In March of this year I wrote about how to establish a global set of standards for companies to report on their environmental, social, and governance (ESG) performance—or so-called “nonfinancial information.”
I’m pleased to report that significant progress has been made in the past five months.
Key to this achievement is the foundational work of five NGOs (The Five) whose missions are aligned with this goal: CDP, the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), and the Sustainability Accounting Standards Board (SASB), guide the overwhelming majority of ESG disclosure and the International integrated Reporting Council (IIRC) provides the framework for how to connect ESG disclosure to reporting on financial and other capitals.
Their work is particularly critical now, as governments and major accounting bodies are acting on standards. The IFRS and IFAC have recognized the need for mandated standards for nonfinancial information. The EU, in reviewing its Non-financial Reporting Directive (NFRD), has instructed EFRAG to establish a European Lab Project Task Force to make recommendations on standards for nonfinancial information, as a prelude to their stated intention to regulate. And a variety of business groups, including the IBC/WEF and the Big Four have voiced the need for global ESG reporting standards for companies and markets.
All of these groups should build on the work of “The Five.”
Not only are they field leaders, they also recognize that they are stronger as a group than individually. And while each of “The Five” has its own particular approach to ESG standards and reporting, much of their technical content is complementary rather than overlapping. This is clear in their recent “Statement of Intent to Work Together Towards Comprehensive Corporate Reporting (The Statement)” authored by The Five and facilitated by the Impact Management Project, the World Economic Forum, and Deloitte. I