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CORPORATEREPORTINGFACULTY

SHAPINGSUSTAINABILITY

STANDARDSETTING

Whatlessonscansustainabilitystandard-setterslearn

fromtheexperienceofaccountingstandard-setters?

CONTENTS

FOREWORD1

1.SUMMARYOFKEYFINDINGS2

2.PURPOSEOFTHISREPORT5

3.UNDERSTANDINGTHECONTEXTFORSUSTAINABILITYSTANDARDSETTING6

3.1?A?historical?focus?on??nancial?performance??6

3.2?An?increased?focus?on?non-?nancial?information??7

3.3?Sustainability?reporting??7

4.?KEY?STANDARD-SETTING?LESSONS??9

4.1?Clarity?of?purpose?and?intended?audience??9

4.2?Strategic?plan?and?detailed?roadmap??11

4.3?Conceptual?framework?12

4.4?Effective?due?process?14

4.5?Independence?and?appropriate?expertise?17

4.6?Stakeholder?engagement?and?political?pressures?19

4.7?Avoiding?disclosure?overload?22

4.8?Interoperability?23

4.9?Prioritising?implementation?26

4.10??Assurance?and?enforcement28

5.?NEXT?STEPS?29

APPENDIX:PROJECTPARTICIPANTS30

Designandlayout?ICAEW2024

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SHAPINGSUSTAINABILITYSTANDARDSETTING

FOREWORD

Forthepast20years,ICAEWhasplayedaleadingroleinsustainability,workingcloselywith

governments,regulators,standard-settersand

agenciessuchastheUnitedNations(UN).One

ofthekeythemesinICAEW’scurrent10-year

strategyis‘helpingtoachievetheUN’sSustainable

DevelopmentGoals(SDGs)’.ICAEWiscommittedto

makingaleadingcontributiontotheachievementof

SDGsaddressingpoverty,protectionoftheplanet

andthepromotionofpeaceandprosperityby2030.

Inthiscontext,thefast-movingworldofsustainability

reportingisincreasinglyimportant.Thisisespeciallytrueoftheprogressmadesince2021

bytheInternationalSustainabilityStandardsBoard

(ISSB),withitspromiseofasuiteofinternational

sustainabilitydisclosurestandardsandalessfragmentedglobalreportinglandscape.Withso

muchchangehappeningatpace,manystakeholders

wespoketoinlate2023agreedthatitwasimportant

totakeastepbacktore?ectonwhathasbeen

achievedinthisarea,andwhatmightbedonebetter.

Theoutcomeofextensivediscussionswithstakeholderssincethenisthisreportonsustainability

standardsetting.Itexploresthelessonsthatsustainabilitystandard-setterscanlearnfromthe

experienceoftheiraccountingcounterparts,drawing

onICAEW’sconsiderableexperienceininternational

accountingstandardsetting.Thisdatesbackasfaras

1973,whenICAEWhostedtheinauguralmeetingof

theInternationalAccountingStandardsCommittee

(IASC),theInternationalAccountingStandards

Board’spredecessor,inLondon.

Thisreportisaconsideredcontributiontothemuch

widerdebateaboutthechallengesweallface

aroundsustainability.Ihopeitwillbeofinterestto

awiderangeoforganisationsandindividualswith

aninterestinthedevelopmentandfuturesuccessof

sustainabilityreporting.

AlanVallance

ICAEWChiefExecutive

1

1.SUMMARYOFKEYFINDINGS

Thisreportanalysesthekeyfeaturesofaccounting

standardsettingandconsidersthechallenges

facedbysustainabilitystandard-setters.Drawing

onthisanalysis,itmakesrecommendationsand

observations,whicharesummarisedbelow.These

?ndingsshouldbereadinconjunctionwiththe

contextualinformationinsection2ofthereport,

andthedetailedanalysisinsection4.Thissection

highlights10corestandard-settingareasthatwe

thinkshouldbegivenparticularfocus,together

withourdetailedrecommendations.

