It has been one year since the creation of the International Sustainability Standards Board (ISSB) was announced at COP26 in Glasgow.
During this time, considerable progress has been made towards its goal to develop and maintain IFRS Sustainability Disclosure Standards that meet the information needs of investors.
A fully operational board (chaired by Emmanuel Faber with Jingdong Hua and Sue Lloyd serving as Vice-Chairs) is now in place. Several existing organisations and their disclosure frameworks have been consolidated into the work of the ISSB.
Having issued two proposed standards for consultation in March 2022 – General Sustainability-related Disclosures (IFRS S1) and Climate-related Disclosures (IFRS S2) – the ISSB is currently reviewing more than 1,400 comment letters received in response.
Key advisory bodies, including a jurisdictional working group, have also been established to enable deep engagement with experts around the world and help the ISSB achieve its aim of establishing a global baseline of disclosure requirements.
Although significant progress has been made within a short timeframe, the ISSB’s journey towards establishing a global baseline of disclosure requirements is not without challenges. The sustainability reporting landscape is becoming increasingly busy, with the emergence of different frameworks supporting similar aims. The EU is storming ahead with its first batch of European Sustainability Reporting Standards. The Securities and Exchange Commission in the US has proposed its own rule for reporting entities under its authorities.
The ISSB is now challenged to consider how a higher degree of interoperability between these frameworks can be achieved. The extent to which key terms and definitions can be aligned is still being debated. The extent to which other standards and frameworks should be used by preparers to help identify sustainability-related risks and opportunities as required by the draft IFRS S1 standard is also up for debate.
Marking one year on from its creation, the ISSB has taken the opportunity provided by COP27 to make several key announcements.
A new Partnership Framework is being established to assist jurisdictions around the world in preparing for the adoption and implementation of sustainability-related disclosures. More than 20 public and private organisations from around the world have already confirmed their support.
The partnerships are supported by a framework agreement under which the ISSB will drive a coordinated effort to support preparers, investors and other capital market stakeholders as they prepare to use IFRS Sustainability Disclosure Standards. The framework will enable partners to directly leverage and unite expertise across international stakeholders and improve coordination at both a regional and international level.
The ISSB has also announced a new alliance with CDP, a not-for-profit institution that runs a global environmental disclosure platform to support companies manage their sustainability-related risks and opportunities. In an attempt to reduce fragmentation in sustainability reporting, the CDP will incorporate the IFRS S2 requirements into its environmental disclosure platform. This move will improve the consistency of climate-related information for investors and reduce the disclosure burden on entities.
These announcements highlight the continued efforts of the ISSB towards achieving a truly inclusive and global disclosure framework. Balancing the urgent need for quality sustainability disclosures with achieving greater alignment within the world of sustainability reporting is no mean feat. As such, COP27 serves as a key milestone for the ISSB as it turns its attention from development to implementation, with final standards expected in early 2023. It will be interesting to see what the journey to COP28 brings.
- View the Financial Reporting Faculty’s non-financial reporting hub, which includes resources on reporting on climate and the ISSB.
- Find out more about ICAEW’s Climate Summit – a flagship event, free and open to both ICAEW and non-ICAEW members.
- Read more about COP27.
- Read more about the ISSB and its activities.
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