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Canada’s accountants say it is time to decide on a universal approach to replace a dizzying array of reporting standards for environmental, social and governance issues – and that companies should make their voices heard in an international push to come up with one.

Chartered Professional Accountants of Canada, the industry body, says business is made more difficult and costly by multiple frameworks for disclosing sustainability issues. Investors and ratings agencies demand disclosure in the platforms of their choice. Meanwhile, small and medium-sized enterprises have fewer financial resources to meet these standards.

“Over all, the general consensus is that the current reporting landscape is complex, not well understood and involves a number of different players. And the rules of those different players are similarly not really well understood,” said CPA Canada vice-president Gord Beal.

“Organizations that we have spoken with through our research over the last number of years have expressed frustration with this fragmented reporting environment.”

The group is calling on private- and public-sector leaders to contribute to an effort by the International Financial Reporting Standards Foundation (IFRS) to develop a global sustainability standards board. The body has set up a “technical readiness working group” and is looking to have a plan for standardization well under way by November, when countries meet in Glasgow, Scotland, for the next United Nations climate conference.

CPA Canada, whose members are instrumental in the smooth running of companies, investment funds and capital markets, says Canadian business leaders have earned a good reputation for working with international bodies on sustainability issues, and have an important role to play in this initiative.

ESG reporting has become an alphabet soup of platforms for disclosing such things as board and management gender diversity, environmental impact, labour relations and charitable giving. Among approaches in use now are those developed by the Sustainability Accounting Standards Board (SASB), Global Reporting Initiative and Principles for Responsible Investment, among others.

On climate-specific data, the world is coalescing around the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) as the standard template for disclosing emissions and analyzing the risks to businesses from global warming and policies to combat it.

It makes sense that accountants would call for a standard global approach to ESG disclosure – indeed, they shaped standardization in financial reporting. Accepted accounting principles allow investors, companies, financial institutions, rating agencies and governments to speak a common language when it comes to analyzing earnings reports, balance sheets and public accounts.

Now, sustainability factors are catching up in importance when it comes to evaluating businesses, and that has exposed the problems with numerous platforms for reporting. There is already a push to come up with standardization domestically.

Canada’s eight largest pension funds, including the Canada Pension Plan Investment Board, Caisse de dépôt et placement du Québec and Ontario Teachers’ Pension Plan, have called on corporations to improve their ESG disclosures by reporting data in a standardized fashion. The group, representing $1.6-trillion in assets, backs the SASB approach.

The federal government has been pushing wider adoption of TCFD reporting in Canada’s public and private sectors as it seeks to achieve its commitments made under the Paris agreement. This standard is a good place to start for a global sustainability body, Mr. Beal said.

“The whole area around sustainability reporting encompasses much more than climate change, but to start with that is an excellent opportunity to really focus the resources because the board will have limited resources to focus,” he said. “We as an organization, from a practical point of view, support an initial focus on that climate element given its pervasiveness and urgency.”

With calls getting louder for standardization, a big question is whether Canadian governments and regulators will get tougher in enforcing more and better disclosure. So far, many have made recommendations, but have yet to mandate reporting and decide which standards to use.

Better global co-ordination could make that easier. In Canada, small and medium-sized businesses have been among the most adamant that a universal approach is needed, said Rosemary McGuire, CPA Canada’s director of external reporting, research and guidance. This is a bit counterintuitive, as such enterprises normally lead the charge in calling for reduced regulatory burdens.

“In fact, it’s been opposite for them, which is, ‘We don’t have the time [or] resources to spend navigating and figuring out what we need to do. Please provide us with more clarity and direction in this space so that we can optimize our resources in the most effective way,’ ” she said.

Jeffrey Jones writes about sustainable finance and the ESG sector for The Globe and Mail. E-mail him at jeffjones@globeandmail.com.

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