SUSTAINABILITY REPORTING
International Standards - March 2023 - ISSB’s Six Updates
Article Highlights
By the end of the second quarter of 2023, ISSB plans to issue its first two standards - S1 (General Requirements) and S2 (Climate).
SASB is a practical tool to implement S1 and S2.
ISSB focuses on being a global baseline.
Jurisdictions are given multiple tools to assist them in implementing ISSB Standards.
To assist companies, ISSB will develop (1) application guidance, (2) illustrative guidance, and (3) examples.
ISSB made the decision to incorporate the concept of connectivity between sustainability and financial value creation. S1 has the Integrated Reporting Framework embedded in it.
(1) First Standards - S1 and S2
The ISSB plans to issue its first standards by the second quarter of 2023. The first standards will be S1 (General Requirements) and S2 (Climate)
(2) SASB Practical Tool for S1 and S2
In the absence of a specific ISSB Standard, S1 will require the use of SASB standards to identify and disclose sustainability topics and metrics.
S2 will consider disclosures from SASB Standards as illustrative guidance.
The SASB Standards will be supported on a standalone basis by the ISSB for at least four years.
ISSB members, chaired by Jeff Hales (Former Chair of the SASB Standards Board), have been tasked to develop recommendations for the ISSB with respect to the enhancement of the SASB Standards.
(3) ISSB as the Global Baseline
The IFRS created the ISSB to be a baseline for global sustainability disclosure for investors.
Mark Carney, UN Special Envoy for Climate Action and Finance and Co-Chair for the Glasgow Finance Alliance for Net Zero, stated the following:
“I think that the ISSB baseline is going to be decisive in terms of how cross-border capital is allocated because it’s comparable, reliable and consistent across jurisdictions…It would be exceptionally costly to a jurisdiction itself to not apply the core elements of S1 and S2.”
The ISSB continues to focus on creating the global baseline for sustainability disclosures. The ISSB plans to make S1 and S2 the first disclosures.
(4) Jurisdictional Implementation of ISSB Standards
Jurisdictions need to implement the ISSB Standards in order for the ISSB to achieve its goal of being the global baseline for sustainability disclosures for investors.
The ISSB has built in proportionality, relief and guidance to assist jurisdictions in their implementation. ISSB guidance includes the use of “reasonable and supportable information available without undue cost or effort”, and each individual company’s “skills, capabilities and resources” in order to determine the information to disclose.
(5) Building Capacity
To assist companies with the implementation of the ISSB Standards, the ISSB will develop (1) application guidance, (2) illustrative guidance, and (3) examples.
The ISSB also plans to introduce transition reliefs to reduce the burden on a company to implement the ISSB Standards. The reliefs include phase-in time periods and proportionate requirements such as reporting requirements based on the resources of a company.
(6) Incorporate Integrated Reporting
The ISSB plans to build on the Integrated Reporting Framework and the International Accounting Standards Board (IASB) Management Commentary.
S1 has the Integrated Reporting Framework embedded in it.
ISSB made the decision to incorporate the concept of connectivity between sustainability and financial value creation. The company’s financial value to investors is linked to (1) its stakeholders it serves, (2) the society in which it works and (3) the natural resources it draws on.
Key Takeaways
Tasks to help you prepare
To prepare for ISSB’s first standards (S1 and S2), familiarize yourself with the SASB Standards, the Integrated Reporting Framework, and the IASB Management Commentary
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