Leaders of the big 4 accounting firms pwc, deloitte, ey and KPMG announced the new ESG (Environmental, social and governance) criteria. These ESG criteria will measure a company’s progress on things like greenhouse gases and diversity in the boardroom.
They took these ESG standards from the UN. The UN first mentioned them in 2006.
The CEO of EY said that:
The time is now for companies to broaden their engagement with stakeholders. The combined impacts of climate change, COVID-19 and economic inequaliy contribute to the urgency for businesses to embrace long-term, sustainable value creation and prioritize the needs of people and planet and the creation of broad-based economic prosperity.
It is reported that the World Economic FOrum and International Business Council partnered with the Big 4 to make this happen. The Bank of America CEO is in charge of the international business council.
Bill THomas who is the lead of KPMG had the following to say:
Reporting on ESG factors like carbon emissions and human rights and other key metrics will not only help inform investors while helping companies control their full corporate value, it has the power to realign capitalism for the benefit of broader society.
This is becoming more and more popular around the world. We’ve covered in previous podcasts about mandatory reports that are required in Australia for human trafficking. The big 4 already have to report some of this stuff. Additionally, the big 4 see this social justice stuff as a way to make money during a downturn in the economy. They don’t care about society or making a social impact. They see a way to make more money from a crisis. If they cared so much about human rights, then why did they cut the pay and retirement benefits of employees. WHy did they lay people off. Why do they continue to screw up their audits and cost investors 10’s of billions of dollars a year.
They are in favor of more regulation over financial statements because it means more work for them. Additionally, this type of audit work sounds super subjective. How can you tell what someone has really done regarding diversity or pollution. No one is actually going to check up on this stuff. If they do, no one is going to give them a material misstatement for it. What is the implementation plan for this.
It appears that the Sustainability Accounting Standards Board will be the board that maintains the standards in this area. THey won’t only audit these disclosures, they will also offer consulting services in this area.
What are other companies doing in this area. BlackRock launched a suite of ESG ETF’s. I’m sure they will just hold the largest companies in the world like Apple and Amazon.