The International Sustainability Standards Board (ISSB) has launched a working group to explore compatibility between global and jurisdictional sustainability reporting frameworks and initiatives.
Emmanuel Faber, ISSB Chair, said: “There is strong public interest in seeking to align where possible the international and jurisdictional requirements for sustainability disclosures.
“We have a window of opportunity to do just that, given that the ISSB’s proposals are out for comment at the same time as several major jurisdictions are also seeking public input on their proposals.”
ISSB aiming to ensure high-quality global baselines
March 2022 saw the ISSB release two new ESG disclosure standards, one for climate and one on more general ESG topics for public consultation.
The goal of the working group is to develop enhanced cohesion between the ISSB’s exposure drafts that are currently open for comment and ongoing jurisdictional initiatives on sustainability disclosures.
That means not only between the ISSB’s focus on financial materiality of action and the European Financial Reporting Group’s (EFRAG) focus on double materiality, but on domestic national frameworks too.
The IRFS says its mission is to ensure a high-quality global baselines of sustainability disclosures, including a focus on detailed climate requirements.
This focus on climate risk addresses the “needs of capital markets participants around the world and can be directly used on a voluntary basis by market participants or incorporated into jurisdictional mandatory requirements (which might also serve broader public policy or multi-stakeholder needs).”
Working group places importance on diversity
Yet the question of different standard setting within different jurisdictions is relatively new and many groups are attempting to address the standards challenge at the same time. Therefore it is vital that any working group has a diverse set of members.
The ISSB working group members include the Chinese Ministry of Finance, the European Commission, the European Financial Reporting Advisory Group, the Japanese Financial Services Authority, the Sustainability Standards Board of Japan Preparation Committee, the UK Financial Conduct Authority (FCA) and the US Securities and Exchange Commission (SEC).
The ISSB has said that it plans to set up a new advisory body – the Sustainability Standards Advisory Forum. This body will to facilitate regular dialogue with, and high-level advice from, a broad set of jurisdictions.
Moving towards industry sustainability standardisation
The International Financial Reporting Standards Foundation (IFRS) set up the ISSB in 2021. The ISSB has already incorporated the Climate Disclosure Standards Board (CDSB) and is in the process of incorporating the work of the Sustainability Accounting Standards Board (SASB), as well as that of the International Integrated Reporting Council (IRRC).
And while there are significant differences between the financial materiality focused ISSB approach and the EU’s proposed double materiality focus, there are clear moves towards standardisation in approach.
In March 2022, for example, the Global Reporting Initiative (GRI) and the IFRS Foundation announced plans to co-ordinate and align their capital market and multi-stakeholder standards for sustainability disclosures.
Aligning all of these approaches is a major step towards the achievement of a global sustainability reporting standard.