1CLARITYOFPURPOSEAND

INTENDEDAUDIENCE

Someofthedebatearoundsustainabilityreporting

stemsfromthelackofconsensusaboutwhat

sustainabilityreportingisandwhoitisfor.While

thismaybeinevitabletosomeextent,matters

arenothelpedbysustainabilitystandard-setters’

contrastingapproachesandviewsonsome

fundamentalissues,suchastheapproachto

materiality.Thiscanbeconfusingforbusinesses

andotherstakeholders.

2STRATEGICPLANAND

DETAILEDROADMAP

Whilesuccessfulaccountingstandard-setters

willalwayshavealong-termplan,theymust

alsobehighlyagilewhenunexpectedor

urgentissuesarise.Long-termplanningallows

standard-setterstoprioritiseprojectsand

allocateresourcesproperly.

WestronglyrecommendthattheISSBpublishes

aclearanddetailedroadmapsettingoutthe

stepsthatneedtobetakenforittoachieve

itscoreobjectives.Thisalsoincludeshow

individualprojects?tintoitslonger-termplan

andthewayinwhichtheISSB’sworkrelatesto

theoverallstrategy,missionandobjectivesof

theInternationalFinancialReportingStandards

(IFRS)Foundation.Presentingthebigger

pictureisessential,particularlyforgovernments

andregulatorsconsideringendorsement

andadoptionofthestandards.Theyneedto

understandthebiggerpictureinthecontextof

theirownlegislativeprioritiesandopportunities.

Clarityofpurposemayhavebeenachievedby

individualstandard-setters,butislostwhenthe

broadsustainabilitystandard-settinglandscapeis

considered.WerecommendthattheroleofISSB

standardsisclearlyarticulatedandagreed,relative

tothoseoftheGlobalReportingInitiative(GRI),

EuropeanFinancialReportingAdvisoryGroup

(EFRAG)andothers,soastode?netherelationship

betweenthedifferentsetsofstandards.

3CONCEPTUALFRAMEWORK

Toaconsiderableextent,theaccounting

standard-settingmodelprovidesatemplate

forsustainabilitystandardsetting.Oneofthe

moresigni?cantfeaturesoftheInternational

AccountingStandardsBoard’s(IASB’s)standard

settingisitsConceptualFramework–high-level,

overarchingprinciplescoveringkeyaspectsof

?nancialreporting.

2

SHAPINGSUSTAINABILITYSTANDARDSETTING

TheISSBusedtheIASB’sConceptualFramework

whenitdevelopedits?rsttwostandards,which

wesupportasaninterimstep.However,this

frameworkwascreatedforadifferentpurposeand

containsrelativelylimitedguidanceondeveloping

disclosurerequirements,whichmakesitoflimited

usetosustainabilitystandard-setters.While

perhapsnotanimmediatepriority,aconceptual

frameworkdesignedforsustainabilitystandard

settingshouldfeatureprominentlyintheplansof

theISSBandotherrelevantstandard-setters.

4EFFECTIVEDUEPROCESS

Rigorousdueprocessisavitalpartofstandard

setting,anditisimportantthattheISSBandEFRAG

followedspeci?candde?neddueprocesssteps

whenproducingtheirinitialstandards.Concerns

havebeenraisedwithusaboutaspectsofearly

dueprocess,includingcommunicationand

transparencyaroundactionstaken.Theseconcerns

haveledtoaperceptionofshortcomingsinthat

dueprocessamongsomestakeholdersthat,if

repeated,couldunderminecon?denceinthe

standard-settingprocessovertime.

Qualityisparamount.Establishedpracticesmay

needtobe?exedinthefaceoftimepressures,but

sacri?cingthemwithoutverycarefulconsideration

wouldbecounterproductive.Astimepressures

abate,sustainabilitystandard-settersshould

considerasteadierpaceofactivity.Theyshould

alsoconsiderwhetherexistingdueprocesssteps,

suchasthepost-implementationreview(PIR)stage,

needgreaterfocusandenhancementgiventhe

relativeyouthofsustainabilityreporting

standardsgenerally.

