When discussing sustainable development, people often link it with 'Environmental (E)' issues due to the complexity and diverse nature of social issues, which are harder to measure and slower to show impact. However, global dialogues are shifting from environmental concerns to 'Social (S)' aspects, fostering opportunities for social dialogue on just transitions.

Unveiling ‘Inequality’! TISFD to Transform Corporate Risk Management Blueprint

The market's functioning depends on people and social structures, making corporate actions impactful on society and presenting potential business risks or opportunities. To better address social issues in corporate sustainability, TIFD and TSFD merged into a single framework announced on April 13, 2023. This initiative helps corporations manage social inequality. On September 23 of the same year, TISFD was officially established.

（TISFD Development／Image Source: Director CY Chen’s Reference Diagram）

The recently formed steering committee includes 30 senior delegates from financial institutions, businesses, civil society, and global organizations. It is co-chaired by Peter Bakker, President and CEO of the World Business Council for Sustainable Development (WBCSD); Sharan Burrow, former General Secretary of the International Trade Union Confederation(ITUC); Arunma Oteh, Academic at the University of Oxford and Former Treasurer of the World Bank and Director General of the SEC in Nigeria; and Gabriela Ramos, Assistant Director-General for Social and Human Sciences at UNESCO.
(Reference: https://www.tisfd.org/about)

Inequality poses a systemic economic risk that can destabilise social structures. TISFD's main goal is to create a global framework for reporting and managing inequality-related social risks, opportunities, impacts, and dependencies. Leveraging existing sustainable development initiatives, TISFD plans to align with current disclosure frameworks such as ISSB, GRI, and EFRAG. The committee will focus on:

1. Developing Disclosure Standards: Establishing disclosure standards will aid corporations and financial institutions in sharing their impacts and risks related to social issues and inequality, helping investors better evaluate these risks and opportunities.

2. Capacity Building: Improving corporate and organization participants' skills in social risk management through education, training, and resources. This helps them better identify and handle social risks, boosting their long-term competitiveness.

3. Stakeholder Engagement: Partnering with businesses, banks, non-profit groups, and government bodies to promote the widespread adoption and application of disclosure standards

From Mines to Markets: The Transparency Revolution in Five Major Industries

The creation of TISFD is a major move toward tackling global inequality. By setting financial disclosure standards, the international market aims to improve transparency and promote fair economic growth. This framework targets social inequality and related issues, impacting various sectors, especially those with unique operations and significant social influence.

1. Labor-Intensive Industry:

Textiles, apparel, and electronics manufacturing industries struggle with wage inequality, poor working conditions, and low unionization. TISFD focuses on addressing these issues. Moreover, the complexity of managing global supply chains complicates efforts to evaluate and report labor conditions and social impacts.

2. Resource-Intensive Industry:

The resource extraction practices of mining, cement, and oil and gas industries can harm the environment, society, and economy of local communities. These activities often occur on indigenous peoples'

traditional lands, highlighting the need to protect their rights as a key concern for TISFD.

3. Consumer Goods Industry:

In industries like food, beverages, and cosmetics, product safety, quality, and consumer impacts will be scrutinized to meet standards such as liability and privacy protection. Moreover, since advertising may mislead consumers (greenwashing risk), companies must be responsible for the social effects of their marketing strategies.

4. Financial Industry:

Financial products like loans, investments, futures, and bonds from financial institutions can worsen social inequality (e.g., high-interest loans can cause debt cycles for low-income groups). As financial institutions hold extensive data about clients, ensuring data security to protect customer privacy is crucial for TISFD.

5. Technology Industry:

New technologies like AI and big data can cause algorithmic bias, privacy concerns, and ethical problems. Moreover, the rapid tech growth might widen the digital divide, increasing social inequality.

Facing TISFD: Three Major Guidelines as Navigational Compasses

Guideline One: Integrating the Supply Chain is Crucial! Act Now for a Sustainable Future

Global sustainable development advanced with the EU's approval of the Corporate Sustainability Due Diligence Directive (CS3D) on May 24, 2024, and the creation of TISFD. Companies now need to start or improve their supply chain dialogue, ensure suppliers meet environmental and human rights standards, and perform due diligence. It's essential to identify and mitigate risks, lessen the impact on the environment and society, and engage in social dialogue to reduce regulatory risks.

Guideline Two: The ‘Sustainability Strategy Blueprint’ and ‘Operational Strategy’ Are Not Parallel Lines

When a company talks about its sustainability strategy, it's crucial to link these strategies to their operations. Companies must not only suggest sustainability goals but also embed them into policies and processes, ensuring they are tied to resources and budget allocation. Collaboration across departments is key, and sustainability should be part of strategic planning. Notably, without adequate resources and budget, any sustainability plan is likely to fail.

Guideline Three: Deeply Understand the Essence of the T-x-FD Universe and Establish Systematic Strategies

Global standard setters and regulatory bodies are improving corporate public reporting by unifying various standards and disclosure frameworks. TISFD, TCFD, and TNFD collectively create a framework for assessing corporate sustainability, promoting proactive disclosure and transparency so investors and the public can better grasp an organization's social impacts.

With governments and companies focusing more on ESG-related risks and information disclosure in capital markets, the creation of TISFD marks an important step in tackling global inequalities. By establishing disclosure standards, it enhances market transparency and helps organizations identify risks and opportunities more accurately. This advancement in sustainable development ushers in an era where business, nature, society, and sustainability are tightly connected, offering a broader strategic vision for corporate stability. TISFD contributes to a fairer economic landscape and harnesses global wisdom and action to address future challenges.

Sub-editing: SC. (Tracy) Ni

Photo credit to：Getty Images
Resource：CSROne