New proposals on the first IFRS® Sustainability Disclosure Standards mark the next step towards equal prominence for sustainability and financial reporting. The proposals aim to create a global baseline for investor-focused sustainability reporting that local jurisdictions can adopt or build into its own local requirements.

This is a critical milestone in the journey towards a consistent global baseline of investor-relevant sustainability reporting. The standards will drive transparency and enable investors to make more informed and so better decisions, making companies accountable for sustainability reporting in the same way as they are for financial reporting.

A new era for reporting

The two Exposure Drafts published on 31 March 2022 – covering general requirements as well as climate-related disclosures – are the first to be released by the newly formed International Sustainability Standards Board (ISSBTM).

These standards are being developed at a much faster pace than IFRS Accounting Standards. The first standards are expected to be finalised in June 2023. Individual jurisdictions, including Australia, will decide whether and when to adopt.

Some companies may choose to adopt the proposals voluntarily before they are finalised, for instance those responding to investor or societal pressure. Therefore, reporting could be as soon as 2023 for those companies with a 30 June or 31 December year end.

Our Sustainability reporting resource centre provides you the latest on the ISSB's deliberations and our insights.

Driving global consistency

Under the proposals, companies would report on all relevant sustainability topics (not just on climate-related risks) across four content areas that are consistent with TCFD– i.e. governance, strategy, risk management, and metrics and targets. Companies would provide globally consistent disclosures that focus on how sustainability topics affect enterprise value.

Connecting sustainability and financial reporting

Reporting would be connected to the financial statements and released at the same time. Therefore, companies will need processes and controls in place so that they can provide sustainability information of the same quality, and at the same time, as their financial information.

Getting ready now is critical even if the final standards are not identical to the proposals. Companies that already have the processes in place to produce similar sustainability-related information are likely to find reporting under the final standards easier.

In getting ready we urge companies to take an integrated approach in their reporting and seek to understand how all relevant ISSB standards, as they are developed, have been considered, addressed and reported on, where material, from the governance, strategy and risk perspectives with metrics in the performance section where material. Without an integrated approach, companies risk multiple siloed, lengthy and potentially duplicative disclosures for each ISSB standard, rather than explaining the implications and actions taken for all standards within the relevant section (i.e . governance, risk and performance) of the report.

What does this mean for Australia?

The Australian Accounting Standards Board is actively considering the release of these standards in Australia, and has separately sought feedback on the ISSB Exposure Drafts to inform the AASB as to the appropriateness of and support for its proposed approach to sustainability-related financial reporting in Australia.

The AASB has already formally endorsed its support of the voluntary adoption of the recommendations made by the TCFD. The statement is an interim position and a means of providing direction for stakeholders prior to the AASB developing any mandatory reporting requirements for sustainability-related financial information.

In December 2022, the Australian government released a consultation paper that seeks initial views on proposals to introduce standardised, internationally aligned legislative requirements for disclosure of climate-related financial risks and opportunities from financial years 2024-25 in Australia.

Submissions closed on 17 February 2023. Some key areas consulted on included:

  • Scope of entities captured by mandatory climate-related reporting requirements
  • Timing of mandatory reporting and assurance of disclosures
  • Alignment to ISSB climate related risk standard
  • Materiality considerations

Read more in Reporting Update 23RU-01 >

Read our response to the Treasury consultation >

What do you need to do now?

Watch out for the next Australian government's consultation paper later in 2023 that will seek views on more detailed proposals for the new reporting requirements, their implementation and sequencing in Australia.

Educate your organisation on sustainability-related risks and opportunities and what they mean for the company.

Establish a board-led governance structure that brings both finance and sustainability reporting to the boardroom table when making commitments, decisions and reporting on sustainability-related issues.

Engage with current process owners and understand how information is being defined, captured and reported, and where there are control gaps.

Expand your systems, processes and controls to create efficiencies and move certain aspects of the data collection and calculation process into existing or new systems and processes.

Read our guide for a high-level summary of the issue, the impact, and these next steps - including ten key questions that can help you with your preparations.

Read our publication below which provides a more detailed analysis on the Exposure Drafts and explores some of the key impacts, and how companies might apply the proposals, using our insight and illustrative examples.

Sustainability reporting continues to develop at a fast pace across the globe. 2022 saw three sets of proposed standards from the ISSBTM, the US Securities Exchange Commission (SEC) and the European Financial Reporting Advisory Group (EFRAG). The aim of the ISSBTM proposals is to create a global baseline for investor-focused sustainability reporting that local jurisdictions (e.g. the US and the EU) can build on. Read our publication comparing proposals from the ISSB, EFRAG and SEC and to gain further insight on some of the practical challenges you may encounter as you prepare for the new sustainability reporting standards.

Our feedback on the proposals

The comment period for the ISSB Exposure Drafts closed on 29 July 2022. Read our response to the first two proposed ISSBTM IFRS Sustainability Disclosure Standards >

The comment period for the AASB Exposure Draft closed on 15 July 2022. Note that the AASB posed specific additional questions on a number of matters to inform the Australian context. Read our response to the AASB’s consultation (PDF 236KB) >

Read our response to the SEC’s climate proposals (PDF 361KB) >

Read our response to EFRAG’s sustainability reporting proposals (536KB) >

Read our response to the Treasury consultation >

For further information on the proposals, speak to your KPMG contact.

Latest on the ISSB deliberations

Follow the outcome of deliberations by the ISSB.  Our Sustainability reporting resource centre provides practical guidance to help you get ready for the new sustainability standards, capturing the latest thinking and developments together with our insight.

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