Child Rights Online as a Case Study for Entity- and Sector-Specific Disclosures

The sustainability reporting community is currently placing significant focus on the Omnibus Simplification Package and the associated revisions to the European Sustainability Reporting Standards (ESRS) by EFRAG.

However, one of my biggest takeaways from participating in company double materiality assessments and reading the first ESRS disclosures has been the importance of entity-specific and sector-specific material topics and disclosures. Entity-specific disclosures are defined in the ESRS as material impacts, risks, or opportunities that are not covered by an ESRS but should still be disclosed owing to their material significance.

On several occasions, I have seen companies diligently work their way through the list of sustainability topics provided by ESRS, yet completely miss the most critical material impacts topics of interest to investors and other stakeholders because ESRS does not cover them directly.

Today’s main reporting standards—i.e., the ESRS, International Sustainability Standards Board (ISSB), and Global Reporting Initiative (GRI)—do an excellent job of setting out the core reporting principles that should be used by every company, but struggle with material topics that vary significantly by company or sector.

Consequently, a core priority for improved disclosure is to apply the key features of the ESRS, ISSB, and GRI to entity- or sector-specific issues. Recently, I had the opportunity to participate in a UNICEF-led process to develop disclosure recommendations on child rights impacts in relation to the digital environment, and I gained firsthand experience of what this might look like in practice.

Child rights in the digital environment are clearly of material relevance to investors and stakeholders, including regulators, civil society organizations, and academics. Children account for approximately one-third of the world’s population, are a significant proportion of internet users, and their rights are impacted by their online experiences. Participation in the digital environment provides children with opportunities for learning, play, freedom of expression, and access to culture; on the other hand, digital technologies also pose a broad spectrum of risks to children.

Despite the significant business and societal issues at stake, UNICEF’s review of 195 corporate reports (2022-2024) from 95 companies found that only 27% of companies published meaningful disclosures on child rights in the digital environment. 

To help address this gap, UNICEF has published disclosure recommendations that include (1) targeted child rights-based disclosures that companies can include in their mainstream financial and sustainability reporting and (2) guidance on how child rights disclosures link with existing mandatory and voluntary reporting standards and frameworks.

The 42 UNICEF disclosure recommendations (of which 12 are considered “core”) were developed via a nimble multi-stakeholder consultative process. Importantly, the UNICEF disclosure recommendations make use of the same four-part framework that the main reporting standards have also coalesced around:

• Governance: The company’s processes, controls, and procedures to oversee material impacts, risks, and opportunities relating to child rights in the digital environment.

• Strategy: The company’s material impacts, risks, and opportunities relating to child rights in the digital environment, including how they interact with the company’s business model.

• Impacts, risks, opportunities: The processes, policies, and actions to identify, assess, and manage material impacts, risks, and opportunities relating to child rights in the digital environment.

• Metrics and targets: The company’s performance and progress addressing material impacts, risks, and opportunities relating to child rights in the digital environment.

The UNICEF disclosure recommendations cover essential topics, such as rights to privacy, safety, freedom of expression, culture, and education, as well as the role of commercial advertising and the research companies are undertaking into the impacts of technology on children. Use of these disclosure recommendations by companies interacting with children in the digital environment would be a meaningful advance in the quantity and quality of decision-useful information available for investors and other report users.

My instinct is that there are a variety of other topics where a sustained investment in the development of entity- and sector-specific disclosures aligned with international reporting standards would be valuable. The impacts, risks, and opportunities arising from the development and deployment of AI across industries are a clear example; however, other topics also come to mind, such as financial services, access to health, and content moderation. Resources like those published by UNICEF enable a more tailored disclosure to a company’s specific circumstances, while also facilitating comparability.

One consequence of the Omnibus Simplification Package is the elimination of ESRS sector-specific standards. This is a disappointing development, but it does open the opportunity for industry and issue-specific organizations and experts to fill the void. While proof will be in the uptake, I believe UNICEF has shown how this can be done quickly and effectively.

My first experience with sector-specific disclosure recommendations was a GRI-led effort in the early 2000s to develop reporting guidelines for the telecommunications industry. Although the document no longer holds formal status due to its inconsistency with today’s reporting standards and processes, historians will be pleased to learn that an archived edition remarkably still exists.

Back then, we had to make up a lot as we went along, but we are in a much better place today. The common core elements of effective disclosure are consistently described across ESRS, ISSB, and GRI, providing a solid foundation for practitioners to turn industry-agnostic standards into practical and meaningful disclosure recommendations on specific issues. We can continue to make substantial progress on this crucial technical work, regardless of what happens in the surrounding political context.