23 Sep Airo AV Reports Big Four firms release ESG reporting metrics with World Eco…
The Big Four accounting firms have developed a set of metrics for companies to use for environmental, social and governance reporting internationally.
The metrics were released Tuesday by the World Economic Forum in conjunction with the fourth annual Sustainable Development Impact Summit, which coincided with Climate Week in New York. They come a week after five ESG standard-setters — the Carbon Disclosure Project, the Climate Disclosure Standards Board, the Global Reporting Initiative, the International Integrated Reporting Council and the Sustainability Accounting Standards Board — agreed to work together more closely on aligning their various sets of standards and frameworks after being urged to do so by international securities regulators (see story).
The ESG metrics are organized around four pillars of principles of governance, planet, people and prosperity. The metrics and disclosures aim to align the existing standards to enable companies to collectively report nonfinancial disclosures.
The metrics and disclosures were developed in collaboration with the Big Four firms — Deloitte, EY, KPMG and PwC — and come after a consultation process with representatives from corporations, investors, standard-setters NGOs and international organizations. They aim to provide a common set of existing disclosures that lead toward a more coherent, comprehensive global corporate reporting system.
The World Economic Forum also collaborated with the Impact Management Project to bring together the efforts of the five leading independent global framework and standard-setters (CDP, CDSB, GRI, IIRC and SASB) to work toward a comprehensive corporate reporting system and a statement of intent which works as a complement to the common metrics released Tuesday.
“This is a unique moment in history to walk the talk and to make stakeholder capitalism measurable,” says World Economic Forum founder and executive chairman Klaus Schwab in a statement. “Having companies accepting, not only to measure but also to report on, their environmental and social responsibility will represent a sea change in economic history.”
Leaders of the Big Four global firms expressed support for the new metrics.
“The disruptions of 2020 have underscored the critical importance of organizations managing and reporting their impact on the economy, the environment and society, and their increasing connection to long-term enterprise value creation,” said Deloitte Global CEO Punit Renjen in a statement. “Deloitte is pleased to have led the development of the Principles of Governance pillar and collaborated on this project with so many respected organizations. We hope our work supports organizations as they move towards consistent reporting of ESG metrics and disclosures in mainstream annual reports, as ultimately, this is how the business community will make greater progress against the Sustainable Development Goals.”
“The time is now for companies to broaden their engagement with stakeholders,” said EY Global chairman and CEO Carmine Di Sibio in a statement. “The combined impacts of climate change, COVID-19 and economic inequality contribute to the urgency for businesses to embrace long-term, sustainable value creation and prioritize the needs of people and planet and the creation of broad-based economic prosperity.”
“As businesses become more acutely aware of their role in addressing societal and environmental issues, moving toward a common set of ESG-focused metrics will help ensure that we all collectively make a difference where it counts,” said Bill Thomas, global chairman and CEO of KPMG International, in a statement. “Reporting on ESG factors like carbon emissions and human rights and other key metrics will not only help inform investors while helping companies control their full corporate value, it has the power to realign capitalism for the benefit of broader society.”
“Robust non-financial reporting is a crucial element of the systemic economic reform the world needs to address issues like climate change and social inclusion, and we were pleased to be able to collaborate on this initiative and lead on the Planet pillar of this work,” said Bob Moritz, global chairman of PwC, in a statement. “Stakeholders — including investors, but also policy makers, consumers and employees — need more rounded, comparable and robust information to make decisions. Get that information flowing, align market incentives against performance on these metrics, and a better tomorrow becomes possible.”
Companies view the importance of social, climate and other non-financial factors as crucial for long-term viability and success. A survey by the World Economic Forum found 86 percent of executives agreed that reporting on a set of universal ESG disclosures is important and would be useful for financial markets and the economy.
In conjunction with Climate Week NYC, the International Federation of Accountants and the Association of Chartered Certified Accountants held an online panel discussion Tuesday about the role of finance and accounting professionals in addressing the climate crisis. Eu-Lin Fang, a partner at PwC Singapore, discussed how the firm had made a commitment last week to achieve net zero carbon emissions. “Last week, PwC joined the net zero community and made a signed commitment to net zero by 2030,” she said. “What does this mean? This includes a switch to 100 percent renewable electricity in all our offices, energy efficiency measures and improvements in all our offices, cutting the emissions associated with business travel and accommodations. We’re a professional services firm. We try our best not to travel, but we have to travel from time to time. We are also investing in carbon removal projects and natural climate solutions. We know that our footprint is not as large as other companies, but we want to make this commitment nonetheless.”
She said PwC would also support its clients and other organizations in getting to net zero.
Esther van der Vleuten, an assurance partner at PwC Netherlands, talked about the results of a recent IFAC survey. “We conducted a survey amongst our members asking to what extent they’re currently involved in a matter of CO2 reduction,” she said. “The main conclusion is that the topic of CO2 emissions is not highlighted by 75 percent of both clients and accountants. According to the respondents, 76 percent of our clients do not raise the topic of CO2 emissions with their accountants, and the reverse also applied: 71 percent of accountants don’t raise the topic of CO2 policy with their clients. The fact that climate issues are not discussed by public accountants and clients contradicts the outcome that 59 percent of respondents believe that organizations must address the financial impact of climate change in their risk analysis.”