I often wonder what the vintners buy –
One half so precious as the goods they sell.
-- The Rubaiyat of Omar Khayyam (FitzGerald trans.)
Controversy fills the daily news over standards of behavior –- enforcing compliance and sanctioning deviance around mask mandates, drug tests for Olympic athletes, and even the invalidity of thousands of infant baptisms for a priest’s use of a single incorrect pronoun.
So it’s with a combination of enthusiasm and apprehension that I struggle to follow the Babel of public conversation that seeks expansion of large-company disclosures on Environmental, Social and Governance, and Diversity, Equity and Inclusion.
There are a host of issues, to be explored here in due course; these are only a handful:
- Should ESG/DEI reporting be mandatory or voluntary?
- Should there be expert assurance –- if so, by whom?
- How best to measure non-compliance?
- Who should be accountable, and with what sanctions?
Before any of these can be discussed, much less resolved, this at the threshold:
What qualifies as a standard? And what chance is there for broadly-accepted standards for ESG/DEI reporting and assurance that are coherent, comparable, and credible?
As Amanda Iacone wrote for Bloomberg in December, “Investors hungry for information about corporate climate risk and performance on social issues want some confidence that the data companies report are accurate and calculated consistently from year to year.”
The community of information users who live in the eco-system of traditional financial reporting, accounting and assurance standards have nailed their colors to the mast of the International Sustainability Standards Board –- newly-formed late last year and slowly ramping up its staffing and early agenda development.
But as Iacone surveyed 2020 reporting by S&P 500 companies, “Engineers and boutique firms that specialize in sustainability metrics were among the (assurance) providers, along with accountants. Combined, those providers relied on a jungle of testing standards that mirrors the confusing mix of frameworks that companies rely on to create their reports.”
Foreseeable disclosure and reporting challenges, then, will plainly include, as she put it, “Inconsistent testing of voluntary ESG reporting –- including the myriad providers and the varied scope of the assurance….”
Pondering society’s resistance to converging over “what is a standard” -- the very baseline requirement before all others -- I am preparing to travel between Paris and London for meetings where this high-level question will figure.
My chauffeur to Gare du Nord will be in his Uber’s customary left-side front seat; he will use the dedicated taxi lane on the right. On his way to pick me up, he would have pulled over a droit for fuel, measured in litres and paid for in Euros. If necessary he would have checked his tires –- the pressure gauge measuring in kPa, that is, newtons per square meter.
All routinely consistent with the standards and practices of tens of millions of motor vehicles in Europe.
Two hours and a bit on the Eurostar will include the 50.5 kilometres in the Channel Tunnel between Calais and Dover – that is, 31.35 miles, depending on who’s counting.
At St Pancras Station I will hail a cab, pulling up from the taxi rank’s left-side lane. The driver, behind the wheel on the cab’s right-hand side, will have started his day by taking on petrol by the gallon, paid in pounds sterling. His British tyre gauge would have measured in “psi” – that is, pounds per square inch.
He'd have thought nothing of the applicability of those quotidian standards.
Nor are the English and the French about to change or converge any time soon.
Borrowing from an elder source of wisdom, as I peel another page from my yearly calendar, “The older I get, the more respect I have for the phrase, ‘Not in my lifetime’.”
Investors and other data users who provide capital to the world’s markets have their appetite for ESG/DEI information fully displayed. Broadly suitable standards that will achieve their support are, however, a considerable distance far down the road –- however that distance is measured.
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