The IFRS Foundation’s International Sustainability Standards Board has moved closer to its goal of establishing a “comprehensive global baseline of sustainability disclosures”, issuing the steps it will take to complete a set of technical standards by the end of this year.
The ISSB was established last year to co-ordinate sustainability disclosure requirements and overcome the current fragmentation. Its work is supported by Australian regulators, including ASIC.
“The global baseline approach will play a vital role in building the trust and transparency needed to foster economic stability and contribute to the transformation of sustainable economic, social and environmental systems,” the IFRS Foundation said in a statement.
It is building on work already done by the Task Force on Climate-Related Financial Disclosures and is working with the Global Reporting Initiative’s Global Sustainability Standards Board.
The Net-Zero Banking Alliance, which includes a small number of large Australian banks in its membership, is closely aligned with the TCFD and the ISSB.
In its latest update, the ISSB said it would “intensify its engagement with jurisdictional authorities and market participants to facilitate participation in the standard- setting work”.
One of those authorities is the International Organisation of Securities Commissions, which will evaluate the standards and decide whether to endorse them.
In March, the ISSB published its first proposed standard, covering governance, strategy, risk management and metrics and targets. They are to be included in financial reporting.
Governance disclosures are designed to allow investors and other stakeholders to understand the procedures and controls used to monitor and manage significant sustainability-related risks and opportunities.
Disclosures on strategy would allow stakeholders to understanding how an entity is addressing sustainability-related risks and opportunities.
Risk management disclosures are designed to help understand an entity’s sustainability-related risk management processes and whether those processes are integrated into overall risk management processes.
Metrics and targets disclosure standards are designed to show stakeholders how an entity measures, monitors and manages sustainability-related risks and opportunities.
“These disclosures shall enable users to understand how the entity assesses its performance, including progress towards the targets it has set,” the draft says.
The definition of sustainability-related risks and opportunities in the standard is broad, covering employment practices of suppliers, waste related to the packing of products a business sells, investments in associates and joint ventures, and sources of finance.