G20-Backed Rules Redefine Corporate Climate Change Disclosures


The need for comprehensive climate change disclosures has become paramount in an era where our planet’s health hangs in the balance. Recognizing the urgency of the situation, the International Sustainability Standards Board (ISSB) has unveiled a groundbreaking set of global rules endorsed by the G20. These rules aim to transform sustainability reporting, empowering regulators to combat greenwashing and shedding light on the intricate relationship between climate change and business operations. By providing a clearer picture of companies’ environmental impact, these standards are poised to reshape corporate reporting practices and accelerate the transition towards a more sustainable future.

Under the ISSB rules, companies now face mounting pressure to reveal the true extent of climate change’s influence on their operations. Regulators around the world are taking proactive measures to combat greenwashing by mandating comprehensive reporting on environmental, social, and governance (ESG) factors. This collective effort highlights a global commitment to fostering transparency, accountability, and informed decision-making. 

Britain took a groundbreaking step as the first major economy to enforce mandatory TCFD disclosures for listed companies. Leading the way in promoting transparency and accountability in climate-related financial reporting

The ISSB rules mark a significant step forward in aligning sustainability reporting with financial reporting practices. By bridging these two domains, companies can provide investors with a comprehensive understanding of their ESG performance and its impact on their financial outcomes. Surprisingly, a substantial number of companies currently fail to disclose data on carbon emissions. This information gap undermines the effectiveness of capital allocation and hinders progress towards a sustainable future. However, the ISSB standards require the disclosure of material emissions, verified by external auditors, enabling a more accurate assessment of companies’ environmental footprints.

Recognizing the need for consistent and globally applicable reporting frameworks, the ISSB and the European Union (EU) have joined forces to ensure compatibility between their respective disclosure rules. This collaborative effort seeks to eliminate redundant reporting requirements for multinational companies operating across jurisdictions, streamlining the reporting process and reducing administrative burdens. Addressing the specific needs expressed by banking supervision entities, the ISSB places particular emphasis on detailed emissions disclosures from banks, particularly within sectors like oil and gas. In the coming months, the ISSB and the EU will issue guidance to facilitate harmonization and streamline compliance, benefiting businesses and stakeholders alike.

The introduction of G20-backed global rules by the ISSB heralds a new era of climate change disclosures and accountability. When widely adopted, these standards foster transparency, empower stakeholders and encourage corporate responsibility. As companies face mounting pressure to disclose their climate-related risks and opportunities, investors and stakeholders will gain access to more comprehensive and reliable ESG data, enabling them to make informed decisions that align with their sustainability goals. This transformative shift towards transparency will catalyze the transition to a more sustainable and resilient global economy, where companies are responsible for their environmental impact and actively contribute to positive change.

Sources: https://www.reuters.com/sustainability/new-global-rules-aim-clamp-down-corporate-greenwashing-2023-06-26/ https://www.ifrs.org/content/dam/ifrs/project/general-sustainability-related-disclosures/project-summary.pdf