Environmental, social and governance reporting has been improving, but questions remain about how advanced it is right now.
“From a reporting quality perspective, there's definitely still room for improvement,” said Desiré Carroll, a senior manager with the Association of International Certified Professional Accountants. “The reporting systems around sustainability information are currently at generally rather immature stages. There's a survey from the Harvard Law School Forum on Corporate Governance where they note that questionable data quality or lack of assurance is one of the top three challenges for investors for trying to consider ESG factors in their investment analysis. There's definitely room for improvement around data quality.”
Sustainability reporting could be on a similar path as GAAP. “Right now, the best analogy I can give is it’s kind of like how GAAP was 20 years ago, where there were all different levels of GAAP and a hierarchy of this is the best and highest GAAP,” said Brent Leslie, director of audit and attest services at Top 100 Firm Berkowitz Pollack Brant. “You’d work your way all the way down to where you had interpretations that you’re trying to get to, ‘OK, this works for my situation.’ That’s kind of where we are at with the standards right at this second.”
What about the possibility of the IFRS Foundation overseeing an international sustainability standards board?
“I think if we look at the way U.S. society is structured and its litigious nature, the fact that the SEC is the standalone body that governs our markets, I think it will be difficult to adopt a worldwide standard,” said Scott Anderson, an audit partner at Sensiba San Filippo. “Our definition of materiality is based on court precedents and court cases, and that’s not necessarily the case and not consistently applied across all the countries of the world, so I think U.S.-based frameworks are probably here to stay for the foreseeable future. But I think that the intangible benefits of having another body developing standards on its own footing is fantastic.”
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