

About a year ago, Hans Hoogervorst, Chair of the International Accounting Standards Board (IASB), stirred the ESG alphabet soup by suggesting a merger of some of the sustainability reporting bodies which form the Corporate Reporting Dialogue (CRD) – see members and acronyms below.
Hoogervorst said this might create “a less chaotic world” for companies which face a cacophony of ESG disclosure standards and frameworks. His comments seemed then an apt response to counter the several calls the IASB has been enduring to do their bit for sustainability reporting.
This provides some context to analyse last week’s pledge by five main sustainability reporting bodies to work closer together “towards comprehensive corporate reporting”.
There is nothing groundbreaking in the joint statement by SASB, GRI, CDSB, IIRC and CDP. That they need to work together is inevitable, as much as the IASB cannot bury its head in the sand by ignoring the appetite in the market for blending ESG disclosure with conventional financial reporting. It is a matter of survival for all of them.
The five bodies stated: “We are trying to arrive at the same level of maturity that the financial reporting ecosystem has achieved via IFRS and US GAAP, by achieving global legitimacy [emphasis added] for sustainability disclosure frameworks and standards.”
Standard-setting might seem an arcane activity, but it has an undeniable political dimension. The five bodies say they want to achieve “legitimacy”, which in political science is defined as the right and acceptance of an authority.
Reading between the lines, one might gather that SASB, GRI, CDSB, IIRC and CDP want a proper seat at the table of global standard-setting – alongside, or within, the IASB and FASB [the US counterpart Financial Standards Setting Board].
The idea of a second board within the IASB that would issue ‘International Non-financial Reporting Standards’ – perhaps labeled as ‘IN-FRS’ – is not new either. It has possibly been the end goal from the very beginning.
“SASB, GRI, CDSB, IIRC and CDP have more chance of influencing EFRAG if they set aside their differences and are seen as an harmonious bloc that can showcase a shovel-ready version of their standards.”
Also a year ago Eumedion, the Dutch governance forum, formally proposed the idea of an independent and authoritative International Non-financial reporting Standards Board or ‘INSB’.
Last week the International Federation of Accountants (IFAC), a New York-based association of almost all professional accountancy bodies in the world, endorsed such an approach – which it called The Way Forward.
Rients Abma, Eumedion’s Executive Director, told RI that even if nothing new, these are important developments. Abma agreed with SASB, GRI, CDSB, IIRC and CDP, that all of the current sustainability standards would ideally be housed under one roof.
Abma said: “Eumedion has a clear preference for housing the sole non-financial reporting standard setter under the roof of the IFRS Foundation. We are encouraged to see that also IFAC supports this idea.”
There is also a megatrend dominating the standard-setting agenda. Donato Calace, Innovation Vice-President at ESG-risk management software firm Datamaran, told RI: “Although all non-binding standards are in the process of updating their requirements or finally joining forces, this process is in a way overshadowed by public institutions, like the EU, finally stepping in.”
On the back of the European Green Deal, the political bosses of the EU have greenlighted, or at least shown appetite for, the creation of ESG standards. This is happening as part of the revision of the Non-Financial Reporting Directive (NFRD) as a group of experts appointed by the European Financial Reporting Advisory (EFRAG) has already started standard-setting prep work.
As Abma told RI, this work towards convergence of existing sustainability frameworks and standards “can provide important input for EFRAG’s Project Task Force”.
Arguably, SASB, GRI, CDSB, IIRC and CDP have more chance of influencing EFRAG if they set aside their differences and are seen as an harmonious bloc that can showcase a shovel-ready version of their standards.
It is also interesting to note the internationalisation efforts of SASB over the past few years, to overcome its characterisation as a US-centric body, bogged down by the hurdles of the Trump Administration.
In contrast to what is happening in Europe, Calace said: “How quickly can the US catch up with these policy trends? The US at some point will necessarily need to take action too, or risk that capital flows migrate towards jurisdictions better equipped to deal with sustainable finance.”
He added: “Corporate America has to adapt to the higher standards that are demanded by foreign regulators to operate in their markets.”
As for IASB, Hoogervorst said last year in response to Eumedion that he would bring to the “special attention” of the IFRS Foundation’s Trustees a proposal to create a second board for non-financial reporting standards.
A spokesperson for the IFRS Foundation, the governing body of the IASB, told RI that the Trustees are discussing the proposal, as reported here.
“The Trustees noted that some influential stakeholders had expressed a view that the IFRS Foundation could or should play a role. [They] agreed that further steps should be taken to consult and intend to publish a public consultation paper at a later date.”
It is worth remembering that the IFRS Foundation, as a London-based private company in a post-Brexit world, owes the EU bloc for adopting its accounting rules in 2002 driving further internationalisation of the accounting standards. As the EU now works on its non-financial reporting standards, there surely is a lot at stake for the IFRS Foundation too.
Corporate Reporting Dialogue Members and Observers
- CDP: formerly the Carbon Disclosure Project
- CDSB: Climate Disclosure Standards Board
- FASB: Financial Accounting Standards Board (“observer” participant)
- GRI: Global Reporting Initiative
- IASB: International Accounting Standards Board
- IIRC: International Integrated Reporting Council
- ISO: International Organization for Standardization
- SASB: Sustainability Accounting Standards Board