International Sustainability Standards Board Commences its Streamlining of the Sustainability Disclosure Landscape
Much is heard of the plethora of – often disparate – disclosure regimes and standards around sustainability, and the attendant difficulties for stakeholders, including investors, customers, and the public more generally, of assessing and comparing performance in a meaningful way. Significant developments in the consolidation of the sustainability disclosure landscape are, however, imminent.
The Climate Disclosure Standards Board (CDSB) – an international consortium of businesses and NGOs that offers companies a framework for reporting environmental information – has announced that it will close down its operations and consolidate with the International Sustainability Standards Board (ISSB) at the end of January 2022. In addition, the ISSB will complete the consolidation of the Value Reporting Foundation (VRF) – an international NGO that houses the Integrated Reporting Framework and the Sustainability Accounting Standards Board (SASB) Standards – by the end of June 2022. These developments mark significant steps towards the ISSB’s ambition to become the world’s leading sustainability standards board.
What is the ISSB?
The ISSB, first announced at COP 26, will become the new standard-setting body of the International Financial Reporting Standards Foundation (IFRS Foundation), sitting alongside the International Accounting Standards Board (IASB). The IFRS Foundation is establishing the ISSB in order to develop a comprehensive global baseline of high-quality Sustainability Disclosure Standards to meet demands from investors for transparent, reliable and comparable reporting by companies on climate and other sustainability-related matters. Under the IFRS Foundation’s revised Constitution, the ISSB will be responsible for all sustainability-related technical matters of the IFRS Foundation, including, for example:
- Developing and pursuing the IFRS Foundation’s technical agenda, subject to certain consultation requirements with the Trustees and the public; and
- Preparing and issuing Sustainability Disclosure Standards and exposure drafts, following the due process stipulated in the Constitution.
The ISSB’s Sustainability Disclosure Standards, which will include climate-related disclosure requirements that build on the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations (for further information on the TCFD Recommendations, please see our earlier blog posts here and here) and the SASB Standards, will facilitate compatibility with the various jurisdiction-specific disclosure requirements, such as the EU’s planned Corporate Sustainability Reporting Directive, thereby streamlining the currently fragmented sustainability disclosure landscape.
Why is the ISSB consolidating the CDSB and the VRF?
To achieve the IFRS Foundation’s goal of streamlining the sustainability disclosure landscape, the IFRS Foundation reached commitments with the CDSB and the VRF to consolidate their technical expertise, content, and other resources with the ISSB. The intention is that the standards and frameworks of the CDSB and the VRF, along with those of the TCFD and the World Economic Forum’s Stakeholder Capitalism Metrics, will provide a basis for the technical work of the ISSB.
To provide the ISSB with a solid foundation on which to start this technical work, the IFRS Foundation have also created the Technical Readiness Working Group (TRWG), which comprises of representatives from the CDSB, VRF, TCFD, IASB and World Economic Forum, to provide recommendations to the ISSB. The TRWG has already published two prototype documents, focussing on (1) climate-related disclosures that build on the TCFD Recommendations, and (2) general sustainability disclosures. The ISSB will consider these prototypes as part of its initial work programme, and in developing its Sustainability Disclosure Standards.
What next?
Earlier this month, the IFRS Foundation appointed Emmanuel Faber – the ex-CEO of Danone – as Chair of the ISSB. Once the ISSB has appointed its Vice-Chairs, the ISSB will commence its initial work programme. As part of this work programme, the ISSB plans to firstly conduct public consultations in respect of the Sustainability Disclosure Standards, followed by public discussions regarding potential improvements to the Sustainability Disclosure Standards prior to their finalisation.
When finalised, it will be for individual jurisdictions to decide whether to adopt the ISSB’s Sustainability Disclosure Standards. Companies may, therefore, wish to keep up-to-date with the implementation of the ISSB’s work programme, to ensure that they are better prepared for the introduction of the Sustainability Disclosure Standards.
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