06/26/2023 1:07 pm (act. 06/26/2023 1:07 pm)
More detailed reporting requirements should give investors a clearer view of a company’s business impact on the environment. The International Sustainability Standards Board (ISSB) came up with a corresponding framework for this on Monday. This international body develops guidelines to assess the sustainability of business models.
Investors who increasingly want to put their money into projects that meet certain criteria for environmental friendliness, treatment of employees or good corporate governance (ESG) can use them as a guide. This market is now worth several trillion dollars.
Companies can use the new 2024 standards to create their annual reports, said ISSB head Emmanuel Faber. However, individual states have decided whether this becomes mandatory for listed companies. Canada, Great Britain, Japan and some emerging countries have looked into this.
According to experts, the new rules make it more difficult for companies to do what is known as “greenwashing”. The company’s own business model is presented as greener than it really is. So far, 42% of the world’s 4,000 largest companies have not disclosed detailed information about their carbon emissions, said David Harris, head of strategic initiatives for sustainable finance at the London Stock Exchange. Under the new rules, companies would have to provide this information, which would be verified by auditors.
The ISSB is part of the independent International Financial Reporting Standards (IFRS) foundation. This creates rules by which companies in 100 countries around the world prepare their balance sheets. The European Union intends to present its own sustainability standards for accounting next month. In doing so, it coordinated with the ISSB to avoid duplication for international corporations.