New Sustainability Norms To Standardise Disclosures

By Rajiv Tikoo June 27, 2023

The inaugural ISSB standards provide for sharing of sustainability and financial information in a common package and enable global comparability

New Sustainability Norms To Standardise Disclosures
The ISSB comes under the International Financial Reporting Standards (IFRS) Foundation. Image by Freepik

The launch of the much-awaited global sustainability standards will enable not only standardised disclosure of climate related risks and opportunities, but also comparability globally, which will help investors make informed decisions.

Launched by the International Sustainability Standards Board (ISSB), the inaugural set of standards—IFRS S1 and IFRS S2 — have been designed to enable companies share sustainability related information along with financial information in a common package.

Commenting on the launch, Emmanuel Faber, ISSB Chair, said in a communication, “The ISSB Standards have been designed to help companies tell their sustainability story in a robust, comparable and verifiable manner. We have consulted closely with the market to ensure the standards are proportionate and will result in disclosures that are relevant for investment decision-making.” 
The ISSB comes under the International Financial Reporting Standards (IFRS) Foundation, a non-profit corporation, which is also responsible for global accounting standards through its International Accounting Standards Board (IASB).

Erkki Liikanen, Chair of the IFRS Foundation Trustees, added in the communication: “The global baseline approach, supported by the G20 and others, will provide investors with globally comparable sustainability-related disclosures that have the potential to move market prices, without constraining jurisdictions from requiring additional disclosures. This will help companies and investors by tackling duplicative reporting.”

While IFRS S1 focuses on sharing of sustainability-related risks and opportunities from a short to long time span, IFRS 2 focuses on climate-related disclosures and feeds into IFRS S1. Both have taken note of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which focuses on climate change risk mitigation by companies.

The standards have been set up by the ISSB in consultation with regulators from all over the world.  The ISSB is also claims the support of the G7, the G20 and finance ministers and central bank governors.

Going forward, the ISSB focus is to promote adoption of standards. A Transition Implementation Group is being set up to build capacity of companies for this purpose. The ISSB will also continue to work with the Global Reporting Initiative (GRI) to facilitate combination reporting. The GRI standards are commonly used sustainability standards as of now.

Talking about complementarity between the two, Aditi Haldar, Director, GRI South Asia, elaborates, “Both perspectives are necessary and on an equal footing, grounded by a core set of common terminology, topical coverage and disclosures, wherever possible. Taken together, they will address how a company affects society and the world, for a multi-stakeholder audience (through GRI), as well as how sustainability matters affect those organizations, to meet the information needs of investors (with ISSB).”