Should there be global standards on sustainability reporting, and if yes, who should do it?

It has become increasingly important for investors – and others – to know more about entities’ environmental and social impacts and their governance (known broadly as “ESG”) when making investment decisions. The increased focus on ESG means that there is a growing need for sustainability reporting.

There are several organisations – both internationally and jurisdictionally – involved in providing guidance on sustainability reporting or components of sustainability reporting. Just as international accounting standards have a role to play in improving investment through relevant, credible and comparable information in the financial statements, so too could the development of uniform requirements for sustainability reporting.

The IFRS Foundation issued a Consultation Paper requesting views on whether there is a need for standardised guidance on sustainability reporting and whether the Foundation should play a part in developing this guidance.

Various issues are considered in the Consultation Paper, including:

• The Foundation’s potential role.
• Critical success factors that may be needed for the Foundation to establish a Sustainability Standards Board (SSB).
• The focus of the work of the SSB, which includes whether sustainability reporting should focus on the impact of the environment etc. on an entity, or an entity’s impact on the environment.
• Whether reporting should focus on broader ESG issues, or initially focus on climate related disclosures.

From a public sector perspective, there are no specific guidelines issued by the IPSASB on reporting sustainability. Recommended Practice Guideline 1 on Reporting Long-Term Fiscal Sustainability Information focuses on fiscal sustainability rather than broader sustainability and ESG reporting.

Entities with an interest in sustainability reporting are encouraged to comment to the IFRS Foundation by 31 December 2020. Access the Consultation Paper here.

This article was prepared by the Secretariat of the ASB.