Nicola Mawson
Following the end of several high-level summits on climate change and Just Energy Transition, there is still no single standard against which companies can report their environmental, social, and governance (ESG) progress, even as governments call for more to be done to tackle climate issues.
At the conclusion of the United Nations’ COP29 held recently in Azerbaijan, UN Secretary-General António Guterres urged all attendees work together to deliver an ambitious and balanced package on all pending issues, including a new ambitious climate finance goal.
“The need is urgent. The rewards are great. The time is short,” he said.
This was preceded by the 19th G20 Summit in Brazil that culminated in a Leaders’ Declaration, which sets out aims that include action towards sustainable development, energy transitions and tackling climate issues, as well as reforming global governance institutions.
This would include strengthening the UN’s Economic and Social Council “to better promote sustainable development … and to assist member states in achieving the Sustainable Development Goals”.
As Tariro Mutizwa, the regional vice-president for the Association of Certified Professional Accountants told Business Report on Friday, corporate value is no longer measured solely through financial performance and shareholder returns.
“Organisations have now adopted a more holistic approach to defining and measuring corporate value,” she said.
“This shift is largely driven by the growing demand for consistent, transparent, and comparable business sustainability information from investors, consumers, and governments, among others. We are now in a new era of corporate reporting.”
Yet, there are still several different types of standard and frameworks.
According to Acterys, an ESG reporting tool firm, there are more than 600 standards across the globe.
Mokgadi Maloba, lead of operational sustainability and reporting for Nedbank, told Business Report that “businesses have, at times, said the standards and frameworks can be onerous, as well as costly in terms of compliance and internal resources required to adhere to them”.
Maloba provided a list of five frameworks regulatory bodies have made available. She noted, however, that the organisations that have set such rules were working towards having the sustainability standards correlate with each other.
Companies may face difficulties in consistently interpreting and applying the standards, especially when dealing with complex sustainability related risks and opportunities, Maloba said.
Maloba stated that the dynamic landscape of sustainability and ESG standards “indeed presents a multifaceted challenge for organisations”. She explained that, as regulations shift, there was an increasing need for agile reporting processes, demanding both time and resources to stay compliant.
“The complexity of integrating diverse standards can be daunting, often leading to a tangled web of requirements that can be complex to navigate,” Maloba said.
She also noted that it was better for there to be a unified set of global standards than country specific ones as “the implications of the impact of environmental and societal challenges transcend borders. It’s therefore vital that everyone agrees on the problem and how to affectively correct it.”
This, Maloba said, would also enable a nuanced perspective that considered the fact that all regions or countries do not have the same responsibilities, given historical inequities, which would allow for fairness in how global standards were agreed.
“Another reason in support of global standards is that it enables benchmarking of countries and companies when large asset management firms allocate funds for responsible investment,” Maloba said.
Yet, said Maloba, “countries need to adopt the standards in a structured way so that it does not put too much strain on the economy and business, to balance the ability to be competitive in your own lane”.
BUSINESS REPORT