The ISSB has released its first sustainability & emissions standards. These will arrive quickly - in Australia potentially from 2024.
If you’re a CFO ready to support a credible response to sustainability and net-zero transition, you may be familiar with at least one emissions reporting scheme. I say at least one, because a well-intentioned but disjointed approach has resulted in an alphabet soup of disclosure frameworks. One barrier to progress for SMEs is access to knowledge, but even if that knowledge is available, having it nested in acronyms doesn’t make it easily accessible.
It’s a product of a history of what the IPCC calls ‘maladaptation’ - counterproductive solutions which result in steps backwards, not forwards. In our urgency to quicken progress on climate change we created a host of overlapping reporting schemes, which have confused businesses. It’s a commonly acknowledged problem, and one that the IPCC is attempting to solve.
In Jun 2023, the ISSB issued inaugural standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures
At COP26, the 2021 meeting of the signatories to the UN Framework on Climate Change Convention, the IPCC announced the formation of the International Sustainability Standards Board (ISSB). This was an effort to provide a global baseline for corporate reporting. The ISSB is one of the big three disclosure regimes, (along with the CSRD/EFRAG for Europe and SEC for the US entities) that recognise enhanced sustainability disclosures are good for the capital markets. It’s the one you should be keeping track of.
The ISSB builds on many of the above reporting initiatives plus others like the World Economic Forum’s Stakeholder Capitalism Metrics. As a CFO, just know the IFRS is a key driver behind the ISSB which means that sustainability reporting will no longer be an isolated responsibility for a sustainability team but front and centre and integrated into existing financial reporting and disclosures.
An ISSB advantage is that it will be built to be compatible with local requirements. They’re intended to cancel out double reporting so that your reporting can comply with your local government or corporate watchdog’s standards and be confident the ISSB standards are addressed.
APAC countries setting up mechanisms to consider using ISSB standards include:
Yes. Dealing with anything IPCC-related entails learning a host of acronyms. But while learning new standards takes work, IPCC-related initiatives have been successful before. The Sustainable Development Goals were the result of a similar project, to unify sustainability indicators globally. They have now achieved household-name status despite having only been around since 2017.
Finance’s experience should help with standardisation. In comparison to sustainability, financial standards have had centuries of evolution. For example, Luca Pacioli, a peer of Leonardo da Vinci, published details on double entry bookkeeping and the financial statement over 500 years ago. We need maturity and consistency in sustainability reporting in a fraction of the time.
The ISSB has introduced the standards for reporting here. In preparation you need to be getting a comprehensive oversight of emissions at every level of your business, when these standards come into effect, it’s a matter of filtering down to the necessary data.
By developing an appropriate reporting strategy, you can design business processes to capture the right data the first time. If you’re hiring within your finance team, identify candidates with exposure to or readiness to learn carbon accounting concepts and emissions disclosures. You can evaluate accounting and reporting tools & platforms that have carbon accounting and disclosure built-in, or flexibility to be easily integrated. And you should consider how you go beyond reporting the past to building credible transition plans by forecasting scenarios and evaluating capital allocation trade-offs.
