Proposed standards from ISSB - International Sustainability Standards Board
2 april 2022
Under International Financial Reporting Standards (IFRS), the International Sustainability Standards Board (ISSB) has been created. This is with the aim of developing global standards for sustainability reporting on the capital market. In April 2022, ISSB a proposal for standards for sustainability reporting and general accounting criteria. So far, the standards have not been determined, but the draft is to be reviewed and the deadline for submitting comments runs until July 29. Although the standards have not been determined, the draft provides an insight into what the standards will look like and how these will be implemented by the capital market. Implementing the standards will be time-consuming, and we therefore recommend that companies already start looking at what the standards will mean. We at Ava have summarized what the proposed standards from the ISSB may mean. Contact us if you want to know more!
ISSB - International Sustainability Standards Board
During the UN's global summit COP26 in 2022, the International Sustainability Standards Board (IASB) was established with the aim of improving and developing sustainability reporting in the capital market. The interest in ESG reporting and sustainability is great and there is a great demand for more transparent and credible sustainability data. ISSB has therefore launched proposals for new standards. In a sense, the ISSB becomes the sister body to the International Financial Reporting Standards (IFRS) which deals with financial reporting. The purpose is for ISSB to introduce a standard for sustainability reporting similar to financial reporting. The Climate Disclosure Standards Board (CDSB) will be integrated into the ISSB.
The purpose of the standards is to reduce the opportunities for greenwashing, and like the annual reports, ensure that the sustainability reporting is relevant and comparable to facilitate investors' assessment of companies. At the moment, the ISSB has submitted proposals for standards that are under review until the end of July, which means that nothing is completely decided yet. But ISSB aims to introduce the standards by the end of the year, which means that they can start to apply as early as 2023. This means that companies that will be affected by the standards need to quickly integrate them into their sustainability reporting.
The proposed standards summarize the general requirements for sustainability reporting, which in turn aim to increase transparency and information about sustainability within the capital market. The draft is based on IFRS requirements for sustainability-related financial information and includes recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). The draft is consistent with the IASB's definitions and guidelines for financial reporting.
The proposals will mean that companies need to publish essential information about all significant sustainability-related risks and opportunities within the company. The proposals will also contain guidance and support for how the information should be made public. ISSB also recommends the use of guidelines and standards from the Sustainability Accounting Standards Board (SASB) and ISSB's general guidelines. The information to be made public includes the areas of governance, strategy, risk management and measures and objectives. This perspective is therefore largely based on the framework within TCFD. The proposals would require companies to also explain the connections between the sustainability-related risks and opportunities and the information in the financial reports. The sustainability-related financial information must cover the same areas as the financial reporting and also be published as part of the general financial reporting. This means that the information must be published at the same time as the financial reporting. The proposal mentions that all standards within the ISSB will have to be met in order for it to be possible to claim that companies comply with the ISSB. The information requirements are designed to enable stakeholders to assess the company's value from a sustainability perspective.
Be prepared for the standards
standards from the ISSB will expand the requirements in sustainability reporting. Like the TCFD , the standards will aim for companies to disclose material information about all significant sustainability-related risks and opportunities. As the standards have not yet been established, it is not entirely clear to what extent companies are affected. We at Ava therefore follow developments carefully. The ISSB aims to introduce the standards by the end of the year, which means that they may come into effect as early as next year. Companies that will be affected by the standards need to quickly integrate these into their sustainability reporting. It may therefore be beneficial to start working on the introduction of the standards already now.
Contact us at Ava to find out more about how we work with ISSB and the upcoming standards.