More on climate-related disclosure, or: it’s just a just transition!

As we’ve addressed many times, the International Sustainability Standards Board issued its first two exposure drafts, General Sustainability-related Disclosures (S1) and Climate-related Disclosures (S2), which were both open for comment until July 29, 2022.

Last time we looked at the exposure draft’s absence of a definition for the central term “sustainability-related,” leading to a recent release in which “the ISSB agreed how to describe sustainability and clarified that a company’s ability to deliver value for its investors is inextricably linked to the stakeholders it works with and serves, the society it operates in, and the natural resources it draws on.” The release indicated that “sustainability will be described in (S1) as the ability for a company to sustainably maintain resources and relationships with and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term. Sustainability is a condition for a company to access over time the resources and relationships needed (such as financial, human, and natural), ensuring their proper preservation, development and regeneration, to achieve its goals.” We also looked last time at the comment letter from the Business and Human Rights Resource Centre, submitting “that current sustainability reporting frameworks fall short in respect of proper disclosure requirements on human rights in particular, and that this should matter for all investors,” and expanding: “As the widening inequality gap poses risks to communities, democracies – and businesses – across the world, a sustainability reporting framework that does not require companies to report on their underlying human rights and social risks and impacts, risks falling short.”

Well, in that same release, the ISSB also announced this:

  • Having heard strong feedback on the connection between climate and nature, including cultivated and natural biodiversity, deforestation and water—and subsequently decided during its October meeting—the ISSB will research incremental enhancements that complement the Climate-related Disclosures Standard (S2), including relating to natural ecosystems and the human capital aspects of the climate resilience transition (just transition).
  • To deliver this, consistent with its approach of building upon the work of market-led initiatives grounded in current-best practice and thinking, the ISSB will consider the work of the Taskforce for Nature-related Financial Disclosure (TNFD) and other existing nature-related standards and disclosures where they relate to the information needs of investors. This will include considering the TNFD’s recent work on the intersection of climate and biodiversity disclosures in scoping the ISSB’s research on complementing its climate-related disclosures to address disclosures related to natural ecosystems.

I have to admit I initially read that parenthetical reference to “just transition” in the wrong way (hey, it’s just transition, what else do you want?) But this is what’s being indicated there, as defined by the Climate Justice Alliance:

  • Just Transition is a vision-led, unifying and place-based set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy. This means approaching production and consumption cycles holistically and waste-free. The transition itself must be just and equitable; redressing past harms and creating new relationships of power for the future through reparations. If the process of transition is not just, the outcome will never be. Just Transition describes both where we are going and how we get there.

The website indicates that “Just Transition strategies were first forged by labor unions and environmental justice groups, rooted in low-income communities of color, who saw the need to phase out the industries that were harming workers, community health and the planet; and at the same time provide just pathways for workers to transition to other jobs. It was rooted in workers defining a transition away from polluting industries in alliance with fence line and frontline communities.” It further states: “After centuries of global plunder, the profit-driven industrial economy rooted in patriarchy and white supremacy is severely undermining the life support systems of the planet. Transition is inevitable. Justice is not.”

Well, I don’t suppose the ISSB is likely to require that (say) companies disclose their strategy for tackling patriarchy and white supremacy. But it’s fascinating that it’s even grappling with concepts rooted in such a wholesale rejection of much of what the IFRS Foundation has historically existed to facilitate. As we cited last time, the Business and Human Rights Resource Centre correctly noted the risks posed by the widening inequality gap (among other things) to communities, democracies, and businesses; there’s surely hardly a company on earth that guarantees all its employees a wage capable of (in the terms of human rights as articulated for example by UNICEF) consistently financing “their active, free and meaningful participation in, contribution to, and enjoyment of civil, political, economic, social and cultural development.” The intertwining of corporate and societal norms and directives (consider for example the question of an employee’s access to abortion, in the context of a liberal-minded company located in a US red state) seems to raise almost limitless questions and challenges, and a massive capacity for greenwashing (or whatever the human rights version of that should be called). It may be then that the ISSB’s “incremental enhancements” in this direction will be incremental indeed. Still, that would still be the start of something…

The opinions expressed are solely those of the author

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