5INDEPENDENCEAND

APPROPRIATEEXPERTISE

Themainquali?cationsforIASBmembershipare

professionalcompetenceandpracticalexperience.

Itisalsoimportantthatstandard-settersare

independent,unbiasedandhavenocon?ictsof

interest.Evenwhensupportinggovernmentpolicies,

theyshouldbefreefrompoliticalin?uence.

TheISSB’sboardincludespeopleofhighcalibre,

withawiderangeofrelevantskillsandexperience.

Some?exibilityintheselectioncriteriaappliedmay

beneededtoensurethatthisremainsthecase.This

couldbeachieved,forexample,byplacingless

emphasisongeographiccoveragetoensurethat

therecontinuestobeanappropriatelevelofsubject

matterexpertiseorstakeholderrepresentationwithin

thegroup,alongsidesuf?cientdiversity.

6STAKEHOLDERENGAGEMENT

ANDPOLITICALPRESSURES

Accountingstandard-setterstypicallythinkof

stakeholdersaspreparers,usersandauditorsof

?nancialstatements.Thesegroupscanencompass

awiderangeofindividualsandorganisations,

includinginvestors,regulators,governments,analysts

andacademics.However,thereisanevenwider

rangeofstakeholderswithaninterestinsustainability

reportingand,increasingly,itisalsothesubjectof

muchpoliticaldebate.

Arguably,stakeholderengagementshouldlook

ratherdifferentwhencomparingtheISSB’sand

EFRAG’soutreachactivities.ComparedwithEFRAG,

theISSBhasanarrowerprimaryuserinmind.

Nonetheless,effectiveengagementwiththiswider

stakeholdergroup,toensureadequateawareness

oftheirviewsandconcerns,isimportantiftheISSB’s

standardsaretoberegardedastrulylegitimate.

3

7AVOIDINGDISCLOSUREOVERLOAD9PRIORITISINGIMPLEMENTATION

Sustainabilitystandardscomewithasigni?cant

volumeofdisclosurerequirements.Inevitably,

questionshavebeenraisedaboutwhetherthisisjust

anotherexampleofoverloadingtheannualreport

withinformationthatwillbecostlytoproduceand

ofquestionablebene?ttomoststakeholders.Thisis

particularlyrelevantforsustainabilitystandard-setters

focusedontheneedsofawideusergroup,suchas

EFRAGorGRI.

LiketheIASB,theISSBdoesnothavethepower

torequirejurisdictionstoadoptitsstandards.For

EFRAG,adoptionisnotanissueasitsstandards

havebeenincorporatedintoEUlegislation.

However,EFRAGandtheISSBbothfacesimilar

pressurefromstakeholderstoproduceadditional

standardsswiftly.Workingonnewstandards

inevitablytakespreciousresourcesawayfrom

implementationactivities.

Cost-bene?tconsiderationsareacrucialelementof

developingreportingstandardsandshouldnotbe

anafterthought.Sustainabilityreportingmustnot

becomejustanotherbox-tickingexercisewherethe

focusisoncomplianceratherthancommunication.

Thiswouldbringlittlebene?ttoinvestorsand

otherstakeholders–ortothebusinessitself–as

itwouldresultinboilerplatetextthatisoflittleor

nointeresttoanyone.Itisthereforeimportantthat

anyadditionaldisclosurerequirementsadequately

explainwhatinformationstakeholdersneedandhow

theywilluseit.

TheISSBshouldmaketheadoptionandsuccessful

implementationofthesestandardsitshighest

priority,asdoingsoiskeytoensuringthewhole

project’scontinuedsuccessandcredibility.

Sustainabilitystandard-settersshouldtakecare

whenproducingimplementationguidancethat

coverscross-cuttingthemesapplicableinanother

body’sstandardstoensuresuchguidancedoesnot

con?ictwithothersandcreateconfusionratherthan

addingclarity.

