It is well known that “green”, “sustainable” or “eco-responsible” do not mean anything specific and that companies take advantage of it. But if the two standards unveiled Monday by an accounting body are required, companies could be legally compelled to be sincere about their carbon footprint.
” THE greenwashing in the sense of, “I sell sustainable finance which is not sustainable finance to my shareholders”, it’s over the day our standards have taken a sufficiently important place in the markets”, assures Emmanuel Faber, former CEO of Danone who has become Chairman of the International Extra-Accounting Standards Board (ISSB), an offshoot of the international foundations responsible for the IFRS accounting standards used in no less than 140 countries and jurisdictions.
Today, most large companies already declare how many tonnes of carbon they emit into the atmosphere each year, but these declarations are à la carte, more or less verified, often incomplete and generally unreliable. They are not comparable between companies, unlike their profits or turnover.
The first to complain about it are the markets, and the standards are primarily intended to “secure the financial market on the information given to it”, underlines Emmanuel Faber. Investors want to know if the companies they fund will suffer or grow in a warmer or more expensive carbon world. For example, how does an automotive supplier project itself into a Europe of 2035 where only new electric cars can be sold?
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The two standards unveiled Monday by the ISSB will require companies to count everything that is significant for its activity, and with the same method, as in financial accounting. For example, an oil major will have to account for “indirect” emissions generated by the combustion of gasoline or gas by its customers, “scope 3” in the jargon.
They will also have to describe their climate strategies in their annual reports, although the standard does not go into too much detail. “Is it just the boss or the boss of comm’ who did something, or did the executive committee sit down, and there are many budgets, investments, presented on five, ten years? »
The standards will ensure “that what they actually do is detailed in a language that is common to all companies”, explains Emmanuel Faber, who is responsible for the advent of carbon accounting.
The verification will be “done by the financial auditors of the companies so that the connection with the financial language is total”, he explains. “We go from things that are laid in the air to a system that is completely inside the company’s processes”.
“Faithful and sincere”
The standards will either be voluntarily adopted by companies or made mandatory by states.
Japan, United Kingdom, Singapore, Hong Kong, Brazil, Nigeria, Egypt and others seem well on their way to applying them, explains Emmanuel Faber. The European Union is developing its own standards with a much more ambitious scope, including biodiversity or human rights: they should be compatible with the ISSB, expects its leader, who stresses that biodiversity will be the subject of the following standards.
As for China, the Frenchman, without predicting the future, welcomes the government’s “support” for its work. “We cannot do without China”, he repeats in any case.
In 2025, the first annual reports will be published by companies with these new standards, covering their 2024 financial year, in which the published carbon footprint will be supposed to be as “true and sincere” as its financial statements.
Under penalty of being pinned down by the police of the markets, protectors of the shareholders.
In theory, companies will therefore have to warn their shareholders when their “carbon” trajectories change, just as today they must issue “earnings warnings” (” profit warning ”) when they anticipate a drop in profitability.
“A company that makes a “carbon warning” will be penalized in the same way as a company that makes a “profit warning“”, imagines Emmanuel Faber.