PARIS: Newly unveiled common standards for reporting greenhouse gas emissions by companies could effectively tackle misleading climate claims within the corporate sector, according to Emmanuel Faber, chairman of the International Sustainability Standards Board (ISSB). Currently, while many large companies report their annual carbon emissions, the data often lacks reliability. This absence of consistent standards enables companies to overstate their environmental efforts, a practice known as “greenwashing.” The ISSB’s newly issued standards, named IFRS S1 and IFRS S2, will establish global sustainability and climate standards for companies to adhere to starting from 2024.
Emmanuel Faber stated to AFP that “greenwashing… will end the day our standards have gained a sufficiently significant position in the markets.” The objective of these standards is to provide reassurance to the financial market regarding the reliability of information presented. Faber, the former CEO of French food company Danone, highlighted the need for a common language for disclosing climate-related risks and opportunities, thereby enabling informed investment decisions.
The ISSB was established by the International Financial Reporting Standards Foundation, a non-profit organization responsible for governing international accounting rules. The ISSB’s standards seek to enhance trust and confidence in company disclosures related to sustainability, while also addressing the impact of climate-related risks on a company’s prospects.
Voluntary adoption by companies or government mandates will determine the implementation of these standards. As countries aim for carbon neutrality by mid-century in line with the Paris Climate Agreement, a range of regulations is being adopted, creating a complex landscape for companies to navigate. Kate Levick, Associate Director for Sustainable Finance at independent think tank E3G, emphasized the potential challenges faced by companies in complying with multiple regulations simultaneously.
The ISSB expects that several countries, including Japan and the UK, will promptly make the new climate standards mandatory. Additionally, they hope that China, with its significant economic influence, will also adopt these standards. The European Union is developing its own standards, encompassing biodiversity and human rights, and the ISSB aims for compatibility with these forthcoming regulations.
The ISSB standards establish guidelines for measuring direct and indirect emissions, utilizing the widely used and previously non-mandatory Greenhouse Gas Protocol. The standards also require companies to conduct emissions data audits and ensure that their climate strategies are adopted by top management.
Kate Levick of E3G believes that the ISSB standards will contribute to reducing greenwashing practices by companies. She noted that the disclosure requirements were meticulously designed to combat such practices and emphasized the overall goal of holding firms accountable for their environmental impact.
