Driven by global environmental issues and the pandemic, sustainability matters are increasingly top of mind for people around the world. Organizations are being called upon to look beyond profit maximization 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 investors, regulators, employees and stakeholders judge an organization. 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 the recent International Financial Reporting Standards (IFRS) Foundation announcement is so critical 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 helping organizations 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®), welcomes the creation of the International Sustainability Standards Board (ISSB). It will be a means for developing the consistent, reliable and comprehensive global sustainability standards we need to create purposeful, resilient organizations and a more sustainable future.
This historical milestone signals a new era in corporate reporting, one where the same level of rigor 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 organizations that focus on sustainability disclosures to consolidate into the new board. By June 2022, the IFRS Foundation will complete the 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 was developed by the Technical Readiness Working Group, which was 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, with support from the International Organization of Securities Commissions (IOSCO) and its technical expert group of securities regulators. Key aspects of these organizations’ content have been consolidated into an enhanced, unified set of recommendations for the ISSB.
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, which 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
Organizations don’t operate in isolation. To achieve sustainable success, they must take a holistic approach to how they create and deliver value. Customers, employees, society, governments and investors are all demanding greater organizational transparency beyond the traditional financial metrics.
But organizations can’t manage what they don’t measure, and they can’t build trust with their stakeholders unless they provide consistent, comparable information on a variety of metrics — including sustainability metrics. 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 fully supported taking a global approach to sustainability reporting and have worked closely with international standard setters. 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. But to truly embed sustainability into “business as usual,” we must also enhance the reliability and transparency of that information. We will accomplish this through meaningful reporting and, ultimately, related assurance by accounting and finance professionals.
As core members of almost every business and non-governmental organization, accounting and finance professionals have an important role to play in improving their organization’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. They will also be expected to present their insights to stakeholders in a meaningful way.
Enabled by their skill sets and powered by their knowledge of organizational governance, strategy, risk management and performance, accounting and finance professionals are well-positioned to report and assure sustainability information in an ever-evolving reporting landscape. They 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 accounting and finance professionals
For more information on the Association’s sustainability resources, please visit: