Following growing support for global non-financial standards, the International Financial Reporting Standards (IFRS) Foundation has published a consultation paper to formally assess the demand for sustainability standards, and gauge support for the Foundation’s role in developing them.
An increasing number of stakeholders – including Accountancy Europe, IOSCO, IFAC, the five major sustainability frameworks, the European Commission and, of course, XBRL International – have been calling for standardised environmental data, with many arguing that the IFRS Foundation would be perfectly placed to establish a new sustainability standards board.
This week’s consultation paper acknowledges that there is an urgent need to improve the consistency and comparability of sustainability reporting. With investors, regulators, companies, and policy-makers all introducing their own sustainability initiatives, there is a risk that without global direction fragmentation will ensue.
The IFRS Foundation has the existing standard-setting expertise, governance model, processes and procedures in place that, as many have suggested, could be deployed to increase consistency in global sustainability reporting. The consultation paper outlines the possibility of creating a Sustainability Standards Board (SSB), under the auspices of the IFRS Foundation.
The SSB would develop and maintain global sustainability-reporting standards, initially focused on climate-related risks, but with the potential of expansion to cover a firm’s impact on the environment and the wider links between environmental, social and governance matters. Establishing the SSB within the structures of the IFRS Foundation would help achieve sustainability reporting that is complementary to and connected with financial reporting
This is by no means a done deal. A host of questions need to be answered and a number of key issues resolved. Obtaining support from regulators, investors and issuers is vital. Confidence in obtaining and retaining suitably skilled people is needed. Defining a separate and sustainable funding mechanism is required. Working with regional initiatives to achieve consistency will be essential. Ensuring that these new obligations don’t impair the existing functioning of the IFRS Foundation will be a pre-requisite.
Plenty to consider! Here at XBRL International we continue to be concerned with the digital aspects of these reforms, not least the need to ensure that XBRL taxonomies are developed in tandem with standards and that there are not duplicative taxonomies that will make comparison more, not less, difficult.