The heavy toll extracted by the COVID-19 pandemic, racial injustice, and extreme climate events have exposed some of the deepest fissures in society’s foundations. Many people around the world are demanding action.
As a society, we can address systemic issues through better stewardship of the planet and the well-being of its people. As we prevail over the pandemic and restore a semblance of stability, we should also help to create a better normal.
Companies can play a vital role in creating more prosperous societies and a more sustainable relationship with our planet. As leaders, we believe long-term value is most effectively created by embedding urgent priorities—climate change; diversity, equity, and inclusion; human rights; education; employee well-being—in the very fabric of a business and its strategy, operations, and governance. Accountability for performance and progress impels achievement of goals.
That is why we strongly support global sustainability disclosure standards and the moves by the International Financial Reporting Standards Foundation to establish a sustainability standards board to enable high-quality disclosures on sustainability-related risks and opportunities material to long-term enterprise value creation. This will help enable companies to measure and communicate performance against these key themes on a consistent, comparable, and reliable basis.
Standards must be global. Global capital markets need high-quality, consistent, and comparable sustainability information to understand drivers of risk and return, allocate capital efficiently, and finance the transition to a more resilient, low-carbon economy. Furthermore, many companies have global value chains, face global risks, and access capital from global investors.
In advance of global standards, many of the world’s largest investors are encouraging companies to report in line with the Sustainability Accounting Standards Board (SASB) standards and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). This stems from their need for information on the financial impacts of climate change on business performance and prospects. Investors also want insights into the sustainability issues that are most likely to impact the financial performance of companies within specific sectors, facilitating comparable information among industry peers.
Business is also taking collective action to accelerate progress. Last year, the World Economic Forum’s International Business Council (IBC) spearheaded the Stakeholder Capitalism Metrics initiative. In September 2020, the initiative published a report identifying a core set of 21 universal metrics, based on existing standards, that it views as most critical for business, society, and the planet, and that companies can disclose regardless of industry or region.
These initiatives are complementary in principle and in practice. For example, TCFD-aligned reporting on material climate risks and opportunities is explicitly included in the IBC Stakeholder Capitalism Metrics. Likewise, the industry-specific disclosures suggested by SASB standards complement and supplement the IBC industry-agnostic metrics.
Reporting is a powerful lever for change. By starting to report on sustainability performance, a company has to diligently consider how it weighs pertinent risks and opportunities in running its business.
Regulators around the world are beginning to mandate sustainability disclosures. Beginning to report on these issues now begins to build capacity and capability in a company for mandatory disclosures later on. Integrating sustainability into the core of the business and into external reporting takes time and commitment and may require transformational change.
We need to start building the better normal without delay. As part of this, we need to align investment and business horizons with the long term. This means focusing on the issues that matter to people and the planet and deepening our understanding of how these issues affect enterprise value.
To measure and report on these issues on a consistent and comparable basis, global sustainability disclosure standards are a must. We are committed to playing our role in advancing this effort with urgency. We call on all stakeholders to come together to embrace this initiative and execute with speed. There’s no time to waste.
Janine Guillot is CEO of the Sustainability Accounting Standards Board, a nonprofit organization that sets standards to guide the disclosure of financially material sustainability information by companies to investors and potential investors.
Punit Renjen is the CEO of Deloitte Global and a member of the World Economic Forum’s International Business Council.
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