The IFRS Foundation Trustees called for submissions on its Consultation Paper (the Paper) which assesses demand for global sustainability standards and, if demand is strong, to what extent the Foundation might contribute to the development of these standards.
Key points from the joint submission include:
- There is an urgent need for a single set of globally accepted sustainability reporting standards that are integrated, consistent and of a comparable quality to financial reporting standards. A single set of high-quality sustainability reporting standards will bring significant benefits to the global economy, society at large and serve the public interest.
- We support the IFRS Foundation playing a central role in the development of these standards. The IFRS Foundation’s involvement could help achieve globally accepted sustainability reporting standards that facilitate consistency, comparability and value in the information ultimately communicated to stakeholders.
- However, it is critical that the development of a Sustainability Standards Board (SSB) does not add to the existing complex and fragmented reporting landscape. The IFRS Foundation should instead seek to build on existing momentum and consolidate existing initiatives to reduce confusion and avoid duplication of effort.
- There is increasing recognition that the value of organisations is communicated through both financial and non-financial information. We consider it important that the IFRS Foundation uses its unique position to connect financial and non-financial information, with an overarching conceptual framework for corporate reporting.
- The IFRS Foundation will need to ensure it has the necessary expertise and skillset required for the broader role. The IFRS Foundation’s final proposal should result in the establishment of an SSB with an appropriate structure and culture to build effective synergies with existing financial reporting standards.
- Successful and timely development of sustainability standards will depend on the ability to leverage the existing body of work and the long-standing relationships between the existing standard setters and framework developers– both at international and domestic levels. Achieving globally accepted standards and harmonisation in a timely manner is a matter of public interest.
- We support the climate first approach but consider that this should form the first step of a broader roadmap (which could include the development of an overarching conceptual framework for corporate reporting) that covers the full range of environmental, social, and governance (ESG) criteria that are material to enterprise value creation. By leveraging the existing resources and expertise, particularly the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations, the IFRS Foundation will be able to accelerate standard development to meet demand whilst at the same time limiting complexity and duplication.
- It is important to establish a stable funding model to sustain high-quality, global standards development. The funding model should not be dependent upon any one stakeholder group, but rather sourced from a broad range of stakeholders to ensure it does not result in any real or perceived threat to the SSB’s independence.
- It is fundamental that, to the extent feasible, independent assurance can be provided over reported sustainability information. It will therefore be important that sustainability reporting standards contain suitable auditable criteria to allow for reasonably consistent evaluation of the underlying subject matter wherever possible.