(Paris) Corporate accounting is finally getting to grips with the climate: The organization that administers accounting standards used in 140 countries and jurisdictions published its first additional financial standards on Monday, including a long-awaited one to harmonize carbon emissions numbers. Corporate greenhouse gases.
Today, most large corporations report how many tons of carbon they emit into the atmosphere each year, but this data is generally unreliable. This ambiguity fuels the generous communication strategies associated with greenwashing, making companies appear more virtuous than they really are.
In an effort to enforce a global rule, the IFRS Foundation, and the Accounting Standards Managers of the same name, launched at COP26 in 2021 the International Non-Accounting Standards Board (ISSB), chaired by former Danone chairman Emmanuel Faber, which unveiled the first two standards on Monday, Surrey. Effective from 2024.
Objective: For investors to obtain reliable data on whether they are investing in companies with high exposure to climate risks and how their equity portfolio could be affected: for example in relation to a car supplier that faces a potential NEV car ban in the EU in 2035.
The standards will ensure that “what you actually do is detailed in a language common to all companies,” explains Emmanuel Fabre, who claims the advent of carbon accounting, to AFP.
The new climate standard, called IFRS S2, outlines how companies must account for their direct and indirect emissions, building on an already widely used, but not mandatory, Greenhouse Gas Protocol. The standard will require companies to review their carbon numbers and define a climate strategy at the highest level.
It seems that countries are on their way to making this standard mandatory: Japan, the United Kingdom, Singapore, Hong Kong, Brazil, Nigeria … lists Emmanuel Faber, who hopes that China, the world’s second largest economy, will also apply it.
The European Union is developing its own standards of the most ambitious scope, including biodiversity or human rights. But the standards need to be compatible, the ISSB hopes, which will then address these other areas.
The ISSB doesn’t go as far as others, such as the UK and EU, but having core standards is a good thing, says Kate Leveck, an expert on the subject at think tank E3G, because it can avoid the “nightmare” for multinational companies having to comply. For as many standards as countries. “The whole goal is to make companies accountable,” she sums up.
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