Do we have global standards in ESG?

Although it sounds counterintuitive, the hard fact is that the world currently does not have global ESG standards. This is despite the existence of entities like ISO 14040, ISO 14044, ISO 14064, ISO 14067, etc. Well-meaning efforts are being made to evolve a coherent global standard but the goal-post is still quite far and even hazy in certain respects.

We need a rating and calculation matrix that would permit comparisons between the sustainability disclosures of companies producing the same product in different geographies of the globe and even between companies producing different products.

At present, different national and supra-national jurisdictions across the globe emphasize different aspects of the environmental, social, and governance (ESG) amalgam. Europe appears to be more centered on the "E" whereas the Americans appear more focused on the "S." Paradoxically the US also appears to be taking a step back with the emergence of a strong anti-climate, anti-ESG lobby that enjoys patronage at the highest political levels. Adding to this complexity is the fact that many national jurisdictions are yet to institutionalize any credible framework that can serve as a baseline for ESG disclosures even at the country level.

The silver lining in the cloud is that COP26, held in 2021 in Glasgow, announced the setting up of the International Sustainability Standards Board (ISSB) which has set out four key objectives for itself: (i) to develop standards for a global baseline of sustainability disclosures, (ii) to meet the information needs of investors, (iii) to enable companies to provide comprehensive sustainability information to global capital markets, and (iv) to facilitate interoperability with disclosures that are jurisdiction-specific and/or aimed at broader stakeholder groups.

It should be assumed that when ISSB completes its work we will have moved one step forward towards establishing global standards. However, this will be only a step forward because the articulation of the most transparent and fair "global baseline" of sustainability disclosures does not concurrently mean the creation of any ESG calculation and rating matrix that could facilitate comparisons across geographies and products/services. Even when such a matrix is worked out, tested, and ratified by national governments, the next challenge will be its fair implementation in different national and supra-national jurisdictions.