10ASSURANCEANDENFORCEMENT

8INTEROPERABILITY

Interoperabilityisarguablythebiggestchallenge

forsustainabilitystandardsetting.WhiletheISSB

hasbeenworkingonitsstandards,theEUandthe

UShavebeendevelopingtheirownrequirements,

makingthepathwaytoaglobalbaselinelessclear.

Thiscreateschallengesforcompanieswithlistings

ondifferentcapitalmarkets.Itraisestheprospectof

individualcompanieshavingtoreportundertwoor

moredifferentframeworks.

EFRAGandtheISSBhavebeenworkingtogether

toimprovetheinteroperabilityoftheirrespective

climate-relateddisclosurestandards,resultingin

somedegreeofalignment.However,noteveryone

issooptimisticabouttheinteroperabilityofthe

twosetsofstandards.Interoperabilityisaworthy

goal,butitshouldonlybeseenasasteppingstone

towardsgreaterconvergenceovertime,alongside

asuitableequivalenceregime.Agoodfoundation

wouldbeformajorsustainabilitystandard-setters

tocommittominimisingdifferencesbetweentheir

standardsasastartingpointwhendeveloping

theirown.

Like?nancialreporting,acriticalaspectofgood

sustainabilityreportingisrobustassurance

andenforcement.Withoutthese,therewillbe

nocertaintythatinformationreportedwillbe

reliableorcomparable.Similarly,likeaccounting

standard-setters,sustainabilitystandard-setters

mustproducestandardsthatareofsuf?cient

qualityandclaritytoallowforeffectiveassurance

andenforcement.

4

2

2.PURPOSEOFTHISREPORT

ThecreationoftheISSBwithintheIFRSFoundationin

2021wasoneofthemostsigni?cantdevelopments

inglobalcorporatereportinginageneration.It

laidthegroundworkforthedevelopmentofasuite

ofinternationalsustainabilitydisclosurestandards

andalessfragmentedreportinglandscape.Italso

providedopportunitiesforcloseralignmentof

?nancialandnon-?nancialreporting.

Developmentselsewhere,inparticulartheEuropean

Commission’sadoptionoftheEuropeanSustainability

ReportingStandards(ESRS),havealsoprogressed

quickly,especiallywhencomparedtotherelatively

sedatepaceofaccountingstandardsettingtowhich

wehadbecomeaccustomedinrecentyears.

Withsomuchchangehappeningatsomepace–and

withsomuchatstake–manystakeholderswespoke

toagreedthatitwasimportanttotakeastepbackto

re?ectonwhathasbeenachieved,andwhatmight

bedonebetter.

Thisreportisnotanacademicstudyandshouldnot

beinterpretedassuch.Itre?ectsviewsweheard

fromstakeholdersataroundtableeventheldin

LondoninSeptember2023andaseriesofone-on-

oneinterviewswithstandard-setters,policymakers,

academicsandothers,conductedbetween

SeptemberandNovember2023.Naturally,the

viewsnotedinthereportdonotnecessarilyre?ect

theviewsofalloftheprojectparticipants.Where

appropriate,wehaveofferedviewsofourown,

whichbroadlyalignwithpositionswehavetaken

inpreviouspolicyresponses.Somereferencesto

relevantICAEWpolicyresponsesareincluded.

THEAIMOFTHISREPORTIS:

?tore?ectonthefeaturesofgoodaccounting

standardsetting;and

?todiscusswhetherthereareimportantlessons

thatsustainabilitystandard-setterscanlearn

fromtheexperienceoftheiraccounting

counterparts.

WereferfrequentlytotheworkoftheIASBinthe

report.Wedothisbecauseitisabodywithover

twodecadesofinternationalstandard-setting

experience.Itlistenedandlearnedand,overtime,

hasbecomehighlyregardedontheglobalstage

duetoitsreputationforgovernance,dueprocess

andquality.Itsstandardsarewidelyappliedaround

theworld.Weacknowledgethatmany–butnotall–

ofthepointswehavehighlightedinrelationtoIASB

governance,oversight,processesandprocedures

applytootheraccounting(andauditing)standard-

setters,andthattheIASBitselfdrewonearlier

experienceofstandardsettingintheUS.Wealso

acknowledgetheGRI’scontributiontosustainability

standardsetting,whichhasbeenconsideredduring

thedevelopmentofthisreport.

