It is our hope, the strategic direction set out by The IFRS Foundation Trustees will signal a new era in corporate reporting where the same rigour is demanded for sustainability reporting as for financial information. Unification on sustainability reporting is an important step in addressing matters that drive long term business value, we very much welcome the IFRS announcement.
Read our insights on the Future of Corporate reporting from KPMG's Colm O’Se and Conor Holland.
Steps towards establishing an international sustainability standards board
Strategic direction for the new board
The Trustees intend to focus on enterprise value, placing the emphasis firmly on those sustainability factors that drive companies’ short-, medium- and long-term prospects, and the information the capital markets need to assess them. The emphasis on investor decision making provides a clarity of focus that is key for high quality standard-setting, while recognising that companies’ prospects also depend on value created for society and the environment.
Sustainability scope, prioritising climate
The new board would initially focus on climate related information while also working towards meeting the information needs of investors on other ESG matters, recognising the calls for urgent action in this area. This pragmatic approach acknowledges investors’ wider need for information on other sustainability topics.
Build on existing frameworks
Having established an enterprise value focus, the Trustees have recognised the body of existing sustainability reporting frameworks that share a similar goal which they can build on. This includes the work of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and the alliance1 of leading standard setters in sustainability reporting.
Building blocks approach
The Trustees are seeking to provide a global foundation for consistent and comparable sustainability reporting. They recognise that additional or different information may be required to meet other reporting objectives. A ‘building blocks’ approach would enable jurisdictions to layer local requirements onto the global baseline.
The IFRS Foundation plans to publish a feedback statement on their 2020 Consultation along with the proposed changes to its constitution necessary to formally establish a new board, including its composition. This could lead to the announcement of a new board in advance of the November 2021 United Nations Climate Change Conference (COP 26) in Glasgow. Further announcements are expected in the run up to this.
Read the thoughts of KPMG Ireland’s Conor Holland Colm O’ Se recently on the future of corporate reporting here.
1 The CDP, CDSB, GRI, IIRC and SASB (see their paper Reporting on Enterprise Value)