57 organizations publish open letter urging EU to act on ESG

This declaration is signed by 57 organizations representing more 8,500 billion euros in assets and employing more than 5 million people. It is published with the support and coordination of the European Round Table for Industry, the Value Balancing Alliance, the World Business Council for Sustainable Development and the World Economic Forum.

As leading organizations with a global reach, we recognize that the context in which businesses now operate has been transformed by climate change, the loss of nature, social unrest around inclusion and the conditions for work, and changing expectations of the role of business. In addition, the global pandemic has exacerbated the underlying and long-standing challenges regarding equality and access to economic opportunities.

We support the ambition of the European Green Deal and we are committed to playing our part to strengthen the resilience of the business and enhance our license to operate through an increased commitment to creating long-term sustainable value as well as taking into account the needs of all our stakeholders.

We believe that these efforts and commitments should be supported by consistent and globally comparable performance metrics and information, in order to improve decision-making, trust and accountability.. Sustainability must be integrated into accounting and reporting systems.

However, preparers and consumers of environmental, social and governance (ESG) data around the world still struggle with a profusion of reporting frameworks and standards that do not allow for consistent and comparable disclosures.

The standardization that has already taken place in financial accounting offers a model for success. In the past, accounting faced a myriad of measures, jurisdictions and organizations, and coordination took decades. Global accounting rules in place today ensure that the performance of companies in any industry or country is comparable and that companies can be held accountable by investors.

To achieve a similar result on the ESG front – and to do it quickly – the world should follow the same model and establish an independent body that can ensure objectivity and due process. We therefore strongly support the initiative of the International Financial Reporting Standards (IFRS) Foundation to create an International Sustainability Standards Board (ISSB) to develop globally accepted standards for sustainability reporting that can be adopted worldwide. ..

We also recognize that some jurisdictions are further along in embracing sustainability and want to go further and faster to address specific policy priorities. We therefore support the European Commission in its objectives of promoting high quality ESG standards. as part of the transition to the continent’s green economy, through its proposal for a directive on sustainable development reporting (CSRD), including through the introduction of European reporting standards on sustainable development that will be developed following the creation of a new standards body within the European Financial Reporting Advisory Group (EFRAG).

High quality standards should be based on the principles of legitimacy, independence, transparency, public accountability and full due process. Stakeholder engagement and due process must be inclusive and allow for a high quality contribution from the business community. We therefore call on the European Commission to put in place a solid and inclusive official procedure to develop its own sustainability standards., as indicated in its proposal for a directive. This is important because all future standards will be adopted by delegated acts having a direct effect on companies. In this regard, we welcome the consultation of EFRAG on its future due process.

As investors and organizations with global operations, we leverage international supply chains and attract capital from around the world. Global alignment of reporting standards is crucial in providing a comprehensive view of a company’s sustainability performance. We encourage the European Commission to support the creation of the International Sustainability Standards Board and to actively and urgently promote cooperation between EFRAG and the new Board.. Increased international cooperation to align and harmonize sustainability reporting standards is essential to ensure a level playing field globally. To meet the needs of financial and capital markets, non-financial reporting standards must be global.

We support the International Organization of Securities Commissions (IOSCO) and the IFRS Foundation in their recommendation of a “modular approach” for establishing a globally consistent sustainability standards base, upon which national and regional standard setters can develop additional standards that meet their specific jurisdictional needs. Note that this model was recently endorsed by G7 and G20 finance ministers and central bank governors, including the European Union.

We believe that this approach is necessary to minimize the risk of divergence, inconsistency and lack of comparability, which would risk creating an unfair playing field. This could double the reporting burden in countries where different standards exist. Worse yet, capital markets would continue to be unable to effectively channel investments into sustainable enterprises, hampering the necessary restructuring of the global financial system towards long-term value creation, inclusiveness and resilience.

Therefore, we encourage constructive cooperation between the future European standardization body for sustainable development, EFRAG, and relevant international initiatives to maintain a modular approach. IOSCO’s proposal for a multi-stakeholder advisory committee operating within the structure of the IFRS Foundation could help promote consistency and comparability with the reporting standards specific to each jurisdiction. The appropriate presence of multilateral bodies and key stakeholders within such a body, including the European Commission, could provide the necessary support to reach a global benchmark and an effective mechanism for cooperation with national or regional standard setters. .

As global organizations operating in Europe, we know that doing business in a more sustainable, inclusive and resilient way is one of the crucial challenges of our time. With its international position and its leadership role on the sustainable development agenda, the European Union can be a key force for global cooperation and alignment with ESG reporting standards. We support the institutions of the European Union in this effort and are ready to contribute our experience.

Eurasian Resources Group (ERG)

Mitsubishi Chemical Holdings

Sumitomo Mitsui Financial Group

This declaration is signed by 57 organizations representing more 8,500 billion euros in assets and employing more than 5 million people. It is published with the support and coordination of the European Round Table for Industry, the Value Balancing Alliance, the World Business Council for Sustainable Development and the World Economic Forum.