The push to develop ESG and sustainability reporting standards that can be used globally is taking a big step forward with the announcement of two new standards by the International Sustainability Standards Board (ISSB). ISSB is now developing a “general sustainability-related standard” (S1) to describe “sustainability” as a company’s ability to sustainably maintain resources and relationships, manage dependencies and impacts within its whole business ecosystem over short-, medium-, and long-term timeframes. A second standard (S2) will address corporate disclosure about climate within the context of the company’s value creation.
Importantly, both the S1 and S2 standards will build on the current SASB Standards that are now maintained within ISSB. Some 2,700 companies in 70-plus jurisdictions are using voluntary SASB standards for their reporting, according to the ISSB. These include 72 percent of the S&P Global 1200 Index.
Explains Jeffrey Hales, Chair of ISSB’s SASB Standard Board Advisory Group: “The increase in companies around the world voluntarily using the SASB Standards in response to investor demand sends a strong signal about the information that investors need. ISSB is committed to maintaining and enhancing the SASB Standards so that they continue to be effective in supporting companies [to] deliver industry-based sustainability disclosure to investors. Through this project we hope to make it easier for companies to apply the SASB Standards regardless of where they operate, and to help companies apply IFRS S1 to produce comparable and decision-useful disclosures.”
The ISSB welcomes your feedback on the proposed S1 and S2 standards (scheduled to go into effect in January 2024), with consultation open for comments until August 9. The Exposure Draft for the IFRS Sustainability Disclosure Standard is available to review and comments can be provided online at the IFRS web site.
According to the ISSB, feedback will help the ISSB develop “targeted amendments to the SASB Standards to make sure references within them are internationally applicable.” Currently, about 20% of SASB Standards have references to specific jurisdictional laws/regulation. The SASB Standards were initially developed for the sustainability reporting of U.S. companies. G&A Institute is a member of the SASB Standards Consultant Content Program and helps its clients with consulting and advice regarding the use of SASB Standards and where these fit in the broader ESG ecosystem.
The S1 and S2 standards will also be based on the framework of the Taskforce on Climate-related Financial Disclosures (TCFD) for assessing and reporting on financial risks of climate change within portfolios. The TCFD was established in 2015 by the Financial Stability Board, created by the G20 nations to promote financial stability. The board coordinates with national financial authorities and international standards bodies to develop strong regulatory, supervisory, and other financial sector policies. In the U.S., member organizations include the Securities and Exchange Commission, the Treasury Department, and the Federal Reserve.
The G&A Institute team is closely following the development of important sustainability reporting standards being developed around the world and looks forward to keeping you updated. We are also available for consultation. Connect with us!