The Big Four accounting groups and scores of the world’s largest companies have signed up to the most comprehensive effort yet to account for businesses’ social and environmental impact.
A new framework, launched at the World Economic Forum [WEF] in Davos on Wednesday, will enable them to report their corporate metrics on subjects such as employment standards and the environment in line with the United Nations' sustainable development goals.
The metrics, created by the WEF's International Business Council (IBC), are intended to be deployed in corporate accounts from 2021.
The IBC did not name the companies that have accepted the standards but in an anonymous vote during a meeting in Davos on Tuesday two-thirds of its members declared they would immediately embrace the initiative.
Yet an informal poll of WEF attendees found only a third were confident that fully-fledged metrics would be in place within the next five years.
Growing scrutiny
Brian Moynihan, chief executive of Bank of America and co-ordinator of the initiative, told the FT he expected that most large companies would adopt the system by next year, due to investors' growing scrutiny of environmental, social and governance (ESG) issues, and peer pressure.
“The idea is that we syndicate out [this framework] for comments and finalise it in the next six months and use it for 2021,” Mr Moynihan said. “The idea is to have consistency across industry – we have asset owners and managers and operators all signed up, and even those which have not signed up are working on it. Getting the accounting firms on board was crucial.”
The effort is likely to be welcomed by investors as a tool that could provide more clarity in the fast-growing ESG investing sector.
Larry Fink, chief executive of BlackRock, last week identified the need for standardised climate reporting, calling for companies to use frameworks published by the Sustainable Accounting Standards Board (SASB) and the Taskforce for Climate-Related Financial Disclosures (TCFD).
The IBC’s new metrics focus on four sectors: governance, planet, people and prosperity. They take inspiration from existing disclosure frameworks such as SASB, the Global Reporting Initiative and the TCFD and will also include the EU’s new taxonomy that defines green instruments.
Disclosures
Companies will disclose information that demonstrates their corporate ethics, sustainability and how they treat their workers.
"[The metrics] will say, 'these are the things we'd expect to see in your financial statements'," said Sharon Thorne, global chair of Deloitte.
The disclosures will not be limited to factors that are deemed to be financially material.
"That's important because impacts that are financially material to businesses themselves, while important, are only half the story," said Tim Mohin, chief executive of GRI. "Companies need to consider all their stakeholders – and not only shareholders." – Copyright The Financial Times Limited 2020
