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Climate change and ESG reporting

By Samantha Sango

I HAD several  ideas when I proposed writing about climate change in the context of Environmental, Social and Corporate Governance (ESG). But in researching and drafting the paper, I have realised I have more questions than answers.

Climate change is a hot topic at the moment in the aftermath of the United Nations COP26 Climate Change Summit and within the accounting world, as signposted by the recent creation of the International Sustainability Standards Board (ISSB) to sit alongside the International Accounting Standards Board (IASB).

My worry was whether I can do this topic enough justice when it is not my bread and butter remit.

But because I am an inhabitant of planet earth, and I have kids who will outlive me, this makes me an interested and vested party to the conversation in as much as I also can use my background to draw out the financial reporting aspects which form my day job.

Clamouring voices

The one thing that Greta Thurnberg does not have when compared to David Attenborough is the weight and breadth of his experience.

Both voices warn against the dangers of climate change if the world continues on its current trajectory, but where Greta is an activist who can feel at times to be in your face, David is a well loved and respected expert whose voice perhaps gets lost in the grandfatherly warmth that he exudes.

Their messages have been and remain important — climate change is real and we are at risk of shortening both the lives of humankind and the earth if we do not act upon this now.

Regardless of the messenger, the message is what we as human beings need to take on board and act on now, today and not tomorrow.

Carbon footprint

Current environmental reporting under statutory and legal requirements is predominantly focussed around carbon emissions reporting.

The aim of all companies is to show that they are reducing their carbon footprint with initiatives such as reducing printing of documents, introducing recycling stations, encouraging employees to cycle to work and the like.

These initiatives tick the boxes for environmental reporting requirements but they are nowhere near the effort required to reverse the kind of changes that even I have experienced in the past couple of years.

When I first moved to London, floods and snowstorms (let alone snow days) were unheard off. Fast forward 15 years later and I have now lived through this and more. Currently I am in the throes of what feels like the mildest October on record.

The stats

Let us start with the statistics:

A 2017 report from the Climate Accountability Institute attributed 70% of carbon emissions to 100 companies.

According to a new report by BloombergNEF, corporate boards with 30% or more women have shown a positive correlation with better climate governance and innovation in the global electric utilities, oil and gas and mining sectors over the last four years.

On the Worldometer website, the five countries with the highest carbon emissions contributed almost 60% of the world emissions. Granted China, the US and Russia are large territories both from a population and square area perspective, but the results give pause for thought.

Let the above statements sink in for more than a minute and after that, grant them more than just a passing thought.

Big problem

The reality is that the kind of changes needed to be implemented and reported on by companies and countries are monumental to even start making a dent in reversing or even just stopping the effects of climate change.

Given the above statistics, I would think that this points to the need for an approach that is strategic and tactical. If this was managed like a company, with carbon emissions as the currency, I would propose a twofold approach:

For maximum impact, focus actions where they will give the most impact with governments targeting and working with the companies with the most emissions within their boundaries.

A worldwide approach where each person does their bit and this will come together to make a huge impact, these initiatives have already started if we consider the extent to which recycling and reusing has been embedded within daily activities.

What does this have to do?

In the wake of COP26 where several companies and country governments stepped up and went on record pledging to introduce initiatives and actions with the aim of limiting global temperature rises, such words would need to be translated into measurable actions to give this earth a fighting chance.

Shaming companies into submission is not an effective tool to garner change and activism only works to a point.

Currently climate change protests in the UK have been carried out in such a fashion that they have instead disrupted the lives of the woman and man on the street who, in the aftermath of Covid-19 and the lockdown, is doing their best to put bread on the table.

So instead of getting support, blockading motorways has not been effective and has garnered derision instead.

What will  the ISSB do differently?

There is a certain nonchalance that people have when assessing if reporting standards and mandating audits of financial reports can stop companies going bust, when in the aftermath of the Enron scandal, which rocked the financial world, there have been several aftershocks of similar company collapses.

So the challenge that the ISSB has right now, considering sustainability being at the fore of what they do is:

Will the companies and countries with the most impact on the environment take demonstrable steps to tackle their carbon footprints?

In light of the impact that gender diversity in boardrooms has on company decisions, will the reporting requirements be able to drive prioritisation of diversity actions within boards as an important and necessary action?

Will the newly created ISSB do more than just introduce a tick box exercise for companies to comply with, with little actual impact on corporate actions or indeed the environment?

Will governments actually step up and apply environmentally principled measures rather than maximising economic benefits — either as lobbied by companies or due to tax budget constraints?

Will any metrics required, either new or revised, be aligned with the aims or pledges in the Paris Agreement and/or COP26?

I have no answers for all these questions but I know that now, today, right here, I want to confidently say to my kids, “I am doing all I can to better your futures and the earth’s future; and you and I need to work together towards this and start doing more.”

Can the boards of the corporates make the same promise to their kids, kith and kin because this decision goes beyond monetary benefits? This is about making the decision with our hearts, knowing that there is no price that can be put on sustaining mother earth.

  • Sango is a chartered accountant and an active member of the Women Chartered Accountants Network (WeCAN) an ICAZ initiative to promote, profile and develop female chartered accountants.

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