The International Sustainability Standards Board (ISSB) has launched consultations on its plans for global disclosure standards.
The ISSB was set up in response to growing frustration about the fragmented nature of corporate reporting, which has seen numerous bodies set up over the past decade demanding different levels and types of information from companies on sustainability and ESG issues. The IFRS Foundation, responsible for the longstanding and widely used International Financial Reporting Standards, launched ISSB to develop a similar set of baseline sustainability disclosure standards for sustainability issues.
Today’s proposals incorporate the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) by requiring companies to consider their top-level approach to managing sustainability issues, as well as more specific metrics and targets. The ISSB noted that the existing approaches of the Corporate Disclosure Standards Board, the Sustainability Accounting Standards Board and the Integrated Reporting council were also folded into the proposals, as well as the World Economic Forum’s metrics for stakeholder capitalism.
The plans show strong alignment with the new climate disclosure proposal from the US regulator the Securities and Exchange Commission.
The climate standard addresses the increasingly controversial use of carbon offsets in decarbonisation plans, suggesting that companies should explain if they intend to use offsets and, if so, “a company would be required to disclose specific information to enable an investor to assess the offset schemes”.
Companies would also need to disclose its absolute gross Scope 1, Scope 2 and Scope 3 GHG emissions, in metric tonnes of CO2 equivalent, as well as the intensity of those emissions.
As expected, the proposed standards focus on ‘enterprise value’ – providing information that allows companies, regulators and investors to assess how sustainability issues may impact the profitability of a company. Standard setters in Europe are also looking at the impact that a company’s operations and activities may have on the achievement of environmental and social objectives – known as ‘double materiality’.
Sue Lloyd, vice-chair of the ISSB, told Responsible Investor that the ISSB’s plans were compatible with a double materiality approach: “IFRS Sustainability Disclosure Standards are intended to be compatible with jurisdiction-specific requirements, including those intended to meet broader stakeholder information needs,” she said, adding that the board’s recent agreement to work with the Global Reporting Initiative (which focuses on sustainability impacts) “clearly demonstrates that investor-focused sustainability information that meets the needs of the capital markets, and information intended to serve the needs of a broader range of stakeholders can be complementary”.
The ISSB will be working with the European Financial Reporting Advisory Group to harmonise the global proposals with the EU-focused ones. It will also seek feedback on what information investors most need to assess enterprise value-based risks and opportunities and will publish details of plans for companies to be able to electronically tag their disclosures to make them easier to use and compare.
Looking ahead, the ISSB’s consultation is open until 29 July; the aim is to issue the standards by the end of the year.