Date posted: 10/03/2021

Sustainability and non-financial reporting - are you up to date?

CAs need to be aware of the urgent push towards global harmonisation of frameworks as changes gain momentum globally and locally.

The start of 2021 has seen some key developments in sustainability and non-financial reporting, with a common theme to strengthen and align current frameworks to create a global sustainability reporting system.  

Organisations are collaborating and responding to the increased demand for a harmonised global framework. The Climate Disclosure Standards Board (CDSB), CDP, the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) (a.k.a ‘the group of five’) have come together, kicking off with a climate-related financial disclosure standard prototype with many other non-financial areas to follow. 

What does this mean for New Zealand and Australia?

In New Zealand we have seen the announcement of mandatory climate-related financial disclosures for all publicly listed companies and large financial services organisations. Regulators in Australia, including ASIC, AASB, AUASB and APRA continue to stress the importance for companies to consider and disclose non-financial risks including climate change risk, as a part of existing risk frameworks and reporting disclosures. Stakeholders and investors are also calling for greater transparency when it comes to companies’ strategies and considerations of non-financial risks. 

As momentum increases, accountants will need to become familiar with non-financial risks (such as climate change) and understand the impacts of these risks on an organisation’s business model, operating and strategy.  Outlined below are some key updates to provide you with a snapshot of what is currently happening in sustainability. 

Larry Fink issues annual letter to CEOs 

Blackrock’s Larry Fink has issued his annual letter to CEOs highlighting capital management, long-term strategy, purpose and climate change as pivotal to creating durable value. Fink has also outlined the COVID-19 pandemic accelerating deeper trends such as the growing retirement crisis and systemic inequalities.

Read Larry Finks 2021 letter to CEOs

The Global risks report 2021 

The World Economic Forum (WEF) released the 16th edition of their Global Risks Report in January 2021. The report outlines the results from the 2020 global risks perception survey as well as reflections on the global responses to COVID-19. “The business risks emanating from these trends have been amplified by the crisis and include stagnation in advanced economies and lost potential in emerging and developing markets, the collapse of small businesses, widening the gaps between major and minor companies and reducing market dynamism, and exacerbation of inequality; making it harder to achieve long-term sustainable development.”

Read the 16th WEF Global Risks Report 2021

Next steps in response to broad demand for global sustainability standards

The Trustees of the IFRS Foundation (the Foundation) have responded to the growing and urgent demand for global sustainability standards and are expected to produce a final proposal (including a roadmap and timeline) by the end of September 2021, with the intention of announcing the establishment of the Sustainability Standards Board at COP26 in November 2021.

Read IFRS announcement

The Foundation announces strategic direction and further steps 

Based on feedback from the 2020 consultation, The Foundation have outlined investor focus for enterprise value, sustainability scope with a focus on climate, build on existing frameworks and the application of a building block approach as the strategic direction of a new board. 

The Trustees will publish a feedback statement that summarises the responses received to their 2020 Consultation and how that feedback has shaped the proposed strategic direction of the new board. The proposed changes to the Foundation’s Constitution necessary to formalise establishment of a new board will be published for public comment. 

Read IFRS foundation announcement

IOSCO sees urgent need for globally consistent disclosure standards

In its February 2021 media release, the International Organization of Securities Commissions (IOSCO) expressed the need to work towards the establishment of Sustainability standards board under the IFRS foundation structure. IOSCO has observed that investor demand for sustainability-related information is currently not being properly met. There is a continued need to work to improve consistency, comparability and reliability of sustainability disclosure as this is material to investment decisions. 

Read the IOSCO media release

Climate-related financial disclosure prototype launched

To coincide with the fifth anniversary of the Paris the group of five published Reporting enterprise value Illustrated with a prototype climate-related financial disclosure standard.  The publication illustrates how current frameworks, standards and platforms, along with elements set out by the Task Force on Climate-related Financial Disclosures (TCFD), can be used together to provide a ‘running start’ for development of global standards.

Read the IR media release

Joint initiative aimed to increase confidence in integrated reporting 

The IIRC and IFAC have launched a new joint initiative, Accelerating Integrated Reporting Assurance in the public interest. The recently released first installment sets out what integrated reporting assurance involves for organisations, auditors and others. 

Members are encouraged to participate in the conversation by providing feedback on the initiative and the first installment.

Read IIRC announcement

Working Group convened to accelerate convergence in global sustainability reporting standards

The IFRS Foundations trustees (the trustees) have announced the formation of a working group who will specifically provide technical recommendations, including further development of the prototype built on the TCFD recommendations, as a potential basis for the new board to build on existing initiatives and develop standards for climate-related reporting and other sustainability topics. The working group follows the strategic direction announced by the trustees earlier in March 2021.

Read the perspective article 

Michael Bray FCA shares his insights on the emergence of integrated reporting assurance.

Read more

Read the joint submission

Joint accounting bodies call for a single set of globally accepted sustainability reporting standards

Read more