Think of sustainability reporting like writing a story. With all these approaches, with the varying standards and frameworks that have been developed over the years, finding a steady foundation in conveying the story of your sustainability journey can be confusing. There are standards and requirements to be met. You are writing a story for a large audience that flips through pages in search for substance within the lines of your plot. The road to sustainability may look like an epic bound into a thick novel, but communicating your sustainability performance could be simpler.
Sustainability has evolved through the years. Finding the right standard that is both robust in information and easy to apply can be confusing. With more organizations and experts gathering to collaborate and develop a framework that suits numerous sectors and adapts to changes in sustainability, a new standard was created in response.
Everything has an origin story. During COP26 in November 2021, the International Financial Reporting Standards (IFRS) Foundation established the International Sustainability Standards Board (ISSB). As sustainability is becoming a key factor in financial decision making, the ISSB developed the ISSB Standards, with the intent for it to become the global baseline in sustainability reporting.
The ISSB Standards labels itself as a “global baseline,” aiming to be a formidable starting point for companies entering the complex world of sustainability reporting. As a global baseline, this new standard builds on other existing frameworks and considers the financial impact sustainability brings to a business and its stakeholders.
This approach transforms the way businesses conduct their sustainability reports as it brings the “alphabet soup” of sustainability reporting standards and frameworks under one cohesive guide. The ISSB Standards build and further improve on the standards such as the Task Force for Climate-related Financial Disclosures (TCFD), the Climate Disclosure Standards Board (CDSB), the Integrated Reporting Framework, and the World Economic Forum metrics. The ISSB Standards have also partnered with the Global Reporting Initiative (GRI) to promote efficiency for companies reporting through the two standards. Using these standards as a stepping stone towards better reporting, businesses are able to integrate their sustainability performance with financial metrics.
Given the financial repercussions sustainability brings to a company, reporting using the ISSB Standards is anchored on material and valuable information investors look for in a sustainability report. This is seen as well in the other frameworks the ISSB Standards have absorbed. Having the ISSB Standards catered to the needs of investors and financial markets, decision-making becomes a clearer process, and companies would also be more effective in their reporting as they deliver comprehensive information relevant to key stakeholders.
With the new developments in sustainability reporting brought about by the ISSB Standards, it is essential that businesses learn about the framework to be updated with current sustainability reporting trends and demands that they can apply into their reporting initiatives. Through being informed about the ISSB Standards, businesses will be ready for potential changes and integration into mandated reporting requirements.
The ISSB Standards currently has two disclosures: the IFRS S1 and the IFRS S2. The IFRS S1 or the General Requirements for Disclosure of Sustainability-related Financial Information focuses on the basic requirements for reporting. A good story starts strong. Packed into the IFRS S1 are relevant requirements businesses can integrate into their reports. The IFRS S1 is a foundation, giving a guide for writers on what content their readers look for and how it should be presented.
Generally, here are the following disclosure requirements that sets the scene of your sustainability performance:
By narrating and disclosing these sustainability risks and opportunities, investors and stakeholders are able to get a better understanding of the current sustainability performance of the business. These general disclosures also provide context in the goals and objectives of the business in terms of sustainability, thus preparing its readers for further disclosures and upcoming reports.
The gravity of climate change pulls businesses to a path that compels them to innovate and progress towards a better future. In a story, the IFRS S2 or the Climate-related Disclosures is another chapter in sustainability reporting which focuses on climate-related risks and opportunities disclosures. As mentioned earlier, the IFRS S2 builds from and consolidates the TCFD Recommendations and adopts SASB requirements.
Similar to the IFRS S1, this section asks businesses to disclose processes, procedures, and strategies used to determine, monitor, and evaluate climate-related risks and opportunities. Targets, progress, and performance are also reported.
The ISSB Standards intend to aid investors and financial institutions in decision making. Thus, the risks and opportunities disclosed should be material and have a financial impact to the business whether it be short, medium, or long term.
Reporting using the ISSB Standards is now effective after January 1, 2024 and will be seen in reports published in 2025. When using the ISSB Standards, the standard is made to integrate sustainability reporting with financial reports into one, making a cohesive and smooth story that covers overall business performance.
To help with this transition into a new way of sustainability reporting, the ISSB plans to guide institutions and entities through upskilling initiatives.
This new standard changes the way we view sustainability. Its comprehensive requirements that pull in past frameworks relevant to key shareholders cover what is relevant to readers and aids investors in making the right choices. Its developments shape the future of sustainability reporting, transforming it through global standards that make reporting a language understood by many.
Think of sustainability reporting like writing a story, a series of chaptered books that narrate the entirety of your journey through the years. As the ISSB Standards become a new character in the world of sustainability reporting, it is good to start preparing and get the first draft ready.
At Keslio, we are deeply passionate about sustainability, equipping us with the expertise and extensive network needed to guide clients through their sustainability journey effectively and efficiently. Our expertise is particularly valuable for companies looking to embed sustainability practices into their businesses and investors looking to integrate ESG and impact into investment portfolios. To learn more about how Keslio can assist your organization on its sustainability journey, please don't hesitate to get in touch with us.
