As Britain gets closer to the 2050 net zero target, the most ambitious net zero goal set by any nation in the world, the sustainability rules are getting stricter. This week the government tightened its grip on corporate greenwashing by announcing that the UK will soon adopt globally approved sustainability standards.
This comes at a time when a study done by the Institute of Public Policy Research revealed that one out of 40 British companies have fully adopted the net zero standards.
Globally approved sustainability standards to make London a financial hub
Aiming to crack down on businesses indulging in corporate greenwashing, this move will make Britain more sustainable and fulfil the UK government’s net zero ambitions. The government seeks to transform London into a global financial centre by adopting globally approved sustainability standards.
The UK Department for Business and Trade updated the UK Sustainability Disclosure Standards on the 2nd of August, where it was disclosed that businesses now have revealed their sustainability-related risks and opportunities. For this, the UK government will set up stringent rules and regulations for the business world in line with global standards.
The government revealed that the UK Business Secretary Kemi Badenoch will take international standards into consideration while making a full list of the UK Sustainability Disclosure Standards by July 2024. For this purpose, the Business Secretary is guided by the Financial Reporting Council, the Treasury, the FCA and the Policy and Implementation Committee (PIC) which has the Bank of England in it.
New rules to reduce chances of corporate greenwashing
According to the brief, the new rules will be based on the guidelines agreed at Cop27 and it will be in accordance with the rules underlined by the International Sustainability Standards Board (ISSB) last month.
The new ISSB rules warrant that businesses make their effect on climate change public, making it clear what impact their products or services are having on the environment, ultimately lowering the chances of corporate greenwashing. The new rules will include globally approved sustainability standards for Scope 3 emissions which cover products and services offered by companies.
Rules to set up a common global language for sustainability
The ISSB has made it clear that the globally approved sustainability standards launched last month were aimed at creating a common global language for sustainability. One that will facilitate better climate reporting by businesses and reduce corporate greenwashing. It would also help investors in taking investment decisions as information related to sustainability risks and opportunities will be easily available.
The UK government has made it clear that it will not deviate from international standards unless it is absolutely necessary and for UK-specific matters only.
The government has further underlined how corporate greenwashing will be curtailed through this new set of rules as the Financial Conduct Authority (FCA) will scrutinise UK-listed companies based on their disclosures. Meanwhile, the UK government will oversee this process of scrutiny for UK-registered businesses and limited liability partnerships.
The Business and Trade department ascertained that the new rules strive to make UK-listed companies globally comparable as their disclosures help investors in taking critical decisions.
According to the department, the move will empower investors to allocate capital to the right companies as they can compare the information given by different companies, making way for the smooth running of the UK capital market in the future.
Sustainability reporting coupled with financial reporting
Speaking about the matter the ISSB chair Emmanuel Faber lauded Britain for sustainability reporting for investors and also thanked the government for advising on the development of ISSB standards.
The ISSB has revealed that several countries in the world have ascertained that they will endorse the globally approved sustainability standards including South Africa, Kenya, Brazil, Malaysia, Japan, Singapore, Canada, Egypt and Nigeria.
Faber welcomed the international response the newly published sustainability standards are getting, especially many countries thinking of adopting it.
Being a part of the Independent International Financial Reporting Standards Foundation which makes standardised accounting rules for 140 countries across has added to ISSB’s credibility as the organisation advocates that companies release sustainability reports to be along with financial reports.
Earlier on the launch day Faber revealed that they have been working closely with the UK FCA who are supportive of their efforts to set up a common language for investors. The ISSB launched the standards at the market opening of the London Stock Exchange along with other exchanges of the world.
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