Nearly every company today understands that sustainability must be made core to its strategy and capital allocation process but are often confused by how best to report on ESG progress in a way that will be credible to shareholders and other stakeholders. What is needed is a uniform set of standards for measurement and reporting — just as we have for financial performance. Imagine a world where each company had to decide for itself how to measure say, revenues, or depreciate its assets. Or to pick amongst three or four alternative ways of doing so suggested by NGOs. That is the situation companies have been living in when it comes to ESG — but there is hope on the horizon.
We Need Universal ESG Accounting Standards
A new initiative, the International Sustainability Standards Board, holds promise.
February 15, 2022
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Summary.
ESG accounting is a mess. Competing initiatives mean there’s no uniform set of standards for measuring a company’s progress on sustainability. The good news is that a new initiative, the International Sustainability Standards Board, promises to do for sustainability reporting what the International Accounting Standards Board (IASB) does for financial reporting — develop standards for companies to report their performance to investors. Though still fledgling, the ISSB’s ideal outcome would be if it becomes a global standard that integrates the work of all previous standards. Ideally, the SEC and EU can use its standards. Companies should give the ISSB their full support to make these standards the best they can be.