The G20-backed International Sustainability Standards Board on Thursday approved "global baseline" rules for firms disclosing how climate change affects their business, after calls to curb greenwashing in a "pivotal" year for climate reporting.
Subject to 'balloting', or standard checks before formal publication, the norms are expected to come into effect next January for use in annual reports for 2024 and onwards. Countries such as Britain and Nigeria plan to adopt them.
Trillions of dollars have already flowed into funds touting green credentials based on different and voluntary, private-sector approaches, raising concerns among regulators about greenwashing, or exaggerated climate-friendly claims.
But international firms worry they will simply end up with a patchwork of official sector norms, given the EU and United States are also writing corporate disclosures as new environmental, social and governance (ESG) rules take centre stage.
"2023 is going to be a pivotal year for ESG disclosures," said Marie-Laure Delarue, global vice chair for assurance at 'Big Four' auditor EY.
Some 50,000 firms will apply EU disclosure rules known as ESRS, with many of them having to disclose under ISSB norms at the same time.
The ISSB and EU have come under heavy pressure from regulators to make their climate-related disclosures "interoperable" to avoid clashes that bump up compliance costs.
ISSB board members wrestled on Thursday over introducing some interoperability by allowing companies to refer to compliance with EU norms to help meet ISSB rules under certain conditions, limiting reporting costs.
"The concern I have is, we might confuse both companies and investors," board member Verity Chegar said. "Naming Europe singly will send the wrong signal that we are not truly global and inclusive."
The board voted to include use of EU rules in an appendix to the ISSB rules, given that EU norms could change.
"I do not consider that having us referencing other standards is something that is going to be there forever," ISSB chair Emmanuel Faber said.
EY's Delarue said cross-referencing was a "first step towards convergence" in norms, but in practice would be complex for companies to apply. (Reuters)