Sustainability standards consolidation draws closer 

IFRS Foundation seeks to launch sustainability standards board

In response to growing demand for global standards as sustainability becomes ‘business as normal’ in financial reporting, the International Financial Reporting Standards (IFRS) Foundation is taking action in the run-up to the COP26 Summit.

In September, the IFRS Foundation’s trustees intend to publish a pathway for the creation of a ‘sustainability standards board’ which could be launched as early as November at the Summit.

They will also form a trustee steering committee to oversee the next phases of work and said a key requirement for success will be the “need for urgency to deliver global standards, most notably on climate”.

The trustees will further analyse feedback on the requirements for success and other conditions that will need to be satisfied.

These actions follow their sustainability reporting consultation paper, to which responses indicated “growing and urgent” demand to improve global consistency and comparability in sustainability reporting. There was also broad agreement that the IFRS Foundation should play a key role in this.

The Institute of Chartered Accountants in England and Wales said there is a pressing need for the development of a global set of high-quality, authoritative sustainability reporting standards, and that it believes the IFRS Foundation is in a strong position to help achieve this goal.

Supporters of a sustainability standards board say it would give clear direction to issuers that sustainability is important.

The Sustainability Accounting Standards Board (SASB) Foundation’s chief executive officer Janine Guillot said the IFRS Foundation is “ideally positioned” to advance global acceptance of sustainability disclosure standards for capital markets, just as it did for financial reporting.

However, Guillot added it will have to overcome a range of “conceptual and practical” challenges. These include “facilitating international convergence while also allowing for tailored jurisdictional requirements” and accelerating progress on climate risk disclosure while also giving investors a holistic view of sustainability-related risks and opportunities, she said.

“We believe the success of a [sustainability standards board] would require having a clearly defined purpose and a board composition and standards development process well suited to that purpose,” said Guillot. “With respect to the former, SASB believes a [sustainability standards board] should be committed to addressing the information needs of providers of financial capital.”

SASB is merging with the International Integrated Reporting Council (IIRC) by mid-2021, to offer investors and companies a comprehensive corporate reporting framework in order to drive global sustainability performance. The newly formed Value Reporting Foundation will advance initiatives to work toward a comprehensive corporate reporting system and is expected to simplify sustainability disclosure.