8 Takeaways on ISSB and Global Reporting Standards

We attended the second IFRS Sustainability Symposium to listen and learn about the future of reporting. There were a few key takeaways.

IFRS was created to help end the “alphabet soup” everyone in ESG and sustainability reporting talks about, and they have consolidated some, but other challenges for reporting—and communicating—remain. It was notable that the goal of a universal global standard is making fast strides outside the US and with the upcoming European requirements reaching into US companies, even private companies, more alignment seems inevitable. Even companies outside the reach of global requirements may want to align to global standards to keep up with peer and market expectations.

Our big takeaways from the event:

1. Interoperability

The ISSB Standards are working to create a comparable, consistent global language for reporting in the public interest of capital markets. They want to “defragment” the word of reporting to get all participants aligned. It isn’t perfect but it’s getting better than it has been.

2. Adoption is a transition

Many countries will move from voluntary use of the standards to required use over time. Companies can be ready by using frameworks that are driving the ISSB standards, including SASB—SI, the range of industry issues, and TCFD—S2 focused on climate. And, of course the ISSB standards themselves should be evaluated as new approaches are needed. Companies may choose to use the ISSB standards voluntarily if they’ve been reporting to SASB and TCFD, it is a logical continuation. If you are just getting started, time is short given many issues are operational, not about communications, so moving now is recommended. And talking about this transition so your investors understand.

3. Mandatory reporting is coming, soon

Many countries outside of the US are in the process of adopting the standards, and alignment with European reporting and the CSRD for the financial material items, ISSB is moving toward critical mass fast. If you are in the companies affected by CSRD you know that in 2025 or 2028 there will be major changes. ISSB is separate and not required, but many US companies might seek to adopt it voluntarily to avoid a competitive disadvantage.

4. It’s time to formalize data collection and controls

ISSB is focused on capital markets and wants all disclosures to be of the quality of financial disclosures. And, more detail is required, especially about risks and opportunities. Given ISSB’s focus on financial statements, the preferred approach is to integrate this info into your financial reporting. Timeframe will be an issue for many. Your data will be audited, be ready to stand behind it.

5. Focus on value

Reporting is not the end goal in sustainability and ESG, though sometimes it can feel that way. These frameworks are focused on “decision useful” information for capital markets, and the goal is to reduce the burden of reporting and help businesses access capital.

6. Raters matter in a fragmented world

Investors will still rely on raters to process information for them as the transition to global standards occurs. And, there may always be the need for third party assessments. But long term, the scores may matter less as big investors ingest global, comparable interoperable information to make their own conclusions. This all remains to be seen.

7. Private companies are not immune

Even private companies looking to access credit and the private equity markets may be subjected to these standards as they are adopted by their unique frameworks. CSRD is poised to reach private US companies doing big business in Europe, but even US companies who are seeking domestic credit might need to share information aligned to ISSB.

8. BUT…

Although there are many developments that will hopefully ease the burden of reporting teams everywhere, we were left wondering about the other stakeholders? What of the non-investor audience? Your customers (especially if you are in someone else’s supply chain), employees, and communities may not be served by the “10-K-ification” of all sustainability communication? It will be more important than ever for companies to think about who needs what information, and how it is best delivered.

IOP can help

If you find yourself struggling to get your reporting on track—or even get started—consider expert help. We’ve engaged in reporting strategy and Materiality discussions with clients and created many stakeholder-pleasing sustainability/ESG reports as well as impact communications. Email us to get in touch if you need help with your next step. 

Photo by Clay Banks on Unspalsh