From ISSB: “The International Sustainability Standards Board (ISSB) has today issued its inaugural standards—IFRS S1 and IFRS S2 —ushering in a new era of sustainability-related disclosures in capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions.
And for the first time, the Standards create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects.
About the Standards
IFRS S1 provides a set of disclosure requirements designed to enable companies to communicate to investors about the sustainability-related risks and opportunities they face over the short, medium and long term. IFRS S2sets out specific climate-related disclosures and is designed to be used with IFRS S1.
Both fully incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
A global baseline
The ISSB developed IFRS S1 and IFRS S2 with the benefit of extensive market feedback and in response to calls from the G20, the Financial Stability Board and the International Organization of Securities Commissions (IOSCO), as well as leaders in the business and investor community.
This support for a comprehensive global baseline of sustainability-related disclosures demonstrates the widespread demand for a consistent understanding of how sustainability factors affect companies’ prospects.
The ISSB Standards are designed to ensure that companies provide sustainability-related information alongside financial statements—in the same reporting package. The Standards have been developed to be used in conjunction with any accounting requirements. They are also built on the concepts that underpin the IFRS Accounting Standards, which are required by more than 140 jurisdictions. The ISSB Standards are suitable for application around the world, creating a truly global baseline.
Adoption of the ISSB Standards
Now that IFRS S1 and IFRS S2 are issued, the ISSB will work with jurisdictions and companies to support adoption. The first steps will be creating a Transition Implementation Group to support companies that apply the Standards and launching capacity-building initiatives to support effective implementation.
The ISSB will also continue to work with jurisdictions wishing to require incremental disclosures beyond the global baseline and with GRI to support efficient and effective reporting when the ISSB Standards are applied in combination with other reporting standards.
My Take
Whether you call it, Corporate Social Responsibility (CSR), Sustainability or Environmental, Social, Governance (ESG), it is here to stay, so you can either go the route of compliance, or truly embed sustainability into your culture to authenticate and elevate your impact beyond compliance. If done correctly, sustainability has numerous benefits including: cost-savings; risk management, which is a big component of IFRS S1 and IFRS S2; reputation and brand value; access to capital; attracting and retaining talent; driving innovation; and the least sexy, compliance.
- Cost Savings: Businesses who use resources more efficiently cut costs. For example, energy-efficiency, waste reduction measures, and resource conservation efforts can lower operational costs.
- Risk Management: If you don’t know how climate change may impact your business, you are not properly managing your business, which is why IFRS S1 and IFRS S2 want to integrate climate risks alongside financial accounting.
- Reputation & Brand Value: Company’s that demonstrate their commitment and improvement regarding sustainability performance can generally charge more for their products as well as increasing customer loyalty, which directly impacts their bottom line.
- Access to Capital: Many financial institutions and investors prioritize sustainability in their decision-making. Companies that demonstrate strong sustainability performance are more likely to access capital, attract investments, and secure favorable financing terms.
- Attract & Retain Talent: Demonstrating your commitment to sustainability attracts and retains talent. People want to work for companies that align with their own values. It’s that simple.
- Driving Innovation: Sustainability drives innovation by creating opportunities for new products and services and in doing so, can gain a competitive advantage.
- Regulatory Compliance: Environmental regulations are on the rise globally, so by voluntarily adopting sustainable business practices, businesses can stay ahead of regulatory changes, avoid penalties and ensure long-term compliance.
Ultimately, integrating sustainability into your business not only helps address pressing global challenges, such as climate change and poverty, but also delivers tangible benefits, enabling your company to thrive in a rapidly changing world while making a positive impact on the planet, society and your bottom line. Contact us today to start your sustainability journey!
