It’s time for a new sustainability standards board

09/28/2020

Kevin Dancey, Chief Executive Officer of International Federation of Accountants, on how important work is underway to create a reporting system that delivers consistent, comparable and assurable information relevant to enterprise value creation and sustainable development



No one predicted what has transpired in 2020. While the COVID-19 pandemic and its impacts have been front of mind for businesses and policymakers, focus on the sustainability agenda has not been lost. In fact, throughout 2020, amid calls to “build back better,” momentum has been steadily building to a crescendo of proposals for rationalizing and organizing what and how companies communicate with their investors and other stakeholders about sustainability factors – often referred to as environmental, social, and governance (ESG) or “non-financial” topics. One of the most important voices, yet to be heard, is that of the IFRS Foundation Trustees who are expected to initiate an important public consultation shortly.

An important moment for our profession

From the International Federation of Accountants’ (IFAC) point of view, this consultation could not come too soon. The time is now – to answer the demand from investors, companies, policymakers and all the other stakeholders who will benefit from a reporting system that delivers consistent, comparable, reliable, and assurable information about the impact of sustainability issues on company performance, as well as the impact that companies have on society. Climate change may be the most pressing issue, but not the only topic to be addressed.

In our view, the IFRS Foundation, with its independence, good governance, and track record of due process, is optimally positioned to lead by establishing a new International Sustainability Standards Board (ISSB) alongside the International Accounting Standards Board (IASB). Under the IFRS umbrella, this new board can garner support from public authorities like International Organization of Securities Commissions (IOSCO) and others, which is critical to legitimacy and the ultimate adoption of sustainability reporting requirements. The ISSB must not interfere with the ongoing work of the IASB. But the ISSB would be well positioned to ensure that its standard-setting is compatible with the work of the IASB. A framework such as integrated reporting, in conjunction with the IASB’s Management Commentary project, will help link up conventional financial reporting with sustainability reporting. The overall relevance of corporate reporting, and what the accounting profession delivers, will be greatly enhanced.

Enhancing corporate reporting – the way forward

IFAC has set out a pragmatic “way forward,” with two essential “building blocks” as its centerpiece.

  1. The ISSB will develop reporting requirements for material non-financial information focused on company performance, risk profile, and economic decisions – referred to as “enterprise value creation.” This information will be of interest to investors and consistent with information currently deemed to be material to investment and capital allocation decisions under financial reporting regimes like IFRS Standards and United States generally accepted accounting principles.
  2. Also important is sustainability-related information that addresses broader, material sustainable development and company impacts on economy, environment, and people. The ISSB has a collaborative role to play here.

These building blocks should leverage the expertise and disclosure requirements of leading initiatives, including the CDP, Climate Disclosure Standards Board, Global Reporting Initiative (GRI), and Sustainability Accounting Standards Board (SASB). A recent joint paper by these organizations, plus the International Integrated Reporting Council, explains how these initiatives complement one other and contribute towards a steady state system. Our way forward aligns well with the conclusions and collaboration proposed by these five organizations.

Finally, we also propose a “safety net” (building block 3) to accommodate any supplemental jurisdiction-specific issues and requirements that support local public accountability.

Current developments

Other developments have occurred that will contribute toward a global system. As the international body that brings together the world’s securities regulators, IOSCO has decided to elevate responsibility for sustainability reporting to a board-level task force. In Europe, the European Commission has asked The European Financial Reporting Advisory Group to look into sustainability standards for reporting in the European Union. Next, the World Economic Forum, in cooperation with the International Business Council and the Big Four global accounting firm networks, published recommendations for “Stakeholder Capitalism Metrics” that largely draw on existing standards of GRI, SASB, and others. These efforts are important steps, and must ultimately contribute towards the development of an independent, private-sector system with clear public authority backing – a truly global solution. A global system also includes jurisdictions that are not currently using IFRS Standards for financial reporting. With that in mind, we would encourage a new ISSB to engage with all jurisdictions. Some will adopt and require ISSB standards; others may pursue a voluntary or best-practices approach.

Call to action

These are exciting times. As a profession, we can feel good about doing our part to help companies, economies, and societies achieve a more sustainable future. We have an opportunity to enhance our skills and bring new relevance to corporate reporting and assurance.


Now is the time for professional accounting organizations around the world to lend their expertise and advice as the IFRS Foundation Trustees evaluate taking up this challenge. IFAC offers the Trustees its full support in addressing this important public interest need.