Driven by global environmental issues and the pandemic, sustainability matters are now increasingly top of mind for people around the world. Organisations are now being called upon to look beyond profit maximisation and demonstrate their accountability to people and the planet as well as generating revenues.
As a consequence, sustainability reporting as part of corporate reporting has fast become the lens through which an organisation is being judged by investors, regulators, employees and a multitude of stakeholders. But we know that this cannot be accurate, clear and complete without strong, unified reporting standards, which will allow for consistent and transparent reporting.
That’s why last week’s announcement from the International Financial Reporting Standards (IFRS) Foundation was so crucial to not only sustainability reporting, but for all businesses and governments – and the accounting and finance profession. We have a key role to play in supporting organisations to find more sustainable ways to do business, focus on creating long-term value and strengthen accountability to benefit all stakeholders.
The Association of International Certified Professional Accountants (the Association), which represents The American Institute of CPAs (AICPA) and The Chartered Institute of Management Accountants (CIMA), is welcoming the creation of the International Sustainability Standards Board (ISSB) as a means for developing consistent, reliable, and comprehensive global sustainability standards to create purposeful, resilient organisations and a more sustainable future.
It is a historical milestone and clearly signals a new era in corporate reporting, one where the same level of rigour will be demanded for sustainability reporting, and ultimately other forms of business reporting, as for financial information.
A highly anticipated announcement
At COP26, the global climate-change conference in Glasgow, Scotland, the IFRS Foundation announced three major new developments around sustainability reporting:
- The formation of the ISSB, which is designed to develop a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.
- A commitment by organisations that focus on sustainability disclosures to consolidate into the new board. The IFRS Foundation by June 2022 will complete consolidation of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF), which was formed earlier this year in a merger of the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB).
- The publication of prototype climate and general disclosure requirements developed by the Technical Readiness Working Group formed by the IFRS Foundation Trustees to undertake preparatory work for the ISSB. The prototype requirements are the result of six months of joint work by the CDSB, International Accounting Standards Board (IASB), the Financial Stability Board’s Task Force on Climate-related Financial Disclosures, the VRF, and the World Economic Forum, supported by the International Organization of Securities Commissions (IOSCO) and its technical expert group of securities regulators. Key aspects of these organisations’ content has been consolidated into an enhanced, unified set of recommendations for the ISSB to consider.
The move is an effort to address one of the biggest hurdles for disclosure as stakeholders increasingly seek sustainability information amid worldwide concern around global environmental change. The proliferation of a variety of sustainability frameworks and standards has led to a lack of consistency in reporting that has frustrated companies and their stakeholders. By creating the ISSB to act as one global standard-setter working alongside the International Accounting Standards Board (IASB), the IFRS Foundation has developed a model for uniform disclosures.
Sustainability reporting matters
Organisations do not operate in a vacuum, they must take a holistic approach to understanding how they create and deliver value to achieve sustainable success. Customers, employees, society, governments, and investors are all demanding greater organisational transparency beyond the traditional financial metrics.
But organisations can’t manage what they don’t measure, and can’t build trust with their stakeholders unless they provide consistent, comparable information on a variety of metrics, including sustainability metrics. Therefore, the need for a universally accepted set of reliable, comprehensive and robust sustainability standards, which can accommodate interoperability, has never been greater.
Over the years, the Association and its founding member bodies have worked closely with international standard setters and fully supported taking a global approach to sustainability reporting. As both the CEO of the Association and Chair of the Value Reporting Foundation Board Strategy Committee, I’m very pleased to see our hard work come to fruition.
Accounting and finance professionals play a crucial role
The accounting profession has long focused on assessing and managing financial risks. However, the global risks we are seeing today, in particular sustainability-related risks, are pushing our profession to expand its remit.
Creating global sustainability standards is a great step forward. However, to truly embed sustainability into “business as usual”, we must also enhance the reliability and transparency of that information with meaningful reporting and ultimately related assurance by professional accountants.
As core members of almost every business and non-governmental organisation, they have an important role to play improving their organisation’s integrated thinking and decision-making capabilities. They will have the key responsibility to build the processes and systems to deliver relevant management information in accordance with these new global sustainability standards and present their insights to stakeholders in a meaningful way. Enabled by their skillsets and powered by their knowledge of organisational governance, strategy, risk management, and performance, professional accountants are well positioned to report and assure sustainability information in an ever-evolving reporting landscape. Professional accountants have the necessary expertise to help effect positive change in this area and can work with stakeholders to integrate responsible and sustainable practices into their business and operating models.
Sustainability resources for professional accountants
For more information on the Association’s sustainability resources, please visit our website.