Current corporate reporting by a majority of companies producing the highest levels of greenhouse gas emissions would not comply with proposed new requirements from the International Sustainability Standards Board (ISSB).

This is the key finding of research carried out by ACCA (the Association of Chartered Certified Accountants) and the Adam Smith Business School at Glasgow University, aiming to find out how prepared companies are for new climate-related reporting rules being developed by the International Sustainability Standards Board, formed last November.

The research analysed the most recent reports published by companies in the construction material and chemical industries which had the highest greenhouse gas emissions over the last three years, comparing current disclosures against the disclosure requirements of the proposed climate-related disclosure standard (IFRS S2, Climate-related Disclosures).

This analysis found that most companies fall short of the type and level of disclosure that the ISSB is proposing. Further, the research found that disclosures were often scattered and duplicated across different company sources, often with no cross-reference, and with little connection to financial information published in the financial statements.

Those companies (77% of the sample) that have adopted the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations are significantly better prepared to comply with the proposed new disclosure requirements. However, even these companies will need to significantly increase their climate-related reporting to meet the new requirements of the proposed standard, which the ISSB aims to finalise by the end of this year.

ACCA and the Adam Smith Business School are urging the ISSB to ensure the disclosure requirements are clear and easily understandable, and that thorough guidance is provided.

Lloyd Powell, Head of ACCA Cymru / Wales, said:

“Standard-setters and regulators should focus support and guidance on those companies that have not adopted the TCFD Recommendations, including smaller businesses. It may be appropriate to allow a period of voluntary adoption before making the ISSB standards mandatory.”

He also called on regulators to help users of this climate-related information by resolving the problem of the scattered location of disclosures, the lack of cross-referencing and duplication.

He added:

“The ISSB also has an important role to play by providing greater clarity around location and cross-referencing in the standards, and by collaborating with the regulators to achieve a consistent approach.

“This research is not about pointing fingers at businesses. It is about understanding where they are at in their climate disclosures and working out how to help them improve, this is vital work for all of us.”