The International Sustainability Standards Board (ISSB) has been launched by the IFRS Foundation to develop a comprehensive global baseline of sustainability disclosure standards.
The new board will see investor-focused sustainability disclosure organisations consolidate into the new board. The IFRS Foundation will complete consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF—which houses the Integrated Reporting Framework and the SASB Standards) by June 2022.
THE IFRS Foundation also announced the publication of prototype climate and general disclosure requirements, developed by the Technical Readiness Working Group (TRWG), a group formed by the IFRS Foundation Trustees to undertake preparatory work for the ISSB.
These prototypes are the result of six months of joint work by representatives of the CDSB, the International Accounting Standards Board (IASB), the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD), the VRF and the World Economic Forum (Forum), supported by the International Organization of Securities Commissions (IOSCO) and its Technical Expert Group of securities regulators.
The TRWG has consolidated key aspects of these organisations’ content into an enhanced, unified set of recommendations for consideration by the ISSB.
The ISSB will sit alongside and work in close cooperation with the IASB, ensuring connectivity and compatibility between IFRS Accounting Standards and the ISSB’s standards—IFRS Sustainability Disclosure Standards.
Comprehensive global baseline
The ISSB will develop IFRS Sustainability Disclosure Standards, including disclosure requirements that address companies’ impacts on sustainability matters relevant to assessing enterprise value and making investment decisions. The ISSB’s standards aim to enable companies to provide comprehensive sustainability information for the global financial markets. The standards will be developed to facilitate compatibility with requirements that are jurisdiction specific or aimed at a wider group of stakeholders.
Consolidating and building on existing initiatives
The ISSB will build on the work of existing investor-focused reporting initiatives to become the global standard-setter for sustainability disclosures for the financial markets. To achieve this goal, the IFRS Foundation has reached commitments with the CDSB, whose secretariat is hosted by CDP, and the VRF to consolidate their technical expertise, content, staff and other resources with the IFRS Foundation. It is intended that the technical standards and frameworks of the CDSB and the VRF, along with those of the TCFD and the Forum Stakeholder Capitalism Metrics, will provide a basis for the technical work of the new board.
The International Federation of Accountants (IFAC) has pledged ongoing support for the ISSB. IFAC noted that as climate and other sustainability issues are global in nature, the multi-jurisdictional footprint of the ISSB can hopefully facilitate implementation of the ISSB’s standards.
IFAC CEO Kevin Dancey said: “Now is the time for policymakers around the world to focus on how to capitalize on the forthcoming work of the ISSB. As with the success of IFRS Standards for financial reporting, IOSCO’s support is key. Jurisdictions around the world need to take the next step—deciding to use, implement, and enforce IFRS Sustainability Disclosure Standards as part of a Building Blocks Approach that will deliver the global baseline for sustainability-related reporting needed for investors and capital markets.”
ACCA chief executive and co vice-chair of the VRF Board Helen Brand said: “This development means we now have a once in a lifetime opportunity to help shape global reporting standards for the benefit of investors, economies and the public good.
“In December 2020, we expressed strong support for the creation of the ISSB. This is needed to address the scale of global environmental and social challenges today, accelerate the necessary reallocation of capital, and drive positive changes in corporate decision-making.”
As co-vice chair of the VRF Board Brand added: “With the global reach of the International Integrated Reporting Framework and the SASB Standards, the VRF can help the ISSB to achieve much-needed consistency in reporting across the world. The IFRS Foundation’s commitment to build connectivity between financial and sustainability reporting using the principles of integrated reporting is particularly welcome. We believe that this is vital to high-quality connected corporate reporting.”
Association of International Certified Professional Accountants CEO Barry Melancon said: “Today’s announcement marks a new, historical milestone in our journey to establish globally consistent sustainability reporting standards, signalling a new era in corporate reporting where the same level of rigour will be demanded for sustainability reporting as for financial information. Organisations do not operate in a vacuum, they must take a holistic approach to understanding how they create and deliver value to achieve sustainable success.
“Customers, employees, society, governments, and investors are all demanding greater organisational transparency beyond the traditional financial metrics. But organisations can’t manage what they don’t measure, and can’t build trust with their stakeholders unless they provide consistent, comparable information on a variety of metrics, including sustainability metrics. Therefore, the need for a universally accepted set of reliable, comprehensive and robust sustainability standards, which can accommodate interoperability, has never been greater. As the Chair of the Value Reporting Foundation Board Strategy Committee, I’m very pleased to see our hard work come to fruition.
“Similarly, it is critical to enhance the reliability and transparency of that information with meaningful reporting and ultimately related assurance by professional accountants. They have an important role to play improving their organisation’s integrated thinking and decision-making capabilities. Professional accountants have the necessary skills and expertise to help effect meaningful change in this area and can work with stakeholders to integrate responsible and sustainable practices into their business and operating models.”
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