Date posted: 6/11/2020

The chance of a lifetime! The future of global sustainability standards

Why Australian and New Zealand stakeholders need to understand and participate in this important global consultation.

In brief

  • The IFRS Foundation published a Consultation Paper to assess demand for global sustainability standards
  • As ‘taker’s of international standards, it is important for Australian and New Zealand stakeholders to engage in this consultation

On 30 September, the Trustees of the IFRS Foundation published a Consultation Paper to assess demand for global sustainability standards and whether the Foundation has a role to play in this space.

Some of you may be questioning why this matters and others sighing at the thought of 'another' sustainability reporting framework. However, regardless of your perspective, this is an important development and one that you should engage with.

As 'taker's of international standards, it is important for Australian and New Zealand stakeholders to engage in this consultation to ensure their views and perspectives inform the outcome. Australia and New Zealand played a central role in the creation of the IFRS Foundation and IASB two decades ago. In fact, the Institute of Chartered Accountants in Australia was one of the original signatories in 1973 to the agreement to establish an International Accounting Standards Committee, the predecessor to the IASB.

‘This consultation is the culmination of many months, if not years, of activity in this space and marks a critical step on the path towards the harmonisation of sustainability reporting frameworks.’

This consultation is the culmination of many months, if not years, of activity in this space and marks a critical step on the path towards the harmonisation of sustainability reporting frameworks. Notable activities include:

2014 The Corporate Reporting Dialogue, is a platform launched by the International Integrated Reporting Council (IIRC) in 2014 to strengthen cooperation, coordination and alignment between key standard setters and framework developers. Their 2019 Better Alignment Project looked at the alignment of the key non-financial reporting frameworks to the Taskforce on Climate-related Financial Disclosures (TCFD).

June 2017 The launch in June 2017 of the TCFD recommendations themselves deserves a mention as these specifically recommended the inclusion of climate-related financial disclosures within the financial filings.

December 2019 Momentum increased significantly in December 2019 with Accountancy Europe's Cognito paper on 'Interconnected Standard Setting for Corporate Reporting'. A follow-up paper was released in June 2020 highlighting the key takeaway from the submissions they had received. Key points included:

  • A system solution to deliver global NFI reporting standards connected to financial information.
  • Quickest progress could be made by building on the best of NFI frameworks and standards.
  • A statement from CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB), which confirms their commitment to working together towards a globally harmonised system. 

September 2020 SASB and GRI went on to announce a collaborative workplan and in September 2020 CDP, CDSB, GRI, IIRC and SASB announced a shared vision for a comprehensive corporate reporting system and a commitment to collaborate to achieve it.  The joint statement articulates these five organisation's intent to drive towards this goal – by working together and by each committing to engage with key actors, including International Organization of Securities Commissions (IOSCO) and the IFRS, the European Commission, and the World Economic Forum's International Business Council.
This was followed up with an open letter to the chair of IOSCO's Sustainable Finance Task Force offering to work together to meet the needs of the capital markets.

September 2020 The International Federation of Accountants (IFAC) called for the creation of a new sustainability standards board to exist alongside the IASB under the IFRS Foundation.

September 2020 In New Zealand, Climate Change Minister James Shaw announced that Cabinet had agreed to introduce a mandatory climate-related financial disclosure regime that would require captured financial entities to report against a standard developed by the External Reporting Board (XRB). 

The release of the consultation paper from the IFRS Foundation Trustees represents a response to this growing demand and seeks to determine how the Foundation should respond.

If feedback to the IFRS Foundation indicates support for them to play a role in setting internationally recognized sustainability reporting standards, then it will be important for any developments to leverage the existing frameworks and standards. The IFRS Foundation will also need to seek the relevant expertise for the Board, governance structures and internal resourcing. Further, already the subject of much discussion in relation to the existing frameworks, consideration of the audience for these the reports and how to determine materiality will be critical.

Australia and New Zealand have actively engaged in the development of the International Accounting Standards twenty years ago. This current consultation represents a 'once in a lifetime' opportunity to shape the important global direction of sustainability reporting standards.

Accountancy Europe’s Follow up paper

Interconnected standard setting for corporate reporting.

Download here

Read more in the joint paper from CDP, CDSB, GRI, IIRC and SASB 

Statement of Intent to Work Together Towards Comprehensive Corporate Reporting.

Read more