Accounting bodies around the world agree that a single set of global reporting standards on climate change is needed. An open letter to political leaders attending the Copenhagen summit was co-signed by 13 accounting bodies, including the South African Institute of Chartered Accountants (SAICA), as well as The Prince’s Accounting for Sustainability Project and the Climate Disclosure Standards Board.
The signatories believe that an 80% reduction in greenhouse gas (GHG) emissions by 2050 (as supported by the G8 summit in July 2009) can only be achieved by aligning the actions of governments and businesses so that they are mutually reinforcing.
Uniform disclosure of information
To facilitate this alignment, they urge political leaders to encourage disclosure of climate change-related information in mainstream financial reporting according to a single set of universally accepted standards. A stakeholder-led standard-setting body with appropriate accountability to public authorities must be established to develop these standards. Global standards will promote provision of more accurate, trusted and reliable information to investors and other stakeholders and drive the scale of behavioural change necessary to achieve a low-carbon economy. The universally accepted standards should build on and refine existing climate change initiatives, specifically:
To the extent that they are available, adopt existing standards on aspects of climate change-related information, including the Greenhouse Gas Corporate Standard (the GHG Protocol), which should be used for the purposes of making disclosures relating to GHG emissions (other than those required by regulation); and Adopt principles from financial reporting to elicit disclosures that are useful to investors in their decision-making and that reflect climate change as one of the crucial factors likely to affect the development, performance and condition of a company’s business.
Investors and shareholders need to know
This process should, over time, seek to include the disclosure of all sustainability issues that affect business and decision-making by shareholders.
‘Climate change, whilst probably the single most important issue we face today, cannot be viewed in isolation from, nor eclipse other aspects of disclosure essential to the achievement of a sustainable economy and society.’
The business and investor response required to support delivery of reduction targets will be enabled by an appropriate climate change disclosure framework, states the letter.
Ewald Muller, Senior Executive of Standards at SAICA, says: ‘Chartered Accountants will play a pivotal role in this new era of business that South Africa and the world is entering. They have a unique ability to identify and present relevant, accurate financial information and are well positioned to utilise these skills in presenting non-financial information.’
A recent survey by SAICA among local sustainability experts and business leaders revealed an array of expectations ahead of the Copenhagen meetings.
Doing unusual business
‘Copenhagen will hopefully bring more certainty to the fight against climate change. It is important for business to know the context and the rules and then focus on the task ahead; doing business with a smaller footprint. If we can reach more certainty on the mechanisms, the targets and the commitments that are being made, it will unleash more of the innovative and creative energy that only business can bring to finding the solutions the world needs,’ says Karen Ireton, Director of Group Sustainability Management at Standard Bank.
According to Mervyn King, Chairman of the Global Reporting Initiative (GRI), the governments that are meeting in Copenhagen should agree to legislate that all corporations in their countries have to report or explain the impacts that their operations have on society and the environment.
‘The stakeholders linked to these corporations will support or flee them according to how the corporation has incorporated sustainability into the strategy and rhythm of the business. This would drive corporations to undertake business as unusual and to make more with less. ‘The present economic model on the notion of limitless natural capital and absorption of waste by the planet is clearly unsustainable. The degradation of two-thirds of our ecosystems and biodiversity is a greater threat to the planet than climate change. Both, however, are critical crises and, if not corrected, will lead to the perfect storm of devastating food and water shortages.’
Data gatherers will enjoy best opportunities
‘Addressing climate change is the responsibility of both the business community and government. A joint effort is required,’ says Shireen Naidoo, Sustainability Services Partner at KPMG. ‘While there have been some businesses that have begun the process by measuring and reporting on their carbon emissions, others appear to have underestimated the complexity of the task of gathering accurate and reliable data. Business faces a significant challenge in addressing climate change and other related sustainability issues and their consequences. Those businesses that understand the nature of the challenge and invest in preparedness are, however, the businesses that are most likely to enjoy the best opportunities.’
‘Many stakeholders are still reluctant to venture a guess as to what to expect from Copenhagen. The business community in particular is holding its breath in anticipation as the Conference is set to impact on them severely,’ says Muller.