Manyofthesuggestionswemakearerelevantto

anystandard-settingbody.However,inmanycases

wehavedirectedoursuggestionstowardspotential

improvementsattheISSB.Wedothisnotbecause

wethinktheyareapoorstandard-setter

butbecause:

?weareastrongsupporteroftheISSB’swork

andseetheboardascriticaltothefutureof

sustainabilitystandardsetting.Wewanttodoall

wecantoensureitssuccess.

?manyofthelessonswehaveidenti?edareless

applicableorrelevantforstandard-settersworking

undertherestrictionsofpoliticalremits.

?thereportprimarilytakesaninternational/global

perspectiveratherthanajurisdictionalone.

Theprimaryaudienceforthisreportisorganisations

orindividualsdirectlyorindirectlyinvolvedinthe

workofglobalstandard-settingbodies.Inparticular,

giventheimportanceweattachtothesuccessof

theISSB,weaddresstheIFRSFoundation.The

reportshouldalsobeofinteresttostandard-setters

generally,otherpolicymakers,andthosewithan

interestinthedevelopmentandfuturesuccessof

sustainabilityreporting.

5

3.UNDERSTANDINGTHECONTEXTFOR

SUSTAINABILITYSTANDARDSETTING

3.1

AHISTORICALFOCUSONFINANCIALPERFORMANCE

Theannualreporthaslongbeenthecornerstone

ofcorporatereporting.Itiswidelyregardedasa

keyformofcommunicationbetweenbusinesses,

investorsandothercapitalmarketparticipants.

However,corporatereportingiscontinually

evolvinginresponsetochanginginformation

needsandthedemandsofanever-wideningrange

ofstakeholdersandusers.Thedynamicnatureof

themodernbusinessandregulatoryenvironment

meansthattheannualreportsoftoday’slarge,

listedcompaniesarealmostunrecognisablewhen

comparedtothoseof20yearsago.

Historically,theannualreportwasfocusedon

howabusinesswasperformingfroma?nancial

perspective.Accordingly,regulatorsand

standard-settersdirectedtheireffortstothe

creationofaframeworkofhigh-quality,widely

acceptedaccountingstandards.

Formanyyears,eachcountryhaditsown

generallyacceptedaccountingprinciples

(GAAP).Thismadeitdif?cultforusersof?nancial

statementstomakecomparisonsbetween

companiesreportingunderdifferentregimes.

Moreover,acompany’sperformancewhen

measuredunderoneregimeratherthananother

couldbeverydifferent.Thisbegantochange

withtheformationoftheInternationalAccounting

StandardsCommittee(IASC).

FIGURE1:IFRSACCOUNTINGSTANDARDS—ABRIEFHISTORY

EUROPEANUNION

MANDATEDIFRS

IOSCOENDORSEDTHE

IASC’SSTANDARDS

givingtheIASCboth

politicallegitimacyanda

compellingmandate.

alandmarkdecision

torequireEuropean

companieswithsecurities

listedonEU-regulated

marketstouseIFRS

AccountingStandards.

IASCWASFORMED

withtheaimof

harmonising

accountingpractices

aroundtheworld.

IASCBECAME

THEIASB

havingcreateda

comprehensive,robust

andin?uentialsetof

standards.

147JURISDICTIONS

AROUNDTHE

WORLDUSEIFRS

15oftheG20countries

haveadoptedIFRS

AccountingStandards

forallormost

companiesintheir

capitalmarkets.

