Big Four back universal sustainability metrics

The Big Four accountancy firms, together with the World Economic Forum (WEF), have released a set of universal environmental, social and governance (ESG) metrics designed to make benchmarking sustainable business performance easier and more comparable

The metrics are designed to help companies demonstrate long-term value creation and their contributions to the United Nation’s sustainable development goals (SDGs), marking a milestone in the implementation of ‘stakeholder capitalism’.

The metrics and disclosures are organised around the four pillars of principles of governance, planet, people and prosperity and align existing standards, enabling companies to collectively report non-financial disclosures.

The WEF said the current social unrest, economic inequalities and racial injustice exacerbated by the Covid-19 pandemic has accelerated demand from business, governments, standards bodies and NGOs for a comprehensive, globally accepted corporate reporting system.

Klaus Schwab, WEF founder and executive chairman, said: ‘This is a unique moment in history to walk the talk and to make stakeholder capitalism measurable.

‘Having companies accepting, not only to measure but also to report on, their environmental and social responsibility will represent a sea change in economic history.’

The stakeholder capitalism metrics and disclosures were developed in collaboration with Deloitte, EY, KPMG and PwC, and are designed to provide a common set of existing disclosures that lead towards a coherent and comprehensive global corporate reporting system.

In parallel to this work, the WEF has also collaborated with the efforts of the five leading independent global framework and standard-setters (CDP, CDSB, GRI, IIRC and SASB) to work towards a comprehensive corporate reporting system.

WEF research found 86% of executives surveyed agreed that reporting on a set of universal ESG disclosures is important and would be useful for financial markets and the economy.

Bill Thomas, global chairman and CEO, KPMG International, said: ‘As businesses become more acutely aware of their role in addressing societal and environmental issues, moving toward a common set of ESG-focused metrics will help ensure that we all collectively make a difference where it counts.

‘Reporting on ESG factors like carbon emissions and human rights and other key metrics will not only help inform investors while helping companies control their full corporate value, it has the power to realign capitalism for the benefit of broader society.’

Companies are encouraged to report on the full set of metrics in their mainstream reporting and to use a ‘disclose or explain’ approach when certain metrics are not feasible, not relevant, or difficult to implement immediately.

Brendan Sheehan, VP-senior credit officer in Moody's Investors Service's ESG group, described the move as significant, and said: 'Efforts to bolster ESG reporting, such as the Big Four’s joint initiative, highlight the growing understanding of ESG’s financial materiality and enable bond investors to make better decisions by increasing transparency and market efficiency.'

Useful links

Measuring Stakeholder Capitalism: Towards Common Metrics and Consistent Reporting of Sustainable Value Creation

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