Representatives of 7,000 companies are calling for compatibility and interoperability around the world on Sustainability reporting standards.
They say this will tackle greenwashing, allow proper accountability, and help achieve the Paris Climate Agreement targets.
The coalition wants European legislation to make clear reference to the International Sustainability Standards Board (ISSB) to support a global baseline for capital markets.
They also want it to reference the Global Reporting Initiative (GRI) to maintain consistency with double materiality. Double materiality means companies report on sustainability matters that financially affect the business’s own value and external matters that affect the market, the environment, and people.
In March this year, a Memorandum of Understanding sought to reassure companies that reporting against both ISSB and GRI standards would be compatible.
“We urge a common definition on impact materiality”
But the latest draft of the European Commission’s Corporate Sustainability Reporting Directive (CSRD) has a contradictory definition of impact materiality.
The letter says, “Companies are no longer confident that reporting against IFRS Sustainability Disclosure Standards and GRI will be sufficient to meet the standards required by CSRD.
“We urge a common definition on impact materiality.”
The letter also says , “We call on the US Securities and Exchange Commission to allow comparable reporting standards…
“To ensure global comparability, cost efficiency and greatest impact, we call on the SEC to ensure its final rules are closely aligned with, and comparable to, the ISSB standard.”
“We need a new global baseline reporting standard on sustainability disclosures”
The letter adds, “We urge the ISSB and the members of the working group, which includes the Chinese Ministry of Finance, the European Commission, the European Financial Reporting Advisory Group, the Japanese Financial Services Authority, the Sustainability Standards Board of Japan Preparation Committee, the United Kingdom Financial Conduct Authority and the US Securities and Exchange Commission, to find constructive ways of making sure that the ISSB’s standards are established as the common global baseline for companies to report against to meet the information needs of investors and capital markets…
“We urge you to prioritise convergence between your respective corporate reporting initiatives on sustainability.
“To deliver on the Paris Agreement, The Glasgow Climate Pact and keep alive the chance of restraining global temperature rise to below 1.5ºC we need a new global baseline reporting standard on sustainability disclosures.”
The We Mean Business Coalition addressed the letter to the US Securities and Exchange Commission (SEC), the European Financial Reporting Advisory Group (EFRAG) and the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB).
The coalition includes Business for Social Responsibility (BSR), Carbon Disclosure project (CDP), advocacy organisation Ceres, Corporate Leaders Group (CLG) Europe, Climate Group, The B Team, and World Business Council for Sustainable Development (WBCSD).
“2022 is perhaps the last chance to get this right”
It says, “Transparent, consistent and robust reporting is essential for businesses to demonstrate their progress in cutting emissions wherever they are based, for responsible investors to know where to direct their capital, and for society to understand how quickly progress is being made towards science-based climate goals.
“With each of your initiatives advancing simultaneously, 2022 is a unique opportunity – and perhaps the last chance to get this right.
“We therefore recognise and welcome the pioneering legislative and standard-setting efforts by the US Securities and Exchange Commission (SEC), the European Financial Reporting Advisory Group (EFRAG) and the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB).
“In our view, greater convergence between your initiatives is both possible and vital.
“Even small misalignments around terminology, definitions, and concepts risk undermining their collective impact.”
The coalition believes that comparability leads to cost-efficient reporting and minimising greenwashing. It provides the clearest picture to investors looking for sustainable companies. And it delivers the greatest accountability for corporate climate reporting.
“By working together, we will unleash the potential of corporate climate leadership in pursuit of our shared goals of halving emissions by 2030 and securing a just, sustainable future for all,” the letter says.