Britain’s accountancy watchdog today said auditors need to put pressure on companies over their climate change impact, as it began a review into firms’ reporting on their green footprint.
The Financial Reporting Council is looking into how businesses and auditors meet reporting standards and react to the risks posed by global warming.
The government introduced rules last year that force companies to report their energy use and greenhouse gas emissions.
Laws are also in place that instruct businesses to report on how their company is impacting on the community and the environment.
Companies are coming under increasing pressure to make their businesses environmentally friendly amid the rise of activist organisations such as Extinction Rebellion.
Protesters from the pressure group blockaded the entrance to oil giant Shell’s headquarters in Aberdeen last month over its alleged role in accelerating climate change.
Sir Jon Thompson, the FRC chief executive, said UK boards had a duty to investors to reveal the impact and risks of climate change. He added: “Auditors have a responsibility to properly challenge management to assess and report on their business. The FRC has high standards for company disclosure, including climate change.
“Company reports and accounts are essential to understanding how the corporate world is responding to the challenge of climate change.” The FRC said it would take a sample of company reports and accounts from different industries to see how businesses were complying with the rules.
It also plans to examine auditors’ work to make sure climate change is properly reported, while assessing whether auditors have made enough resources available to properly evaluate the risk.
In addition, the FRC will look into how shareholders are responding to climate change when making investments.
The watchdog said it would write to companies and urge them to shore up their performance if their climate change reporting was found wanting.
If action was not taken, it could take a company to court or slap an auditor with a fine.