Will 2021 Be The Year To Align Globally On Sustainability Reporting?



As the World Economic Forum (WEF) convenes virtually this week, business must recommit to supporting the Sustainable Development Goals (SDGs) and the 2015 Paris Agreement through more consistent environmental, social and governance (ESG) reporting to highlight progress in these areas toward long-term value creation for all stakeholders.

Mitigating the impacts of climate change is a monumental task. Yet, progress is possible if we act collectively. It is vital that we all take urgent and immediate action to reach the goals of the Paris Agreement. In order to achieve these goals, capital must be redirected to low carbon and resilient business. This is only possible if these considerations are embedded in every part of the financial markets’ ecosystem.

Critically, this includes information reported to financial markets. Reliable and comparable data on how business is impacted by and responds to climate change is key to fully-informed investment decision making, because it is inextricably linked to financial returns and risks. For this reason, the information must be connected to financial reporting and it must be global. Climate change is a global challenge. Business today has global supply and value chains. Financial markets and investors are borderless. The data needed to manage climate change must be consistently reported across the globe.

To that end, last year, the WEF’s International Business Council (IBC) initiative developed a core set of 21 universal, comparable disclosures that are considered most critical for business, society and the planet, and that companies can report on regardless of industry or region. This project responds to the recognition by business that it has a wider responsibility to its stakeholders. In addition to promoting the adoption of these universal, core ESG metrics, the IBC encouraged greater cooperation and alignment among existing standard setters.

Twenty years ago, Deloitte was a vocal advocate for International Financial Reporting Standards (IFRS). Today, IFRS is adopted in 144 jurisdictions, and IFRS and US Generally Accepted Accounting Principles (GAAP) are well aligned. We have a common language for financial reporting. We now urgently need the same for climate and ESG factors more broadly.

Over the past year, significant progress has been made to catalyse progress towards a global systemic solution. Deloitte publicly supports the IFRS Foundation Trustees efforts to establish a Sustainability Standards Board, with climate as the first priority standard, but focused on broader sustainability topics. The IFRS Foundation is uniquely positioned to deliver, because of its successful track record in global standard-setting, its due process, stakeholder buy-in, and appropriate oversight by public authorities.

Deloitte has been at the forefront of driving further convergence. Together with WEF and the Impact Management Project, we are facilitating the important work by the five leading sustainability standards and framework reporting providers, which include the Climate Disclosure Project (CDP), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB). They joined forces to set out the vision and roadmap towards a more coherent, comprehensive corporate reporting system. In a statement of intent, the organisations made a commitment to work with the relevant stakeholders, including the International Organization of Securities Commissions (IOSCO) and the IFRS Foundation, to achieve transformational change.

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Source: Forbes

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