In a groundbreaking move to combat the pervasive issue of greenwashing, the International Ethics Standards Board for Accountants (IESBA) is introducing a new ethics code. This code is designed for firms that verify environmental, social, and governance (ESG) claims made by companies, as revealed in an exclusive interview with Reuters.
The rise of greenwashing – the practice of misleadingly touting green credentials – has been a major concern, especially as trillions of dollars flow into investment funds claiming eco-friendly initiatives. To counter this, companies, particularly within the European Union, are now mandated to include new disclosures on ESG and climate-related factors in their annual reports from 2024 onwards.
Gabriela Figueiredo Dias, the chair of the IESBA, emphasized the importance of revising and expanding the ethics standards for auditing sustainability information. The proposed standards, which are currently open for public consultation until May, aim to bolster the credibility of company sustainability claims. This initiative aligns with the development of new technical assurance standards by the International Auditing and Assurance Standards Board.
Dias highlighted the critical role of ethics in sustainable finance. "There is nothing more central to sustainable finance than the information that is provided to those who decide to invest or fund projects and businesses," she stated. The IESBA's focus is not only on technical reporting but also on addressing ethical and independence issues such as conflicts of interest, financial interests, client pressure, inducements, or lack of competence.
The initiative has garnered support from the global securities watchdog, the International Organization of Securities Commissions (IOSCO). Jean-Paul Servais, IOSCO board Chair, expressed his endorsement of IESBA's actions, noting that external assurance based on globally accepted standards of ethical behavior and independence will enhance trust in such disclosures.
Under the proposed new standards, firms other than professional accountants, like consultants, engineers, or lawyers, could also audit sustainability disclosures. This move, particularly relevant in the EU, where non-accounting firms are allowed to audit these disclosures, aims to introduce competition against the dominance of the 'Big Four' – KPMG, EY, Deloitte, and PwC – in corporate auditing.
The proposed ethics code by the IESBA marks a significant step towards ensuring transparency and accountability in the corporate world, offering a robust defense against the misleading practice of greenwashing.
Samira is an Electronics and Communications Engineer by profession, but deep inside, her heart is a nomad! She's a state champion debater, a public speaker, a scriptwriter, a theater actress, but most importantly — A GREEN CITIZEN! She thinks of herself as a storyteller who thrives on enjoying the life at fullest and telling everyone the tales of life.
Business & Policies ,
New Ethics Code to Tackle Greenwashing in Business
by : Samira Tasneem | Published: January 29, 2024
Global initiative introduces ethics code to counter greenwashing, ensuring integrity in sustainability reporting.
In a groundbreaking move to combat the pervasive issue of greenwashing, the International Ethics Standards Board for Accountants (IESBA) is introducing a new ethics code. This code is designed for firms that verify environmental, social, and governance (ESG) claims made by companies, as revealed in an exclusive interview with Reuters.
The rise of greenwashing – the practice of misleadingly touting green credentials – has been a major concern, especially as trillions of dollars flow into investment funds claiming eco-friendly initiatives. To counter this, companies, particularly within the European Union, are now mandated to include new disclosures on ESG and climate-related factors in their annual reports from 2024 onwards.
Dias highlighted the critical role of ethics in sustainable finance. "There is nothing more central to sustainable finance than the information that is provided to those who decide to invest or fund projects and businesses," she stated. The IESBA's focus is not only on technical reporting but also on addressing ethical and independence issues such as conflicts of interest, financial interests, client pressure, inducements, or lack of competence.
The initiative has garnered support from the global securities watchdog, the International Organization of Securities Commissions (IOSCO). Jean-Paul Servais, IOSCO board Chair, expressed his endorsement of IESBA's actions, noting that external assurance based on globally accepted standards of ethical behavior and independence will enhance trust in such disclosures.
Under the proposed new standards, firms other than professional accountants, like consultants, engineers, or lawyers, could also audit sustainability disclosures. This move, particularly relevant in the EU, where non-accounting firms are allowed to audit these disclosures, aims to introduce competition against the dominance of the 'Big Four' – KPMG, EY, Deloitte, and PwC – in corporate auditing.
The proposed ethics code by the IESBA marks a significant step towards ensuring transparency and accountability in the corporate world, offering a robust defense against the misleading practice of greenwashing.
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Samira Tasneem
Samira is an Electronics and Communications Engineer by profession, but deep inside, her heart is a nomad! She's a state champion debater, a public speaker, a scriptwriter, a theater actress, but most importantly — A GREEN CITIZEN! She thinks of herself as a storyteller who thrives on enjoying the life at fullest and telling everyone the tales of life.
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