- IESBA has said that environmental, social and governance claims will follow a proposed new ethics code to help combat greenwashing.
- Companies in the EU and globally will have to use new, mandatory disclosures on ESG and climate-related factors in their annual reports for 2024 and onwards.
The chief of the International Ethics Standards Board for Accountants (IESBA), Gabriela Figueiredo Dias, has said that firms that check companies’ environmental, social and governance claims will follow a proposed new ethics code to help combat greenwashing. Trillions of dollars have flowed into investment funds touting green credentials, but these can be misleading, a practice known as greenwashing. As a result, companies are increasingly being asked to disclose more about their actions on climate change and other issues such as board diversity.
From this year, companies in the European Union and globally will have to use new, mandatory disclosures on ESG and climate-related factors in their annual reports for 2024 and onwards. These disclosures will need checking by external auditors as a safeguard against greenwashing. The standards spell out best practices for verifying a company’s sustainability claims by offering detailed instructions in areas such as accounting for the impact of corporate actions on emissions, relying on outside experts, and identifying and tackling conflicts of interest.
Dias said the proposed standards, open for public consultation until May, would complement the development of new technical assurance standards from the International Auditing and Assurance Standards Board. The International Organization of Securities Commissions (IOSCO) hail the moves by IESBA to update its standards as climate-related disclosures under mandatory rules rather than private sector guidance, making enforcement against greenwashing easier. IOSCO board Chair, Jean-Paul Servais, said he supports IESBA’s action to call on issuers, investors and assurance providers to participate in the consultation.