The body responsible for setting international accounting standards has published a proposal to harmonize the accounting of greenhouse gas emissions by companies. Currently, most multinationals report the amount of carbon they emit each year, but these statements are often unreliable.
The new standard will require companies to submit their emissions figures to an audit and establish an executive-level climate strategy. The lack of international standards has contributed to what is known as “greenwashing” in the field of green activism, where companies try to appear more virtuous than they really are.
The proposal of the International Financial Reporting Standards Foundation (IFRS), in charge of accounting standards in 140 countries and jurisdictions, is to implement this international emissions accounting in 2024. The aim is to provide investors with reliable data to assess whether they are investing in companies exposed to climate risks and how this may affect their share portfolio.
The standards will ensure that companies’ shares are described in detail and in a common language for all companies. According to Emmanuel Faber, former CEO of the French multinational Danone and current chairman of the International Standard Setters Board (ISSB), these standards will bring companies’ actions in line with reality.
The new climate standard, called IFRS S2, sets out how companies should account for their direct and indirect emissions based on the Greenhouse Gas Emissions Protocol, a widely used but non-binding method.
While the European Union is developing its own standards with a broader scope, including aspects such as biodiversity and human rights, these standards are expected to be compatible with those proposed by the ISSB, and it is planned to address these additional areas in the future.