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ISSB Launches Plan to Standardize Sustainability Reporting

ISSB Launches Plan to Standardize Sustainability Reporting

The International Sustainability Standards Board (ISSB) has taken a progressive leap this week with the initiation of a refreshed two-year work plan. The strategy was designed to improve the overall standardization of reporting—a welcome move for many corporate leaders confused about which guidelines to follow.

Founded in 2021, the ISSB comes from the International Financial Reporting Standards Foundation, which standardizes and oversees corporate financial reporting. The ISSB aligns more directly within the sustainability reporting landscape.

These concerns have continued to increase in importance within financial reporting. Accordingly, the ISSB clarifies and prioritizes this particular accounting area.

The group aims to solidify ongoing alliances with major standards and reporting institutions, including:

  • The Climate Disclosure Project
  • The Greenhouse Gas Protocol
  • The Global Reporting Initiative.
  • The Taskforce on Nature-Related Financial Disclosures
  • The Transition Plan Taskforce

Advancing Progress Through Harmonization

In a recent statement, the ISSB has committed to promoting the standardization and harmonization of new corporate net zero transition plans. The group will further focus its efforts on enhancing and streamlining disclosure essentials.

This initiative marks an important step toward resolving market fragmentation caused by several reporting and standardization agencies. The realigned plan hopes to clarify ambiguities and simplify reporting for the participating companies.

Cooperation the Key to Success

The vast scope of ISSB’s plan will require an exceptional level of cooperation among all the above-mentioned organizations.

To help achieve this alignment, the IFRS Foundation, the custodians of ISSB, and the GHG Protocol have signed a memorandum of understanding. This agreement ensures that ISSB remains actively involved in updates and decisions about greenhouse gas reporting.

As part of the alliance, the ISSB will also appoint a representative to observe operations within the GHG Protocol Independent Standards Board. Again, the intention is to strengthen inter-organizational communication and prevent ambiguity.

David Craig, co-chair of the Taskforce on Nature-Related Financial Disclosures, reiterated the growing importance of incorporating environmental issues into the global baseline for sustainability disclosures. In the ISSB’s statement, he said that formalizing the process will allow companies to provide clearer, more comprehensive information about their risks and opportunities.

About the Standards

The ISSB is already making good on its plan with an announcement of the details of the standards. They are divided into two main areas:

  • IFRS S1 Standard: Introduces a comprehensive list of disclosure obligations. It aims to enable corporations to communicate effectively with investors about the sustainability-linked risks and opportunities they are likely to encounter in the short, medium, and long-term phases.
  • IFRS S2 Standard: Offers even more specific climate-related disclosures and is intended to work hand-in-hand with IFRS S1.

The rules unify the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

The ISSB created IFRS S1 and IFRS S2 by utilizing valuable insights from extensive market feedback. They come in response to requests from several global organizations, including :

  • G20
  • Financial Stability Board
  • International Organization of Securities Commissions (IOSCO)
  • Business, Investment, and Community Leaders

Taming the Reporting Chaos

The new standards will require corporate entities to provide sustainability-related data alongside their financial statements. The reporting was developed to complement any existing accounting requirements, making them easily adaptable for global consistency.

The demand for a unified solution comes primarily thanks to a “legislation lethargy” among corporate sustainability executives. Many executives have expressed ongoing concerns about being overwhelmed by numerous simultaneous reporting requirements.

Research by facilities management giant Mitie reveals that 46 percent of green business leaders are reporting through three or more different ESG frameworks. Professionals in regulated sectors like financial services, healthcare, and technology could even face up to eight different standards.

This dizzying reporting standard web leaves many executives spending far too much time figuring out differing reporting standards. The Mitie survey concludes that reporting has bogged down the process and actually slowed many companies’ decarbonization plans.

The ISSB’s standards hope to mitigate many of these woes felt by executives throughout the world. By coming together cooperatively, we can see even better progress across the sustainability landscape.

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