In the ever-evolving landscape of sustainability, new developments have emerged that promise to revolutionise how businesses report on their environmental, social, and governance (ESG) efforts.
The International Sustainability Standards Board (ISSB) was formed with a mission to provide a comprehensive global baseline for consistent, comparable, and high-quality ESG reporting. This development is not just another blip on the radar of sustainability initiatives. It marks a significant shift in the way businesses, investors, and regulators approach sustainability reporting.
The formation of the ISSB is a response to the growing demand for transparency and accountability in how businesses manage and report their impact on the environment and society. With the increasing importance of sustainability in business strategy and investment decisions, the need for a standardised, global approach to sustainability reporting has never been more apparent.
The ISSB’s role is to issue standards that meet investor needs by providing a comprehensive framework for the disclosure of material information about all significant sustainability-related risks and opportunities across an entity’s value chain.
The ISSB’s inaugural standards, IFRS S1 and S2, are designed to provide a global baseline of sustainability-related disclosures for the capital markets, creating a common language to express the risks and opportunities of a company’s sustainability credentials.
The significance of the ISSB’s formation extends beyond the realm of sustainability reporting. It represents a commitment by the global business community to take meaningful action towards a sustainable future.
By providing a standardised framework for sustainability reporting, the ISSB is empowering businesses to make informed decisions that align with their sustainability goals and enabling investors to assess the sustainability performance of businesses more accurately.
We recognise the transformative potential of the ISSB’s standards. As we navigate this new era of sustainability reporting, we are committed to helping businesses understand and implement these standards, and to providing insights on the implications of these developments for businesses and investors alike.
In this week’s long read, we explore the workings of the ISSB, its new sustainability standards, and what they mean for businesses in our upcoming sections.
Understanding the ISSB
The International Sustainability Standards Board (ISSB) is a significant development in the realm of sustainability reporting. Established in November 2021 at COP26 in Glasgow, the ISSB was formed in response to a strong market demand for a comprehensive, globally accepted baseline of sustainability disclosures. The ISSB’s primary objective is to develop standards that meet the information needs of investors and the financial markets, enabling companies to provide comprehensive sustainability information to global capital markets.
The formation of the ISSB is testament to the increasing importance of sustainability factors in investment decision-making. Investors and stakeholders alike are calling for high-quality, globally comparable information on sustainability-related risks and opportunities. The ISSB aims to address the fragmented landscape of voluntary sustainability-related standards and requirements, which often add cost, complexity, and risk to both companies and investors.
There are four key objectives set by the ISSB:
- To develop standards for a global baseline of sustainability disclosures.
- To meet the information needs of investors.
- To enable companies to provide comprehensive sustainability information to global capital markets.
- To enhance interoperability with other international and jurisdictional sustainability-related standards to better support adoption.
The ISSB operates under the umbrella of the IFRS Foundation, which also houses the International Accounting Standards Board (IASB). The IFRS Foundation has a long-standing reputation for establishing globally accepted accounting standards, and the ISSB is expected to bring the same level of rigour and consistency to sustainability reporting. While the ISSB and IASB serve different objectives, their work is closely connected, reflecting the growing recognition that a company’s financial performance and its sustainability performance are inextricably linked.
The ISSB’s role in global sustainability reporting standards is to provide a comprehensive framework for the disclosure of material information about all significant sustainability-related risks and opportunities across an entity’s value chain. Its inaugural standards, IFRS S1 and S2, are designed to provide a global baseline of sustainability-related disclosures for the capital markets, creating a common language to express the risks and opportunities of a company’s sustainability credentials.
The formation of the ISSB represents a significant step forward in the standardisation of sustainability reporting. By providing a globally accepted baseline for sustainability disclosures, the ISSB is helping to create a more transparent and accountable business environment.
New Standards: IFRS S1 and IFRS S2
As is seeks to establish a global baseline for sustainability disclosures, the ISSB has launched its first two proposed standards. These standards, known as IFRS S1 and IFRS S2, set out general sustainability-related disclosure requirements and specific climate-related disclosure requirements, respectively.
IFRS S1, the general standard, outlines the fundamental requirements for the disclosure of sustainability-related financial information. It provides a framework for companies to report on their sustainability performance in a manner that is consistent, comparable, and reliable. This standard is designed to meet the information needs of investors and the financial markets, enabling companies to provide comprehensive sustainability information to global capital markets.
IFRS S2, the climate standard, focuses on climate-related disclosures. It builds upon the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and incorporates industry-based disclosure requirements derived from SASB Standards. This standard is designed to provide investors and other stakeholders with detailed information about a company’s climate-related risks and opportunities, as well as its strategies for managing these risks and capitalising on these opportunities.
