New sustainability standards board

The new International Sustainability Standards Board (ISSB) will aim to develop sustainability disclosure standards that are focused on enterprise value.

The IFRS Foundation is aiming to put sustainability reporting on the same footing as financial reporting by establishing a sister body to the International Accounting Standards Board (the IASB® Board). The goal is to drive globally consistent, comparable and reliable sustainability reporting using a building blocks approach. This approach will allow national and regional jurisdictions to build on that global baseline to set supplemental standards that serve their specific jurisdictional needs.

Companies need to monitor their jurisdictions’ response to standards issued by the ISSB and prepare for their potentially rapid implementation, given the urgency with which the Foundation is being asked to act.

This watershed moment is as ambitious as the creation of the IFRS Standards 20 years ago. This time the Foundation has the advantage of being able to build on the insights of the CDSB, IIRC, IOSCO, SASB, TCFD and WEF. The creation of globally consistent and transparent sustainability disclosure standards focused on long-term value creation will strengthen our capital markets by helping investors make better decisions. The hope now is that jurisdictions globally get behind the new ISSB.

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Reinhard Dotzlaw | Partner, Global IFRS leader

Which organisations are contributing directly to the ISSB and IFRS Sustainability Disclosure Standards?

The ISSB will benefit from the consolidation of global bodies (CDSB, IIRC and SASB) – as well as the support of IOSCO, TCFD and WEF¹. Together they share the aim of enterprise value-focused sustainability disclosures.

Under the governance of the Foundation, the ISSB will work closely with the IASB Board, reflecting the importance of connectivity with financial reporting.

Many companies (and jurisdictions) are already using the work of these bodies. For example, companies that have already adopted the TCFD recommendations on climate-related financial disclosures will be well positioned to use its disclosures as a bridge to the adoption of the new standards.

What will be the ISSB’s first priorities and deliverables?

In preparation for the new board, the Foundation formed a Technical Readiness Working Group (TRWG) to create prototypes to give the new board a running start in developing its first two exposure drafts. These prototypes covered:

climate-related disclosures, building on the TCFD recommendations and SASB industry-based standards; and
general requirements for disclosure.

The ISSB has now released its first two exposure drafts for public comment, which build on these prototypes.

It plans to consult separately on its work programme for future standard setting activity.

When will companies first apply IFRS Sustainability Disclosure Standards?

It will be for individual jurisdictions to decide whether they adopt these new standards.

We can expect a rapid route to adoption in some jurisdictions – e.g. the UK has already said that it expects IFRS Sustainability Disclosure Standards to be a core part of its sustainability reporting requirements.

However, a path to adoption is less clear in other jurisdictions – e.g. in the EU and the US. The Foundation’s aim here is to provide the global baseline of investor-focused sustainability disclosure standards on which jurisdictions can build.

What can companies do now?

Although the new board will follow similar governance and due process to the existing IASB Board, the running start provided by the TRWG means that the development of these standards is likely to be accelerated, with shorter comment periods and redeliberation stages.

It will therefore be important for companies to plan now for the potentially rapid implementation of proposed sustainability disclosure standards. The prototypes provide an early indication of the information that companies may need to disclose.

_{1 Climate Disclosure Standards Board (CDSB), International Integrated Reporting Council (IIRC), International Organization of Securities Commissions (IOSCO), Sustainability Accounting Standards Board (SASB), Task Force on Climate-related Financial Disclosures (TCFD), World Economic Forum (WEF).}