Deloitte strongly welcomes the announcement by the IFRS Foundation (IFRSF) of its new International Sustainability Standards Board (ISSB). Deloitte also welcomes the commitment by the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF, which houses the Integrated Reporting Framework and the Sustainability Accounting Standards Board (SASB) Standards) to merge with the new board, and the publication of prototype climate and general disclosure requirements by the IFRSF’s Technical Readiness Working Group (TRWG).
This is a significant step in response to the urgent need of investors and other stakeholders to understand how climate and sustainability risks and opportunities faced by business affect enterprise value and financial performance.
Global sustainability standards will facilitate consistent and comparable reporting by companies across jurisdictions, which will help direct capital to long-term, resilient business as the world transitions to a low-carbon economy.
The global ISSB standards are an essential part of a system change that will be required to create a global baseline of sustainability information addressing the needs of global capital markets. To be effective, the standards will need to be brought into regulation around the world, together with associated enforcement, monitoring, governance and controls, assurance, and training. Worldwide adoption of the ISSB standards is needed to achieve true harmonization, to replace the alphabet soup of voluntary standards and frameworks.
The announcement of the commitment by CDSB and VRF to merge with the new board sends a clear signal to the market that ISSB is emerging as the global sustainability standard-setter. This will reduce fragmentation and confusion in the sustainability standard-setting landscape. The intention to use the technical standards and frameworks of the CDSB and the VRF, along with those of the Task Force on Climate-related Financial Disclosures (TCFD) and the World Economic Forum International Business Council stakeholder capitalism metrics, will help ensure ISSB has a running start.
Huge progress has already been made. The prototype climate and general disclosure requirements that have been published by the Technical Readiness Working Group (TRWG) demonstrate significant evolution, building on the work of the ‘Group of 5’. The TRWG comprises the extensive expertise of VRF, TCFD, CDSB, the World Economic Forum and the International Accounting Standards Board (IASB). Deloitte is delighted to have contributed to this TRWG effort, in support of the World Economic Forum.
Prioritizing a standard on climate reflects the urgency for consistent and comparable information for capital markets that supports the move to the low-carbon economy. TCFD has made substantial inroads in addressing the information gap and its recommendations have been core to the development of the climate prototype. The prototype is built on the four pillars of TCFD – governance, strategy, risk management, and metrics and targets – and reflects its core recommendations. Many companies are already reporting in line with TCFD recommendations, helping them to develop resources and skills, and gain experience in advance of adopting the new climate standard once issued.
IFRSF Trustees have emphasized from the beginning that the new ISSB would address the breadth of sustainability topics that are critical to business. We welcome the prototype general disclosure requirements which will bring better consistency on how companies report on all sustainability topics material to them. Over time, further thematic and industry-specific standards will provide more specific requirements. Standards focused on capital markets are the first building block of a comprehensive corporate reporting system. Further building blocks will be needed to address public policy priorities and further reporting to stakeholders on companies’ broader impacts. The creation of a new Sustainability Consultative Committee, whose members will include the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank, and a mechanism for formal engagement on standard-setting between the ISSB and jurisdictional representatives will enhance the coherence of the corporate reporting system.
Deloitte remains committed to the goal of global sustainability standards and will continue to support the new ISSB with stakeholders around the world.