International sustainability reporting standards

Sustainability is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainability standards can focus on the impacts a company has on people, the planet and the economy, or on the impacts that those topics have on the company’s enterprise value.

Sustainability reporting is of growing importance to investors and other stakeholders. Investors specifically use sustainability reporting to inform their decisions and are driving the pressure for more consistent and comparable reporting in this area.

Standards are needed to support the direction of capital to sustainable enterprise and to help make global capital markets resilient and efficient.

Standards enable consistent and comparable information essential to efficient capital markets.

Standards based on principles of legitimacy, independence, transparency, public accountability and oversight and through due process are essential to obtain buy-in and trust from all stakeholders.

The IFRS Foundation has created a new standard-setting board within its existing governance structure. The new board is called the International Sustainability Standards Board (ISSB). The ISSB will develop and maintain IFRS Sustainability Disclosure Standards which provide information that is material to the decisions of investors, lenders and other creditors.

The IFRS Foundation has confirmed the new board will initially focus its efforts on climate-related reporting, while also working towards meeting the information needs of investors on other environmental, social and governance (ESG) matters.

The standard on climate-related reporting is likely to focus on providing information on climate-related financial risks and opportunities identified by an entity, their impact on a company’s financial position, performance, and enterprise value creation, and details of the entity’s governance, strategy, risk management processes, and relevant metrics and targets related to those risks and opportunities.

Other priorities include developing a standard for the presentation of sustainability information and establishing conceptual guidelines for setting sustainability standards, while also working towards producing standards which cover the broader scope of ESG matters.

In early 2021, the IFRS Foundation set up a Technical Readiness Working Group (TRWG) which has undertaken preparatory work to give the new board a running start. The TRWG has built upon the work of the Task Force on Climate-related Financial Disclosures (TCFD) as well as other key leading standard-setters for sustainability reporting and has published two prototype documents. The first relates to climate-related disclosures and the second on general sustainability disclosures. The ISSB will consider the protypes as part of its initial work plan.

The announcement of the ISSB was made at the COP26 conference in November 2021. The ISSB is expected to consult publicly on proposals for the first two IFRS Sustainability Disclosure Standards in early 2022.

The ISSB sits alongside the existing International Accounting Standards Board (IASB). However, while they are separate and independent boards, the expectation is that they will work alongside each other in order to enhance interconnectedness between financial reporting and sustainability reporting.

It will be for individual jurisdictions to decide if and how they would like to adopt international sustainability reporting standards. While it is too early to say which jurisdictions will make the decision to adopt the new standards, there has been widespread international support of the IFRS Foundation’s project, including from the UK Government and lead regulators. The G7 and G20 finance ministers and central bank governors have issued statements of support for the proposals of the IFRS Foundation.

There are many existing sustainability reporting initiatives (see below). The intention is for the new ISSB to build upon the established work of these organisations and accumulated knowledge and to consolidate existing initiatives. The TRWG has been tasked to review how technical expertise and content might potentially be transitioned to the new board under the IFRS Foundation’s governance structure, with a view to facilitating consolidation and reducing fragmentation in sustainability reporting standards.

Listed below are the key existing organisations in the field of sustainability reporting. While they share many characteristics and some of their work overlaps, the stakeholders that they serve vary and as a result their approaches and products differ, through a range of frameworks, standards or metrics. Currently implementation of their standards and frameworks is largely voluntary and market-driven.

Value Reporting Foundation (VRF)

The IIRC (International Integrated Reporting Council) and SASB (Sustainability Accounting Standards Board) merged to form the Value Reporting Foundation which is an organisation that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value —how it is created, preserved and eroded. The merging of the IIRC and SASB directly responded to calls from global investors to simplify the corporate reporting landscape. At COP26 it was announced that the VRF will be consolidated into the ISSB in 2022.

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Task Force on Climate-related Financial Disclosures (TCFD)

The TCFD was convened by the Financial Stability Board to produce a common global framework for companies wishing to report how climate change will affect their business. It is already part of mandatory reporting for certain entities in the UK and likely to underpin the ISSB’s work. However, as a private- sector task force it has no mandate or ability to set international standards and has not been established on a permanent footing.

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Climate Disclosure Standards Board (CDSB)

The CDSB was formerly an international consortium of businesses and environmental groups committed to advancing and aligning the global mainstream corporate reporting model to equate natural capital with financial capital. The CDSB was consolidated into the IFRS Foundation in January 2022 to provide staff and resources to the ISSB.

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Global Reporting Initiative (GRI)

GRI exists to help organisations be transparent and take responsibility for their impacts in order to create a sustainable future. The GRI has their own set of sustainability standards.

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The UK government plans to introduce mandatory climate-related financial disclosure requirements, which are aligned with the TCFD recommendations, for certain entities as soon as April 2022. They have also stated their support for the development of international sustainability related reporting standards and have indicated an intention to subsequently align with international standards.

There is two-way support between TCFD and the IFRS Foundation on sustainability reporting. If the UK Government chooses to adopt the ISSB’s standards in the future, it is hoped that the common foundations between the TCFD framework and the ISSB’s standard on climate-related financial disclosures will help enable a smooth transition for companies.

For more information on TCFD reporting visit ICAEW's TCFD page.

On 21 April 2021, The European Commission (EC) adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) which envisages the adoption of EU sustainability reporting standards developed by the European Financial Reporting Advisory Group (EFRAG). The EC have stated that the IFRS Foundation’s plans are relevant and their proposal for EU sustainability reporting standards would take account of global initiatives. Two-way cooperation between EFRAG and the ISSB is intended. Read our thoughts on current developments in Europe in this article.

• Read the latest By All Accounts article: Connecting financial and sustainability reporting
• Read the latest By All Accounts article: A nutshell guide to sustainability reporting
• Find out about other non-financial reporting matters at ICAEW's NFR page
• For an overview of the TCFD recommendations visit ICAEW's TCFD page
• Access a range of resources on climate change by visiting ICAEW’s climate hub
• Read this ICAEW insights article: One standard will not solve the climate crisis
• Take a look at the original IFRS Foundations consultation paper on sustainability reporting
• Visit the IFRS Foundation’s sustainability-related reporting project page