IFRS Foundation and GRI to align the activities of their standard-setting boards

‘For those interested in considering impact when assessing enterprise value, using the ISSB and GSSB together will offer a complete and compatible suite of sustainability disclosures,’ says Emmanuel Faber.

The IFRS Foundation and Global Reporting Initiative (GRI) have teamed up to coordinate the activities of their standard-setting boards to reduce the reporting burden for companies and to harmonise the sustainability reporting landscape.

Announced today, the Memorandum of Understanding will see the pair align – where possible – their work programmes, terminology, and guidance.

They will also join each other’s consultative bodies related to sustainability reporting activities.

Through the collaboration, the duo aim to provide two ‘pillars’ of international sustainability reporting.

“A first pillar representing investor-focused capital market standards of IFRS Sustainability Disclosure Standards developed by the ISSB, and a second pillar of GRI sustainability reporting requirements set by the GSSB compatible with the first, designed to meet multi-stakeholder needs,” their statement noted.

GRI’s Global Sustainability Standards Board (GSSB) was initially announced in 2015, whilst the IFRS launched the International Sustainability Standards Board (ISSB) last November.

At the ISSB’s creation, it was also revealed that existing sustainability corporate reporting bodies the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) will be absorbed into the IFRS by June 2022.

The ISSB is set to take an enterprise value – which focuses on how sustainability impacts a company’s valuation – approach.

A GRI spokesperson told RI it is wholly supportive of the goal of double materiality reporting, which also captures a company’s impact on the environment and society.

“This MoU between GRI and IFRS commits both organizations to the vision of a two-pillar system for corporate reporting on sustainability-related information. The first pillar is about financial materiality, which encompasses the new disclosure standards under the ISSB. The second pillar is about impact materiality, as addressed by the GRI Standards,” they explained.

The spokesperson added: “Taken together, both of these perspectives are needed to deliver double materiality reporting. It’s highly significant that the IFRS Foundation, through this MoU, [is] now in agreement that both approaches are equally important.”

Emmanuel Faber, chair of the ISSB and former CEO of Danone, said: “For those interested in considering impact when assessing enterprise value, using the ISSB and GSSB together will offer a complete and compatible suite of sustainability disclosures. This agreement will see the two standard-setting boards cooperate in pursuit of that objective.”

Currently the market is divided on whether enterprise value or double materiality is the right approach to take.

Just this month, New Zealand’s reporting body said it wants “to define materiality using the lens of enterprise value” in its plans for climate disclosure, whilst the Taskforce on Nature-related Financial Disclosures (TNFD), has said it will focus on double materiality.

The European Commission is also expected to have its upcoming Corporate Sustainability Reporting Directive (CSRD) underpinned by double materiality – previously, Europe’s securities watchdog, ESMA, urged that directive should not “unnecessarily depart” from the ISSB.

Looking ahead, the ISSB intends to publish its proposed Climate and General Sustainability-related Disclosure requirements next week.