- After establishing global minimum tax, G7 proposes new international standard on climate reporting to reduce emissions from large and multinational corporations
- What are the financial implications of corporate climate reporting?
The recent G7 summit, held last week in the UK, has brought about some significant global economic reform, including the establishment of a global minimum tax after years of back-and-forth debate on the idea.
Ticking the next item off of their docket, the G7 were also able to move one step closer in establishing global standards for disclosing corporate environmental data.
Corporate Climate Reporting Proposal
Although there is no true timeframe for when climate change disclosures would take effect, the G7 has already decided on the reporting framework it would require of corporations. These reports were developed by the Task Force on Climate-Related Financial Disclosures (TFCD) which is backed by the Financial Stability Board.
Necessary reporting would not just include quantitative information; rather, companies would also be asked to describe how policies and projects would be affected as opposed to simply providing metrics. The TCFD has recommended that corporations disclose emissions from operations, supply chain, and use of their products as well as financial analyses of how climate change might affect their companies’ sales.
Michael Bloomberg, former NYC mayor and current Chair of the TFCD, summarized the benefits of this initiative for the world, as well as the potentially affected corporations: “Risk disclosure is one of the most important tools we have to speed progress on climate change because it empowers and incentivizes companies to act and drives more capital to those that are helping to lead the way.”
The G7 finance ministers said in a statement: “This will help mobilize the trillions of dollars of private sector finance needed, and reinforce government policy to meet our net-zero commitments.”
Sustainability reporting will mean higher costs for many corporations. The EU has already seen major pushback after proposing mandatory sustainability reporting for nearly 50,000 companies starting in 2024. These companies were estimated to report costs of roughly $4.4 billion (USD) under the proposed standards.
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