Corporate reporting needs updating. What exists today satisfies an old notion that the sole responsibility of companies is to increase profits, as expressed in Milton Friedman’s famous 1970 op-ed in the New York Times[1]. We see now that this traditional approach to corporate reporting and the drive towards sheer profit maximisation has led to environmental damage, human rights abuses and greater inequalities. Antiquated reporting frameworks are therefore no longer fit-for-purpose since, today, investors around the world are demanding increasing disclosure about how their capital is used and the impact their capital is having on the world. In spite of these demands, investors face significant challenges in using and delivering appropriate data to clients.

What exists can be best described as reporting overload with an array of frameworks. However, change is afoot since the past year has seen some progress towards a convergence in sustainability reporting, including:

  • The standard setters SASB, IIRC, GRI, CDP, and CDSB working together to create a comprehensive corporate reporting system[2]
  • The Big Four accountancy firms in consultation with the World Economic Forum’s International Business Council, are working towards bringing about the ‘mainstreaming’ of ESG reporting[3]
  • The European Commission mandating EFRAG to set up a task force with the objective of the swift development, adoption and implementation of European standards[4]
  • The IFRS Foundation is exploring its role towards the development and maintenance of a global set of comparable and consistent sustainability reporting standards[5]

However, these initiatives still fall short of the bigger picture. It is high time that the Accounting Boards, Audit Committees and Auditors accelerate their action on sustainability. ESG investing without a global standard will be marred with conflicts of interests, greenwashing and will ultimately fail investors’ desire to put capital at work to address humanity’s sustainability challenges.

In defining the role to play, it is essential to go back to first principles regarding the user of capital and the provider of capital. Society requires a proper, independent, functioning Accounting Board to define the ESG measurement framework, which needs to be as global and comprehensive as possible. Reporting against this framework should be mandatory and information should be freely accessible to all, including retail investors who cannot afford the time and resources to understand what sustainability means and who is the proper data provider.

Improving ESG data disclosure will also enable investors to go back to do their job of investing and engaging with companies, rather than defining standards and collecting information. The end result ought to be that there is one simple accounting standard and the need for ESG data providers becomes obsolete. Instead, the accounting standards will provide all the information required for investment, whether you are an ESG investor or not.

This paper is organised in two sections. The first provides an overview of key alignment and reporting initiatives. The second details the main ESG reporting frameworks, the key milestones and the countries moving towards mandatory climate-related reporting.

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1. New York Times (September 1970). A Friedman doctrine

2. CDP (September 2020). Five global organisations announce a shared vision towards comprehensive corporate reporting. SASB: Sustainability Accounting Standards Board; IIRC: International Integrated Reporting Council; GRI: Global Reporting Initiative; CDSB: Climate Disclosure Standards Board

3. WEF (September 2020). Measuring stakeholder capitalism

4. European Financial Reporting Advisory Group (July 2020). Recommendations on possible European non-financial reporting standards

5. International Financial Reporting Standards (Sept 2020). Consultation paper on sustainability reporting


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