Firms scrutinizing environmental, social, and governance (ESG) claims are being encouraged to adopt a new ethics code proposed by the International Ethics Standards Board for Accountants (IESBA) to counteract the practice of greenwashing, as reported by Reuters on January 29. To address this, companies globally, including those in the European Union, will be mandated to include new ESG and climate-related disclosures in their annual reports from 2024 onward, with external auditors responsible for verifying these disclosures as a measure against greenwashing. The IESBA is suggesting revisions to its ethics standards to guide auditors in effectively validating sustainability information, aligning with the International Auditing and Assurance Standards Board’s efforts to create new technical assurance standards. The proposed standards will undergo public consultation until May, aiming to enhance the ethical framework in sustainable finance and mitigate issues like conflicts of interest and misinformation.

The proposed standards by the IESBA are designed to complement the development of new technical assurance standards by the International Auditing and Assurance Standards Board, addressing behavioral issues at the root of greenwashing, such as ethical or independence concerns. The move is welcomed by the International Organization of Securities Commissions (IOSCO), which believes that aligning standards for climate-related disclosures under mandatory rules will facilitate enforcement against greenwashing. The IESBA’s action is seen as essential in ensuring trust in disclosures related to sustainability, with external assurance based on globally accepted ethical standards playing a crucial role. The proposed standards are not exclusive to professional accountants; they can be utilized by various firms, including consultants, engineers, or lawyers, involved in auditing sustainability disclosures, expanding the scope of ethical guidance in the increasingly important field of ESG reporting.

Sources:

https://www.reuters.com/sustainability/global-watchdog-proposes-new-ethics-code-combat-greenwashing-2024-01-29/