Big Four Firms and the World Economic Forum jointly release new ESG reporting framework

Sep 23, 2020

 

The Big Four accounting firms and the World Economic Forum have this week released guidelines for sustainability reporting in corporate financial statements, in what was described as the first truly co-ordinated approach to ESG reporting.

The resulting whitepaper Measuring Stakeholder Capitalism, Towards Common Metrics and, Consistent Reporting of Sustainable Value Creation identifies 21 core sustainability metrics and 34 expanded metrics and disclosures.  

Progress, not perfection

“These are the ones that we truly believe as a business community are the right measures to start with,” Bob Moritz, head of PwC, said. “We’re not looking for perfection, we’re looking for progress.”

The metrics are deliberately based on existing standards to bring greater comparability and consistency to the reporting of ESG disclosure.

Four Pillars

The report issued guidelines organised under four pillars, or principles, that are aligned with the UN SDGs and principal ESG domains: Governance, Planet, People and Prosperity.

It also called for companies to move details about their ESG impacts into their mainstream annual financial reports and for the information to be verifiable and as reliable as financial metrics. The current common practice is for companies to report on ESG in separate, voluntary sustainability reports not verified by a third party.

The project was developed within the International Business Council (IBC), a community of over 120 global CEOs, run by Brian Moynihan, chief executive of Bank of America. It aims to encourage the 120+ large global companies in the IBC to adopt the standards for their 2021 accounts.

Described as “perhaps the biggest step yet to rally companies, regulators, and standard-setters around a single set of ESG metrics and integrate them into mainstream financial reporting” the initiative was the result of a growing demand for global consistency and comparability in ESG reporting.

For years there has been a drive to create a common accounting framework, driven in part by frustration among investors at the number of competing systems for measuring sustainability. These include metrics under the TCFD, SASB, GRI and others. It is hoped that the initiative will overcome the challenges that arose from the ‘alphabet soup’ of competing metrics and piecemeal reporting. 

Although it remains to be seen how many global companies will adopt the new standards, the backing of all four top accounting firms is expected to help. Members of the IBC were also urged to take the lead in embracing the guidelines, and are expected to discuss a timeline for adoption at the council’s January 2021 meeting.