Two new exposure drafts for ethical benchmarking for sustainability reporting have been proposed, pushing new standards that aim to mitigate greenwashing and elevate the quality of sustainability information.
The two proposals -- the Exposure Draft on International Ethics Standards for Sustainability Assurance (IESSA) and the Exposure Draft on Using the Work of an External Expert -- were announced by the International Ethics Standards Board for Accountants (IESBA), an independent global standard-setting board that serves the public interest by setting ethics standards in business and organizations.
The IESSA “proposes a clear framework of expected behaviors and ethics provisions for use by all sustainability assurance practitioners.”
The framework covers all professional backgrounds and professional accountants involved in sustainability reporting. Namely, the standards aim to eliminate greenwashing, which can mislead consumers and investors into believing a company’s products, services or policies are environmentally friendly when they might not be.
The proposal for Using the Work of an External Expert aims to guide professional accountants or sustainability assurance practitioners in evaluating an external expert and their capabilities.
The new proposals come as sustainability information is increasingly important across capital markets, consumers, corporations and their employees, governments, and society at large.
Other standards in environment, social, and governance (ESG) reporting have been proposed, including the first-ever standards from the International Sustainability Standards Board. The standards aim to create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects for investors.
In addition, the European Union Council agreed last year on a negotiating mandate for the regulation of ESG ratings, aiming to strengthen the reliability and comparability of ratings and to boost investor confidence.
According to IESBA, new standards also require a global baseline of ethics.
“Ethics is about acceptable behaviors and right decisions to avoid bias in sustainability information and foster trust,” Gabriela Figueiredo Dias, chair of the IESBA, said in a statement. “From investors looking for transparent and credible information, to consumers wanting to ensure the reliability of companies’ narratives about the sustainable credentials of their products and practices, and companies wanting to be trusted, all users of sustainability disclosures have a vested interest in ensuring ethical choices by the preparers and assurers of such information. These proposed standards will serve as a cornerstone of ethical behavior with far-reaching benefits.”
The ethics proposals were developed through extensive outreach, including four global roundtables that involved more than 140 senior-level representatives from stakeholders. All stakeholders are invited to provide their feedback on the exposure drafts on IESBA’s website.
