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Don’t be mistaken by the recent headlines. The Big Four have not unveiled any ESG reporting standards. They can’t issue reporting standards, because they are not an independent standard setting body – they are consultancy firms.
KPMG, EY, PwC and Deloitte teamed up with the World Economic Forum to launch a white paper on the topic last week, to much fanfare. Out of thin air, this document became the silver bullet that will sort out ESG reporting and save capitalism.
If only it was that easy. The real standard setting bodies (take for a moment SASB or GRI from the alphabet soup of options) know very well how arduous such a process is. And, in reality, the white paper is essentially a cocktail of metrics borrowed from that arduous work by other initiatives.
Even if well intended, this white paper cannot be elevated to the category of an ESG standard, as it has been reported. It is just one of many thought leadership reports that firms like the Big Four churn in an attempt to get their voices heard. At a crucial time for ESG reporting, this should not eclipse more meaningful efforts like those of the main independent standard setting bodies paving the way for real solutions.
Judge by the title of the white paper itself: Measuring Stakeholder Capitalism. Towards Common Metrics and Consistent Reporting of Sustainable Value Creation.
As one of the Big Four heads said at the online launch last week, the intent of this union is to make the Business Roundtable’s Statement on the Purpose of Corporation – the poster child of stakeholder capitalism – happen.
RI has written a lot about that Statement before, and the evidence so far suggests that, although it is evolving interestingly, it was a PR effort rather than a bid for change. By its own admission, it sought to show that Corporate America’s CEOs are already the most pro-stakeholder players in the market.
The skeptic in me sees this latest announcement in the same vein. It says that what we are witnessing is the confluence of two PR efforts, or even a unique exercise of meta-PR.
My more rational self understands that the Big Four need to make a splash in the alphabet soup of reporting standards. The European Commission is pondering whether mandatory standards should accompany the ongoing revision of its non-financial reporting law, and if that’s the case, those European standards will be based on the plethora of existing initiatives. So the Big Four are right in time with their two cents. This is not pro bono work. They’ve seen an opportunity and have seized it.
That’s not objectionable in itself: everyone needs to pay the bills. What is harder to stomach from this week’s media coverage is the apparent smack of grandstanding – that accountants are about to save the world.
As for reforming capitalism, I’m afraid the Big Four are not the best ambassadors for that.
They are among the few firms that can afford to send their staff on secondment anywhere, including the offices of politicians; nevermind their scandal-ridden track records, conflicts of interests or revolving doors. Their survival is testament to the oligopolies that don’t let capitalism breath. And we can talk about enabling tax avoidance some other time.