenge to ensure that this reporting is a fully congruent and comparable system, easy to understand, and to apply.
Encouragingly, solutions are emerging. The development of taxonomies has helped clarify what constitutes sustainable economic activity. Advances in digital reporting, data standardization and AI-assisted analysis are beginning to reduce reporting burdens and improve comparability. The use of digital ledger technology is being explored to enable easier verification and auditability.
Standard-setters are collaborating to increase alignment and interoperability. As with financial reporting decades ago, initial complexity is gradually giving way to greater harmonization and efficiency.
At the same time, markets are changing. From my previous roles in financial regulation, including as Chair of IOSCO, I have seen how risks that were once dismissed as peripheral can become central to financial stability.
Environmental and social impacts were long treated as externalities. That view is no longer credible. As financial leaders increasingly recognize, managing these risks is no longer solely an environmental or ethical question, but a matter of long-term economic and financial stability.
Increasingly, the stability of financial systems is inseparable from the stability of the environmental and social systems on which that economic activity depends.
Financial stability can no longer be seen as resting only on the three pillars of banking, capital markets and insurance. Sustainability demands recognition as the fourth pillar of global financial stability.
In my home country of New Zealand — the first jurisdiction to mandate climate-related financial disclosures — climate risk is already influencing the insurance market. In certain high-risk areas, properties are
Similar dynamics are unfolding globally. Extreme weather disrupts supply chains. Resource scarcity strains infrastructure. Social fragmentation undermines economic resilience. Even where political consensus fluctuates, capital markets, insurers and lenders are recalibrating risk assessments.
Investors, in particular, are placing growing emphasis on credible transition plans. These plans are not abstract commitments; they are strategic roadmaps for how companies will navigate physical risks, policy shifts, technological change and evolving societal expectations. They also introduce a forward-looking dimension, requiring companies to consider how their business models will affect people, the environment and financial performance over time. But meaningful transition planning depends on understanding these impacts. Without assessing both impacts and financial implications, transition plans lack substance.
This forward-looking perspective is particularly important for long-term investors such as pension funds, sovereign wealth funds and other asset owners responsible for intergenerational capital. Their investment horizons require them to assess risks and impacts that may not yet be fully visible on today's balance sheets — but will shape economic outcomes in the decades ahead.
This is why the concept of "double materiality" truly matters. Considering a company's societal and environmental impacts as well as the financial consequences of sustainability risks — including those that will emerge over time — provides a more comprehensive basis for decision-making. It enables credible and dependable transition planning. These perspectives are complementary rather than in conflict.
Transparency on real-world impacts — as embedded in the GRI Standards — creates the foundation for accountability and responsible governance.
A financial materiality lens, reflected in ISSB Standards, provides an element of the information capital markets require, focusing on the short and medium term. Together ISSB and GRI, as part of a streamlined approach, form a coherent architecture capable of supporting both short- and longer-term decision making, addressing societal and market concerns.
None of this implies that reporting alone will solve global challenges. It never could. But without credible, comparable and decision-useful information, transformation is impossible.
Temporary regulatory or political retrenchment should not be mistaken for reversal. Systemic change has always involved periods of acceleration and pause, ebb and flow rather than linear progression. The underlying drivers of sustainability reporting — physical risk, societal expectation and long-term value preservation — remain intact.
Over time, markets internalize material information. When they do, capital allocation shifts. Incentives evolve. Strategies adjust. Change may be gradual, and it may be contested, but it is decisive.
Sustainability reporting is not a silver bullet, nor is it a passing fad. It is a key part of a broader transformation in how economic activity is understood and governed in a finite world. After 30 years of development, the foundations for sustainability reporting are stronger than ever. The task now is not to question transparency, but to use it effectively — linking impact, risk and strategy to support resilience, accountability and sustainable growth.
