IFRS: in a strong position on sustainability standards
28 January 2021: There is a pressing need for the development of a global set of high-quality, authoritative sustainability reporting standards, says ICAEW, and it believes the IFRS Foundation is in a strong position to help achieve this goal.
ICAEW welcomes the opportunity to comment on the IFRS Foundation’s Consultation Paper on Sustainability Reporting. It urges the Foundation not to delay in taking the next steps to set up a Sustainability Standards Board (SSB) and to task it with developing sustainability reporting standards.
In its response to the IFRS Foundation’s consultation paper, ICAEW points out that the Foundation’s well-established and robust governance structure is fundamental to the development of high-quality and proportionate sustainability reporting standards. ICAEW also highlights, as key strengths, the Foundation’s experience in developing rigorous and transparent due process, its existing relationships with a broad range of external stakeholders and the natural linkage with financial reporting.
ICAEW notes there is considerable support and momentum behind the development of a truly international corporate reporting system, and it is now time to act.
In addition, ICAEW’s representation to the Foundation points out that it should build on and work with existing non-financial reporting frameworks, standard-setters and regional initiatives. It must also galvanise these various organisations and build on the current momentum.
In particular, the Institute points to the European Commission’s mandate to EFRAG to undertake preparatory work for the elaboration of possible EU non-financial reporting standards and notes that EFRAG’s work could contribute to the Foundation’s proposal to develop sustainability reporting standards.
ICAEW recommends that the SSB should set out a five-year plan, explaining what standards it expects to produce on a broad range of sustainability matters. This plan should outline the matters to be covered, in what order, and the proposed timetable.
Finally, ICAEW recommends that consideration is given to the name of the proposed board and standards.
ICAEW Financial Reporting Faculty’s Sarah Dunn, explains: “We are rather concerned that reference to ‘sustainability’ might indicate that only the standards produced by the new SSB address sustainability matters and that sustainability is not relevant to financial reporting standards.
“Using the term ‘non-financial information’ would be a more accurate description and would avoid confusion over how sustainability matters are addressed more broadly in corporate reports. It could potentially provide more flexibility in the scope of topics addressed by the standards too.”
Further details on the IFRS Foundation’s next steps are expected once the trustees have reviewed the feedback received on the consultation. ICAEW’s Financial Reporting Faculty is monitoring developments closely and will provide further guidance in due course.
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