The publication of the International Sustainability Standards Boards’ (ISSB) inaugural climate-related disclosure standards has been hailed by accounting market participants as a crucial and historic event for the business reporting landscape.
“Today’s announcement from the ISSB marks a watershed moment, and is a vital step towards a consistent and comparable global baseline for sustainability reporting,” said George Richards, partner and head of ESG reporting and assurance at KPMG UK.
“The transparency this creates will ensure companies are better held to account, and can build trust with their customers, investors and regulators over what they are doing to address sustainability risks and opportunities.”
Issuing the two long-awaited sets of standards, IFRS S1 and IFRS S2, on Monday, the ISSB said that the framework is intended to create a “common language” for disclosing the impact of climate-related risks and opportunities on a company’s future outlook.
It added that the standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions.
Commenting on the standards’ potential breadth of influence, Helen Brand, chief executive at ACCA, said the framework will “help investors, financial markets and society more widely”.
“The focus [the standards] provide will help drive the positive changes we need in the way businesses operate in the face of the threat from climate change,” she added.
‘This is just the beginning’
In spite of his enthusiasm, KPMG UK’s Richards went on to note that the emergence of the standards is “just the beginning”, arguing that a mindset change must occur among all stakeholders in order to genuinely influence the climate crisis.
“The hard work doesn’t end with external reporting. This is just the beginning – the measure of success must include a shift in the mindset of boardrooms across all companies – one which also drives positive change to decision making and a move from the ‘what’ to the ‘how’ on setting and achieving sustainability goals and ambitions.”
Similarly, Brand argued that the accountancy profession “has a hugely important role to play” in driving sustainability efforts worldwide. “Global standards are a key part of that picture and we look forward to playing our role in driving their success,” she said.
ISSB chair Emmanuel Faber made a similar acknowledgment upon the announcement of the standards on Monday. While arguing that the standards “have been designed to help companies tell their sustainability story in a robust, comparable and verifiable manner”, he added that the publication “is just the starting point as we consult on our future priorities, beyond climate”.
About the standards
The publication of the ISSB standards marks the end of a lengthy wait for governments, regulators and businesses. The Board was first announced in November 2021 to coincide with the COP 26 climate change summit, with the draft versions of the inaugural standards being published nearly six months later in March 2022.
The Board has divided the standards into two distinct sets of requirements – IFRS S1 and IFRS S2. The former, entitled the ‘General Requirements for Disclosure of Sustainability-related Financial Information’, outlines the rules that businesses must follow when they port on the sustainability-related risks and opportunities they face.
The latter, entitled ‘Climate-related disclosures’, specifically addresses climate-related risks and opportunities and is designed to be used alongside IFRS S1.
Both sets of standards fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The ISSB has said that it will now work with jurisdictions and companies to support adoption, with the first step being to create a ‘transition implementation group’ to support effective implementation.