In an effort to combat corporate greenwashing, a new set of global rules supported by the G20 aims to increase transparency and accountability for companies regarding the impact of climate change on their business. The International Sustainability Standards Board (ISSB) has developed these norms, responding to the influx of trillions of dollars invested in environmentally and socially responsible ventures.
While the decision to enforce these standards will be left to individual countries, ISSB Chair Emmanuel Faber stated that the standards could be applied to annual reports starting from 2024. Several countries, including Canada, Britain, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya, and South Africa, are currently considering the adoption of these rules.
The standards build upon the voluntary guidelines established by the G20’s Task Force on Climate-related Financial Disclosures (TCFD). Britain has already made TCFD disclosures mandatory for listed companies, being the first major economy to do so. UK treasury minister Joanna Penn expressed the commitment to incorporate reporting based on the UK-endorsed versions of the IFRS sustainability disclosure standards.
The ISSB operates under the independent International Financial Reporting Standards Foundation, which also develops accounting rules utilized by over 100 countries. The global securities watchdog, IOSCO, is expected to endorse the new standards, which would significantly impact regulators worldwide, according to IOSCO Chair Jean-Paul Servais.
The introduction of these norms signifies a more stringent approach to sustainability reporting, aligning it more closely with financial reporting. David Harris, head of sustainable finance strategic initiatives at the London Stock Exchange Group, emphasized the importance of comprehensive data, highlighting that 42% of the world’s top 4,000 companies currently do not provide information on Scope 1 and 2 carbon emissions. Under the ISSB rules, companies will be required to disclose significant emissions and undergo external audits to ensure accuracy.
The European Union is also in the final stages of developing its own disclosure rules, aiming to establish interoperability with the ISSB standards to avoid duplication for global companies. Additionally, the ISSB and EU plan to release guidance in the near future to prevent redundancy and streamline reporting practices.