A single, consolidated sustainability standard
It is what we’ve all been waiting for. A single, consolidated sustainability standard that allows us to move away from the alphabetical soup that we’ve been working with over the past few years. The team we can thank for this proposed move are those on the International Sustainability Standards Board (ISSB) – we think we can forgive them for yet another acronym!
Some background information
The ISSB was initially formed at COP26 with the aim of developing a set of standards that has both investor and stakeholder interests in mind. The plan is to work towards companies presenting sustainability information in a way that is comprehensive and considered, yet reliable and allows for easy comparison. In shorter terms, to create a global baseline.
Does that mean we will have to spend time and energy learning another framework? Are these standards going to be different to the ones we are currently working with? The ISSB are looking to work in partnership with other frameworks. They are looking to create the base, in which other jurisdictions can then build on. They have so far built on the work of existing initiatives – including the Task Force for Climate-related Financial Disclosures (TCFD), the Climate-related Financial Disclosures Standards, SASB Standards, Integrated Reporting Framework and the GRI standards.
ISSB Drafts
In March 2022, the ISSB launched two drafts:
- IFRS S1: General Requirements Exposure Draft
- IFRS S2: Climate Exposure Draft
In summary, the General Requirements Exposure Draft looks to require companies to disclose all information regarding their significant sustainability-related risks and opportunities. They have taken the four categories from the TCFD in order to create this draft.
The Climate Exposure Draft requires that companies consider their specific, significant climate-related risks and opportunities. They are aiming for a shift in companies understanding that the climate is material to their business.
Both of these drafts are looking for information that could be relevant to the assessment of enterprise value – looking at the impact and dependency on people, the planet and the economy. This must be considered in relation to governance, strategy and risk management.
The ISSB are looking to publish the final standards by the end of 2022 but are currently requesting feedback on each of the current drafts with a deadline of 29 July 2022.
FRC’s Response
On Wednesday 11 May, the FRC held a webinar, which welcomed Sue Lloyd from ISSB to discuss the basic principles of the drafts, which was then followed by some further information on what the FRC are planning to do from this. They communicated that at this stage they are reviewing the drafts to understand whether they are clear, what is being captured, and what else would need to be considered to support the adoption of these standards.
Preparing your business for IFRS
While these particular standards are only at the draft stages, they have built on concepts and approaches developed by other existing frameworks. This means that if you have already engaged, or are planning to engage, with these existing frameworks and apply them to your reporting, then you are already far along the journey that you need to take to meet the requirements of the new standards. The new standards are simply a new way to define how to report on sustainability, but the spirit and perspective on sustainability reporting is shared with the existing frameworks.
If you would like some support and guidance to develop your sustainability reporting to give you a head-start in meeting the new standards, get in touch with us, we would be happy to help.
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