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Shaping sustainability standard setting

What lessons can sustainability standard-setters learn from the experience of accounting standard-setters?
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In this thought leadership report, ICAEW’s Corporate Reporting Faculty analyses the key features of accounting standard setting and considers the challenges faced by sustainability standard-setters.

The pace of change

The creation of the International Sustainability Standards Board (ISSB) within the IFRS Foundation in 2021 was one of the most significant developments in global corporate reporting in a generation. Developments elsewhere, in particular the European Commission’s adoption of the European Sustainability Reporting Standards (ESRS) and the development of climate-related disclosure rules by the US Securities and Exchange Commission, have progressed quickly. 

With so much change happening at some speed – and with so much at stake – many stakeholders we spoke to agreed that it was important to take a step back to reflect on what has been achieved, and what might be done better. 

Report aims and recommendations

The aim of this report is to consider the features of good accounting standard setting and discuss whether there are important lessons that sustainability standard-setters can learn from the experience of their accounting counterparts.

It reflects views the Corporate Reporting Faculty heard from stakeholders at a roundtable event held in London in September 2023 and a series of one-on-one interviews with standard-setters, policymakers, academics and others, conducted between September and November 2023. Where appropriate, we have offered views of our own, which broadly align with positions ICAEW has taken in previous policy responses.

Within the report, we have highlighted 10 core standard-setting areas that we think should be given particular focus, together with our detailed recommendations. These core areas are:

1. Clarity of purpose and intended audience

Some of the debate around sustainability reporting stems from the lack of consensus about what sustainability reporting is and who it is for. We believe more needs to be done to clearly articulate the differences in approaches taken by different sustainability standard-setters and who the intended audiences are.

2. Strategic plan and detailed roadmap

There is a risk that the recent fast pace of sustainability standard setting may lead to a default position of agile rather than strategic, resulting in standard setting that is almost too reactive. We strongly recommend that sustainability standard-setters publish a clear and detailed roadmap setting out the steps that need to be taken to achieve its core objectives in the long term.

3. Conceptual framework

One of the more significant features of the International Accounting Standards Board’s (IASB’s) standard setting is its Conceptual Framework – high-level, overarching principles covering key aspects of financial reporting. While perhaps not an immediate priority, a conceptual framework designed for sustainability standard setting should feature prominently in the plans of the ISSB and other relevant standard-setters.

4. Effective due process

Rigorous due process is a vital part of standard setting. Established practices may need to be flexed in the face of time pressures, but sacrificing them without very careful consideration would be counterproductive. As time pressures abate, sustainability standard-setters should consider a steadier pace of activity.

5. Independence and appropriate expertise

Other than professional competence and practical experience, it is also important that standard-setters are independent, unbiased and have no conflicts of interest. Sustainability standard-setting boards will also need the skills to support the process of adopting a brand new set of sustainability standards.

6. Stakeholder engagement and political pressures

Compared with financial reporting, there is a wider range of stakeholders with an interest in sustainability reporting and, increasingly, it is also the subject of much political debate. Effective engagement with this wider stakeholder group, to ensure adequate awareness of their views and concerns, is important for true legitimacy.

7. Avoid disclosure overload

Sustainability standards come with a significant volume of disclosure requirements but it is critical that sustainability reporting does not become just another box-ticking exercise where the focus is on compliance rather than communication. In this regard, cost-benefit considerations are a crucial element of developing reporting standards.

8. Interoperability

Interoperability is arguably the biggest challenge for sustainability standard setting. While the ISSB has been working on its standards, the EU and the US have been developing their own requirements, making the pathway to a global baseline less clear. We encourage major sustainability standard-setters to commit to minimising differences between their standards as a starting point when developing their own.

9. Prioritise implementation

Sustainability standard-setters should make the adoption and successful implementation of the new standards the highest priority, as doing so is key to ensuring the whole project’s continued success and credibility.

10. Assurance and enforcement

Without robust assurance and enforcement, there will be no certainty that information reported will be reliable or comparable. Like accounting standard-setters, sustainability standard-setters must produce standards that are of sufficient quality and clarity to allow for effective assurance and enforcement.

Share your thoughts

What do you think about the current sustainability standard-setting landscape? How do you think developments will or should progress over the short, medium and long term? Get in touch and email your thoughts to:



Shaping sustainability standard setting cover
Sustainability assurance: embracing the future
This report will feature at the Audit and Assurance Faculty's Sustainability Assurance conference on 10 June 2024 at ICAEW Chartered Accountants' Hall.

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