This year has been a significant one for sustainability standards. In June, the International Sustainability Standards Board put out its general reporting standards (IFRS S1) and those on climate (IFRS S2). The European Commission was close behind, adopting the first set of sector-agnostic European Sustainability Reporting Standards (ESRS) in July.

Meanwhile, the US is still waiting for the Securities and Exchange Commission to finalise its long-awaited climate disclosure rule, with the current deadline set for April next year.

In 2024, the focus will be on implementation. It is the first reporting cycle for the Corporate Sustainability Reporting Directive (CSRD) and more jurisdictions are expected to adopt reporting standards based on the ISSB.

Standard setters are also expanding their work. The ISSB is expected to announce its next priorities in the New Year, which could involve the development of standards for biodiversity or human rights, and EFRAG is working to roll out its first set of sector-specific ESRS standards.

The key topics of debate between standard setters this year, including interoperability and materiality, are expected to roll over into 2024 as companies push for further consolidation to avoid duplicated reporting and investors request more streamlined information.


Investors and standard setters agree that interoperability will and should remain at the forefront of conversations in 2024, with more co-operation expected over the coming year.

The three big standard setters – EFRAG, ISSB and GRI – have this year issued various MOUs and statements of support for each other’s standards to highlight their interoperability and collaboration.

“We have a very good relationship,” GRI CEO Eelco van der Enden tells Responsible Investor. “There is no competition, or envy, just a mutual drive towards this baseline and to support business with complying.”

However, the launch this year of the EU and ISSB sustainability standards – and their differing approaches to materiality – has prompted comparison and competition between the two standard-setting bodies.

But Emily Pierce, chief global officer and associate general counsel at Persefoni, notes that the ISSB was never established to compete with the EU, or with any other standard setter.

“What remains to be seen is how the pieces fit together,” she says. “But conceptually, it is clear they are not competing. They are quite aligned and complementary.”

Kate Fowler, associate director for policy and advocacy at Federated Hermes, says that while efforts have been made on interoperability, standard setters still need to take responsibility for producing more guidance on how institutions can leverage reporting under different standards.

Van der Enden says the GRI is looking to further grow its relationship with EFRAG and the ISSB, and anticipates “more alignment and co-operation” for the year ahead.

Asked whether the GRI and ISSB might one day merge, he says there are currently no plans for this. The focus is on “closer co-operation”, he adds, noting that he would advise global markets to continue using both ISSB and GRI standards for now.

On the EU side, van der Enden confirms that companies reporting under CSRD will be considered GRI-compliant, but says this will not work the other way around. He estimates that most companies reporting under GRI will be “90 percent ready” for CSRD reporting, but “officially and legally, there is no equivalence”.

“We will be working towards it, and we will do our best to make it happen, but there is no guarantee.”

Reporting consolidation

On reducing the reporting burden for companies, former SEC lawyer Pierce says there is no more space for consolidation among standard setters and that it is now about “collaboration”.

She believes the ISSB standards could play a useful role in “bridging the financially material disclosure obligations companies have outside the EU with the reporting requirements in the EU under a financial materiality lens”.

Asked about the relevance of the GRI – the oldest standard setter of the three – Pierce says it still has a “crucial role” to play for voluntary sustainability reporting.

Fowler at Federated Hermes is unconvinced. “The GRI is not the initiative we see discussed as prominently compared to the ISSB, which is getting the most attention.”

She adds that, while the GRI has served a role for voluntary reporting and fed into the EU’s standards, “when we look at what governments are adopting, the majority are drawing on ISSB”.

“There is value in increased reporting standardisation. As investors, we want decision-useful data which is comparable, reliable, accurate and capturing everything that is material,” Fowler says.

Flora Gaber, ESG analysis manager at AP7, agrees that investors still require further consolidation across standards.

“When we do our engagement dialogues with external managers and our portfolio companies, we want to simplify reporting as much as possible. So it would be good to have one standard,” she says.

Materiality debate

The materiality debate – based on the ISSB opting for single or financial materiality, and the EU using double materiality – has been rife this year.

For van der Enden, the discussion has become “boring” and is “on its last legs”.

That said, it was only in October that ISSB chair Emmanuel Faber publicly questioned the “simplistic” push for materiality in the crucial weeks before the final approval of the EU standards by the European Parliament and EU Council.

Van der Enden says Faber was looking to “shake up the world a bit, and get a discussion going”, but does not see his words as an attack on the ESRS.

Investors are also split on the materiality issue. For Gaber, if companies do not take the double materiality approach, investors will not understand systemic risks. “It’s like asking for half of the information,” she says.

She hopes the debate will continue into 2024 so the market can work out what is most important, but acknowledges that this may take time.

“If you were to find the common denominators across the standards for the simplest version, everyone could agree on single materiality as a minimum,” she says. “But that would not be good.”

Pierce says the so-called “debate” between single and double materiality should be regarded as a “dialogue”.

“The question is what you report where. There is space for both approaches. The ISSB is not saying material impacts are not important, but for many securities regulators this is beyond their authority.”

Growing pains?

While the ISSB and EFRAG have both released their respective global and EU sustainability reporting standards this year, the process has not been frictionless.

In November, RI revealed that 10 individuals involved in developing the ESRS had raised challenges they had experienced to EFRAG CEO Saskia Slomp.

The charges included “insufficient resources, gaps in the organisation of the standard-setting processes and lack of effective representation of civil society’s expertise in the impact dimension of sustainability at all levels throughout EFRAG’s sustainability pillar”.

The ISSB also experienced its own difficulties. Since June, few jurisdictions have committed to fully adopting both its sustainability standards, with countries such as Australia focusing solely on climate and others heavily modifying the standards.

Faber told RI this month that the ISSB plans to publish an adoption guide for national policymakers that will include different “pathways” for implementing its two standards.

He acknowledged, though, that the global baseline the standard setter is looking to achieve will be “a journey”.

For Pierce, S1 and S2 are “inextricable”. The latter does “not make sense” without the former, which sets the “general concepts and foundations” for the climate standard, she says.

A spokesperson for the IFRS Foundation confirmed to RI that its two sustainability disclosure standards are intended to be used together, with S1 acting as the “foundation upon which to apply further standards”.

“In the first wave of adoption, some jurisdictions are wrestling with S1’s incorporation of other sustainability topics, including the SASB standards, largely for technical reasons,” says Pierce. “But I think this issue reflects growing pains, and regulators will find a solution.”

Fowler agrees, adding that the differences in adoption of the ISSB standards reflects “where certain jurisdictions are on their reporting journeys”.

She says Federated Hermes is “broadly happy” with the materiality approach ISSB has taken, which “focuses on the needs of investors and ensures it’s a baseline most countries could adopt”.

“Ideally, we’re looking for jurisdictions to adopt the standards with minimal changes to the ISSB’s framework, because that creates comparability across jurisdictions.”

At the same time, she says, Federated Hermes believes there is a “gap” in ISSB’s climate standard on transition plans, which the Transition Plan Taskforce can fill.

Gaber predicts that climate action plans will be under more scrutiny in 2024, with “more demand for granularity” than existing standards require.

“Reporting standards aren’t enough if you want to help transition a company. We need more guidance on what a good transition looks like across an entire value chain.”

Pierce and Fowler both say they will be watching the ISSB closely in 2024.

Pierce predicts that the market will see “many more” jurisdictions start to use the ISSB’s roadmap in their regulation, and believes the standards will “definitely shape market norms”.

For Fowler, the ISSB has “the most momentum” behind it from a UK perspective. Federated Hermes will therefore be pushing for the UK to align with the standards “as far as possible” and adopt them “very soon”, she says.