The International Sustainability Standards Board (ISSB) is rallying regulators from the U.S., Europe, Japan and other jurisdictions around common rules for disclosures about climate risk and other environmental, social and governance (ESG) issues, according a new report from CFO Dive.
The ISSB is developing a “global baseline” of ESG disclosure standards in a push to require a company to publicly describe how sustainability risks, such as drought or flood, affect its total value.
“There is a strong public interest in seeking to align where possible the international and jurisdictional requirements for sustainability disclosures,” ISSB Chair Emmanuel Faber said in a statement.
The Securities and Exchange Commission (SEC) is also calling for more transparency on sustainability. Under the proposal, the SEC would require companies to describe on Form 10-K their governance and strategy toward climate risk and their plan to achieve any targets they’ve set for curbing such risk.
Like the ISSB, the SEC wants companies to disclose their greenhouse gas emissions, either from their facilities or through their energy purchases, and obtain independent attestation of their data and estimates.
Businesses would also need to report on so-called Scope 3 emissions by their suppliers, vendors and other third parties across their supply chains. The reports would be phased in, subject to safe harbor protections and not required of smaller companies.
Most U.S. citizens back efforts by regulators to require more detailed ESG reporting, according to a survey by Ceres, a non-profit advocate for sustainability.
Nearly nine out of 10 Americans (87%) support federal mandates for “disclosure on human capital and environmental impact data, making performance comparable across companies and/or industries,” Ceres found in a nationwide survey of 1,115 adults from Nov. 30 until Dec. 9.
“Support for corporate disclosure requirements is strong across various demographic groups, including political, age, and geographic breaks,” Ceres said. “Even climate, traditionally a more partisan topic, sees 87% support for mandatory disclosure.”
European regulators are also nudging companies toward measuring ESG risks. The European Union’s Corporate Sustainability Reporting Directive will require businesses to release annual sustainability reports beginning in 2024, including their impact on the environment.
The proposed guidelines will extend the EU’s sustainability reporting rules to all large, publicly traded companies, expanding the requirements to nearly 50,000 businesses from 11,000 currently. The ISSB, backed by the architects for global accounting rules, has asked for public feedback on its proposal by July 29. It plans to complete standard-setting by the end of 2022.