ISSB seeks to ease sustainability reporting burdens with new standards alignment pledges

Image: IFRS Foundation

The Board announced a series of new collaborative workstreams with other sustainability standards bodies today (24 June) to mark the start of London Climate Action Week. It stated that, in doing so, it wishes to “further harmonise and consolidate” the corporate sustainability disclosure landscape over the next two years, “in response to market demand”.

Recent research has found that most sustainability professionals find reporting requirements too complex, and are routinely having to divert resources to disclosures that could be better allocated to drive real-world impact.

One key focus area for the ISSB’s work will be on net-zero transition plans. These build on corporate emissions targets with more detail on delivery, including investment plans, changes in business models and upskilling/reskilling staff. Transition planning is included in the ISSB S2 Standard.

The body which set up the ISSB, the IFRS Foundation, will assume responsibility for the disclosure-specific materials developed by the UK-based Transition Plan Taskforce. These will be housed on the IFRS Sustainability Knowledge Hub. The IFRS Foundation will then develop further educational materials to support transition planning.

Last year, the Transition Plan Taskforce published its general framework for developing ‘Gold Standard’ plans. This was built upon earlier this year with sector-specific guidance for industries including electric utilities and power generation.

UN Special Envoy on Climate Action and Finance, Mark Carney, said: “The ISSB’s work on transition plan disclosures can help unlock a global investment boom that cuts emissions, boosts growth, and creates good jobs. This will only happen if companies and financial institutions consistently report credible net zero transition plans that investors, governments, and society at large can easily compare when making decisions.”

Scope 3 focus

A key part of any credible net-zero transition plan in the private sector will be measures to cut Scope 3 (indirect) emissions. These typically account for the bulk of a business’s overall emissions footprint.

The IFRS Foundation has, to that end, signed a Memorandum of Understanding with the Greenhouse Gas Protocol – a global provider of standards and tools for emissions calculations used by more than 90% of Fortune 500 companies.

The two bodies will put in place governance arrangements to actively engage each other in updates and decisions relating to their standards. This includes the appointment of a representative of the ISSB as an observer on the GHG Protocol Independent Standards Board.

Alexander Bassen, who chairs this Board, said:  “This coordination between the IFRS Foundation and GHG Protocol is a momentous step in standardising GHG reporting globally.

“The deepening of the collaboration between the two parties will be a great benefit to companies seeking to measure, manage and report on, their GHG emissions and close collaboration with the IFRS Foundation will be invaluable to GHG Protocol’s standards update process for the suite of corporate standards.”

These moves build on work already completed to align CDP’s climate disclosure questionnaire with ISSB S2.

Beyond emissions

The ISSB has already taken on the work of the Task Force on Climate-Related Financial Disclosures (TCFD), which developed a widely-used framework for businesses to harmonise financial and climate-related reporting with a focus on risks and opportunities in a climate-affected future.

Voluntary TCFD-aligned reporting has gained momentum rapidly, and aligned disclosure has been mandated for large businesses in some markets, including the UK.

The ISSB is now seeking to work more closely with the Taskforce on Nature-related Financial Disclosures (TNFD), which published its finalised recommendations last autumn. Corporate TNFD-aligned reporting is set to become more common in the coming years; more than 300 firms have pledged alignment on a voluntary basis.

As a first step, the ISSB will kick-start a research project on the state of disclosures relating to biodiversity, ecosystems and ecosystem services. It will assess what information is needed by investors now and what they will likely demand in the future.

The IFRS Foundation lastly reiterated its intention to ensure full interoperability with the Global Reporting Initiative (GRI). This was first announced in May – the two organisations are working to jointly identify and align common disclosures.

GRI produces an array of standards and frameworks which businesses use to inform their sustainability reporting. They are used by more than 10,000 organisations.

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