The UK is considering adopting new rules aimed at clamping down on corporate greenwashing.
The International Sustainability Standards Board (ISSB) – a group set up at Cop27 to set global rules on climate reporting – published its inaugural standards on Monday to help countries regulate companies’ green claims.
Under the rules, firms would face more pressure to publicly disclose their impact on the climate including on their Scope 3 emissions – which covers the products or services that they sell.
The ISSB says the aim is to establish a common global language in which companies report their impact, to improve trust in climate reporting and to help to inform investors about sustainability-related risks and opportunities.
We have been really encouraged by the number of jurisdictions that have already indicated they will consider adoption
Emmanuel Faber, ISSB chair
Speaking at the launch event on Monday, ISSB chair Emmanuel Faber said individual countries can decide whether listed companies must apply the new rules.
The UK is among the countries considering their use, alongside Canada, Japan, Singapore, Nigeria, Chile, Malaysia, Brazil, Egypt, Kenya and South Africa, according to the ISSB.
The London Stock Exchange and the Financial Conduct Authority (FCA) – the UK’s financial watchdog – have both welcomed the new standards with the latter having worked closely with the ISSB on the new rules.
Mr Faber told the PA news agency: “We have been really encouraged by the number of jurisdictions that have already indicated they will consider adoption.
“The UK has been instrumental in paving the way for sustainability reporting for investors and advising on the development of ISSB standards.
“We launched our standards today at the market opening of the London Stock Exchange, as well as at other exchanges around the world, and we have been in close dialogue with the UK FCA which is highly supportive of our objective to establish a common language for investors globally.”
The ISSB is part of the independent International Financial Reporting Standards Foundation, which writes standardised accounting rules used in around 140 countries.
We encourage policymakers to adopt the ISSB’s new standards as this global baseline by 2025
Jane Goodland, London Stock Exchange Group
It says the new rules on sustainability-related reporting can be released alongside firms’ annual financial reports from 2024.
Sacha Sadan, director of ESG at the Financial Conduct Authority, said: “We have been working closely with the ISSB since the start and are hugely supportive of its mission to create a common, global language for companies around the world to communicate their sustainability stories in a consistent and comparable way.
“That is why we are delighted to see the final standards launched today.”
Jane Goodland, group head of sustainability at the London Stock Exchange Group (LSEG), said: “Corporate disclosure of basic metrics such as carbon emissions vary significantly based on size, sector and location and has not improved materially in recent years.
“This is impeding those investors wishing to allocate capital based on sustainable investment objectives.
“We encourage policymakers to adopt the ISSB’s new standards as this global baseline by 2025.”
It is important that investors, jurisdictions, listing authorities, companies and others consider how to incentivise adoption so there is a level playing field of comparable information
Gilly Lord, PwC
Pankaj Bhatia, director of Greenhouse Gas Protocol at the World Resources Institute, said: “The ISSB’s requirement to disclose Scope 3 emissions is a major step forward in measuring and managing emissions from companies’ value chain.
“This is the first time a major global standard setting institution required reporting of Scope 3 emissions, setting a precedent for other institutions and regulatory programmes to follow.”
Financial services giant PwC welcomed the new rules but added that high quality standards alone are not enough.
Gilly Lord, global leader for public policy and regulation at PwC, said: “Companies need to use them to produce high-quality sustainability reports.
“It is important that investors, jurisdictions, listing authorities, companies and others consider how to incentivise adoption so there is a level playing field of comparable information.”
She added that climate change is not the only area where investors and stakeholders need more reliable, comparable disclosures of non-financial information.
“So we encourage the ISSB to pursue its plan to go beyond climate and prepare standards with specific disclosure requirements focused on other sustainability areas,” she added.
PA has contacted the UK Treasury for comment.