News analysis
The world’s biggest corporate polluters fail the most basic test
There are just 134 companies responsible for 80 per cent of corporate industrial emissions, yet none have given disclosures of their polluting activities in company audits.
What does this mean?
It means the biggest corporate polluters in the world are paying lip service to ESG (environmental, social and governance).
It appears that most of the world’s biggest polluters don’t care about the effects of climate-related risks and their net zero emissions plans because they don’t address such issues in their financial statements.
How do we know this?
Carbon Tracker, an independent non-profit, conducted its annual review of the world’s biggest polluters and found that carbon-intensive companies failed to disclose enough information about climate-related risks and net zero plans in their financial statements, which deprived investors of valuable information.
How big is the problem?
98% of the 134 industrial companies responsible for the bulk of pollution failed to provide evidence that the effects of climate-related matters were factored into their 2021 financial statements. This is according to a report developed with the Climate Accounting and Audit Project, an investor group supported by the UN.
The auditors of these companies “do not appear to comprehensively consider the effects of material climate-related matters in their risk assessments and audit testing,” says the Carbon Tracker Initiative. “The stark differences between audit report information across the same global firm further suggests a lack of network policies to address climate matters.”
Why is this an issue for investors?
“When companies don’t take climate-related matters into account, their financial statements may include overstated assets, understated liabilities and overstated profits,” says Barbara Davidson, Carbon Tracker’s head of accounting, audit and disclosure.
What can be done?
Pressure can be brought to bear. Senior executives and board members of big-polluting firms should get training in ESG and the auditors of the biggest polluters on the planet must take responsibility.
The International Accounting Standards Board is currently considering whether it should clarify its existing guidelines, which require companies to take climate-related matters into account in financial statements “when the effects are material”.