The implications of these standards for businesses and investors are significant. For businesses, the standards provide a clear and consistent framework for reporting on sustainability performance. This can help businesses to communicate more effectively with investors and other stakeholders about their sustainability efforts, and to benchmark their performance against their peers. For investors, the standards provide more reliable and comparable information about companies’ sustainability performance, which can inform investment decisions and risk assessments.
These standards aim to address the current issues in sustainability reporting. The landscape of sustainability reporting has been characterised by a multitude of different standards and requirements, which can create confusion and inconsistency. By providing a global baseline for sustainability disclosures, the ISSB’s standards aim to bring greater clarity and coherence to this landscape.
It represents a significant step forward in the standardisation of sustainability reporting. The standards promise to bring greater transparency and comparability to the reporting of sustainability performance, and to enhance the ability of businesses and investors to make informed decisions about sustainability.
The Impact of the ISSB’s Standards on Businesses
The impact of the ISSB’s new standards on businesses will be profound. The introduction of IFRS S1 and IFRS S2 marks a new era in sustainability-related disclosures, and businesses worldwide will need to adapt to these changes.
The potential benefits for businesses adopting the ISSB’s standards are vast.
Firstly, the standards provide a clear and consistent framework for sustainability reporting, which can help businesses communicate their sustainability performance more effectively. This, in turn, can enhance their reputation and build trust with investors, customers, and other stakeholders. Secondly, the standards can help businesses identify and manage sustainability-related risks and opportunities, thereby improving their strategic decision-making and long-term resilience.
However, the adoption of these standards also presents challenges. Businesses will need to invest time and resources to understand the new standards, adjust their reporting processes, and ensure compliance. This may be particularly challenging for smaller businesses or those in industries where sustainability reporting is less established.
Businesses play a crucial role in supporting the ISSB’s objectives.
By adopting the ISSB’s standards, businesses can contribute to the creation of a more transparent and accountable global business environment. Businesses also can influence the development of future standards by participating in the ISSB’s consultation processes and providing feedback on their experiences of implementing the standards.
So, how can businesses prepare for the implementation of these standards?
Firstly, businesses should familiarise themselves with the new standards and assess their current sustainability reporting practices against these standards. This will help businesses identify any gaps or areas for improvement.
Secondly, businesses should engage with their stakeholders, including investors, customers, and employees, to understand their expectations and needs in relation to sustainability reporting.
Finally, businesses should seek advice and support from experts in sustainability reporting, such as ClearVUE.Business, to ensure a smooth and successful transition to the new standards.
The new sustainability standards represent a significant opportunity for businesses to enhance their sustainability reporting and contribute to a more sustainable global economy.
Businesses will still need to navigate the challenges of adopting these standards and ensure they are well-prepared for this new era of sustainability reporting.
Our Perspective
We welcome the formation of the ISSB and the introduction of its new sustainability standards. We believe that these developments mark a significant step forward in the standardisation of sustainability reporting and will greatly enhance the transparency and comparability of sustainability information.
We fully support the ISSB’s objectives of providing a global baseline for sustainability disclosures and meeting the information needs of investors and the financial markets.
We believe that these objectives align closely with our own mission at ClearVUE.Business, which is to help businesses understand and communicate their sustainability performance in a clear, credible, and meaningful way.
Our services at ClearVUE.Business are designed to support businesses in navigating the complexities of sustainability reporting and achieving compliance with the ISSB’s standards.
We offer a range of services, including sustainability reporting consultancy, training, and software solutions, all of which can be tailored to meet the specific needs of each business.
We understand that the adoption of the ISSB’s standards may present challenges for many businesses, particularly those with limited experience in sustainability reporting. That’s why we’re committed to providing the guidance and support that businesses need to overcome these challenges and realise the benefits of the ISSB’s standards.
We believe that the ISSB’s standards represent a significant opportunity for businesses to enhance their sustainability performance and contribute to a more sustainable global economy. By adopting these standards, businesses can not only meet the expectations of investors and other stakeholders, but also drive positive change in their industries and communities.
ClearVUE.Business believes that the ISSB’s standards present opportunities for businesses and for the sustainability reporting industry as a whole. We look forward to supporting businesses on their journey towards ISSB compliance and helping them to realise the benefits of enhanced sustainability reporting.
Learn more about our services and how we can support your business in its sustainability journey.
Whether you’re just starting out with sustainability reporting or looking to enhance your existing practices, ClearVUE.Business is here to help.
Contact us today to find out more.
