23 September 2022 (Updated 31 August 2023)

What’s the issue?

A global baseline can only be achieved if it is feasible for all types of company to apply, not just the most sophisticated. Therefore, a proportionate approach to applying the standards1 is important.

The International Sustainability Standards Board (ISSB) has identified ways to support companies that are less prepared or that could find it challenging to apply the standards due to resource constraints – in terms of systems, or availability of specialist staff or data.

Proportionality measures aim to ensure all types of company can apply the standards, not just the most sophisticated.

What are the requirements?

The ISSB has provided a number of mechanisms to address proportionality. These include the following.

diagram

For example, companies will use scenario analysis to assess their climate resilience. In making this analysis, companies will:

  • consider all reasonable and supportable information available without undue cost or effort and take an appropriate approach depending on their specific circumstances; 
  • have relevant guidance materials; and
  • have the option of applying the temporary transition relief from providing comparative information in the first year of application. 

These proportionality mechanisms may not be available to all companies and jurisdictions need not include them in local requirements.

What’s the impact?

The ISSB is aiming to make the standards easier to apply. Companies need to understand what they need to do to be ready for reporting under the standards. They also need to have a plan to improve their reporting after initial application because some of the available reliefs are only temporary. The ISSB expects that as companies’ experience of reporting develops, the level of analysis and disclosure will increase over time.

Actions for management

Do not delay starting your implementation project. The ISSB has provided ways to help with transition but companies will still need to do a lot of work in preparing to apply the standards. So what can be done now?

  • Read our guide for more on the standards, including any applicable proportionality mechanisms.
  • Perform an impact assessment to understand where gaps exist between your current reporting and the standards.
  • Engage with your local standard setter to understand how it plans to introduce the requirements and whether any proportionality mechanisms may be permitted.

1 IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (together 'the standards').

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