By Huw Jones
LONDON (Reuters) -The European Union and a global standard setter agreed joint guidance on Thursday to minimise costly overlaps for thousands of international companies that must comply with two sets of disclosures on how climate change affects their business.
Authorities worldwide are introducing stricter climate-related disclosures for companies, replacing a patchwork of voluntary private-sector norms, to crack down on greenwashing, or inflating green credentials to attract investors.
"It is important that reporting frameworks in different jurisdictions are interoperable with each other to reduce the reporting burden for EU companies," EU financial services chief Mairead McGuinness said in a statement.
At the request of the G20, the International Sustainability Standards Board has finalised standards for climate-related corporate disclosures that will be used in countries such as Britain and Canada, but not in the U.S., which has its own rules.
The EU disclosures, known as European Sustainability Reporting Standards or ESRS, are already in force, and go further than ISSB in covering social and governance issues as well.
Companies and regulators want the two sets of standards to be "interoperable" on climate, so compliance with one means little extra work to comply with the other set as well.
In a public meeting on Thursday, the sustainability board of EU's advisory group on financial reporting approved joint guidance on climate-related disclosures drawn up with the ISSB.
"Regardless of whether it starts with ESRS or ISSB Standards, an entity can comply with the climate requirements of both sets of standards by following the content of this interoperability guidance," the guidance said.
Under both sets of standards, companies will have to report carbon emissions and other factors if they think they are "material" enough to warrant disclosure.
The definitions of what is material are aligned in both sets of standards, the guidance said.
"There is a high-degree of alignment of the climate-related disclosures in the two sets of standards and, in particular, almost all the disclosures in ISSB Standards related to climate are included in ESRS," it added.
Similar corporate climate disclosures have been finalised in the U.S., though put on hold pending judicial review.
Sue Lloyd, vice-chair of the ISSB, said there would be interest in guidance to minimise reporting overlaps for companies that apply ISSB and U.S. rules.