Yet another step towards standardising sustainability reporting had been taken — from 1st January 2024 IFRS S1 and IFRS 2 standards are available for annual reporting.
As awareness of sustainability challenges, particularly climate change, has grown amongst the international community, there has been an increasing recognition of the need for an action, both among environmental advocates and within the financial industry. This resulted in founding many dedicated frameworks for sustainability-related disclosures schemes.
In 2007 the Climate Disclosure Standards Board (CDSB) had been established in London, as part of the Carbon Disclosure Project initiated in 2002. The International Integrated Reporting Committee (IIRC) was formed in London in August 2010, involving various stakeholders such as the Global Reporting Initiative, International Accounting Standards Board, U.S. Financial Accounting Standards Board, International Organization of Securities Commissions, and International Federation of Accountants. While the Sustainability Accounting Standards Board (SASB) was founded in San Francisco in 2011, focusing on U.S. securities disclosures.
The variety of numerous frameworks and reporting standards offered many options for a company to report on their sustainability, but stakeholders, governments, and corporate representatives started raising the urgency for standardisation of the disclosure. There was a global demand for consistent, international sustainability reporting standards.
Latest trends and developments
In June 2021, the IIRC and SASB merged, creating the Value Reporting Foundation (VRF). In November 2021 the International Sustainability Standards Board (ISSB), were established at the UN Climate Change Conference (COP26) to address the fragmented reporting landscape and provide a global baseline for sustainability disclosures.
Advancements in sustainability reporting are progressing rapidly, particularly in the area of standard-setting. In August 2022, the Value Reporting Foundation and the Climate Disclosure Standards Board (CDSB) consolidated with the ISSB.
Effective 2024 the TCFD has officially been dissolved and the International Sustainability Standards Board (ISSB) will take over the monitoring of climate-related financial reporting.
Almost daily, new announcements are made — such as the recent collaboration between ISSB and CDP. Ongoing discussions at ISSB include the consideration of incorporating and referencing other sustainability standards like the Global Reporting Initiative (GRI) and the European Sustainability Reporting Standards (ESRS), developed by the European Financial Reporting Advisory Group (EFRAG).
International Financial Reporting Standards (IFRS) Standards
ISSB released two first standards in 2023: the IFRS S1 and IFRS S2, take effect from 1st January 2024. IFRS S1 lists general requirements for disclosure of sustainability-related financial information, while IFRS S2 focuses on Climate-related disclosures.
Many countries around the world have expressed interest in the standards, while Australia, Japan, and the UK announced that they will adopt the standards into their regulatory framework by 2025.
As part of the EU’s green deal EU has introduced its own mandatory sustainability standards (the European Sustainability Reporting Standards – ESRS), however ESRS and IFRS are highly aligned with one another, with ESRS and the IFRS S1 and IFRS S2 having been developed simultaneously.