6

3.2ANINCREASEDFOCUS3.3SUSTAINABILITY

ONNON-FINANCIALREPORTING

INFORMATION

Muchofthediscussionaroundnon-?nancialinformationrelatestosustainabilityrisksand

Inrecentyears,therehasbeenincreasinginvestor

opportunities,especiallyclimate-relatedissues.

demandformoreinformationthanthatprovided

Sustainabilityreportingalsocoverswider

tomeettherequirementsofaccountingstandards.

environmentalconsiderationssuchasbiodiversity,

Otherstakeholders,whoseneedswouldnottypically

aswellassocialresponsibilityandgovernance.

bemetbytraditional?nancialreporting,havealso

beenseekingadditionalinformation.Asaresult,theInrecentyears,agrowingbodyofregulations,

annualreportstartedtoincludemorenon-?nancialstandardsandguidancehasemergedinrelationto

information.Thisinformationissometimesreferredtosustainabilityreporting,withanoverallaimofhelping

asnarrativereporting.companiestocommunicatepertinentinformation

aboutsustainabilitymattersinacoherentand

Non-?nancialinformationisabroadterm,which

meaningfulway.

includesdetailsofthecompany’sapproachto

businessrisksandopportunities,andtobroaderCreatedwiththebackingoftheG7,theG20,the

societalandethicalissues.ItalsocapturesInternationalOrganisationofSecuritiesCommissions

managementdiscussionandanalysisandcorporate(IOSCO),theFinancialStabilityBoardandothers,

governancedisclosures.ThepurposeofprovidingtheISSBislookingtobuildontheworkofexisting

thisinformationisnotalwaysclearandvariesreportinginitiativestodevelopahigh-quality,

considerablydependingonwhoyouspeaktocomprehensiveglobalbaselineofsustainability

–anissuewewillreturntolaterinthisreport.disclosuresfocusedontheneedsofinvestorsandthe

?nancialmarkets.

Onecommonaimisfornon-?nancialinformation

toincreasetransparency.ThisinturnshouldenableThe?rsttwoIFRSSustainabilityDisclosureStandards,

investorsandotherstakeholderstohaveabetterIFRSS1GeneralRequirementsforDisclosureof

understanding–andthereforemorecon?denceSustainability-relatedFinancialInformationandIFRS

–aboutanentity’sriskmanagement,governance,S2Climate-relatedDisclosures,incorporateandbuild

strategy,performanceandprospects.ontheworkofthebodiesdepictedin?gure2.The

ISSBisalsoworkingwiththeGRI,whosewidelyused

Theapproachtonon-?nancialreportingvaries,with

standardsareaimedatbroaderstakeholders,to

governmentsandregulatorsintroducingnewlocal

ensurethatthetwosetsofstandardsarecompatible

requirementsinresponsetoavarietyofstakeholder

andinterconnected.

demandsand/orforpoliticalpurposes.Eachnew

requirementtypicallyleadstoanincreaseintheElsewhere,theEU’sESRSwereadoptedbythe

sizeandcomplexityofannualreports,resultinginEuropeanCommissioninJuly2023.IntheUS,there

concernsaboutclutterandinformationoverload.havebeensomeimportantinitiativesatstatelevel.In

AconsequenceofaddingnewrequirementsinMarch2024,theSecuritiesandExchangeCommission

suchapiecemealwayisthatannualreportscanlack(SEC)?naliseditsrulestoenhanceandstandardise

coherenceandtheconnectivitythatinvestorsneed.climate-relateddisclosures.

7

FIGURE2:EVOLUTIONOFTHEINTERNATIONALSUSTAINABILITY

STANDARD-SETTINGLANDSCAPE

PRE2021

Withsustainabilityfactors

becomingamainstreampart

ofinvestmentdecision-making,

itbecameapparentthatthis

fragmentedlandscapeoflargely

voluntaryrequirementswas

not?tforpurpose.Acommon

globalapproachwasneededif

meaningfulcomparisonswereto

bemade.

SASB

TCFD

TaskForceon

Climate-related

Financial

Sustainability

Accounting

StandardsBoard

Disclosures

IIRC

International

Integrated

ReportingCouncil

GRI

GlobalReporting

Initiative

CDSB

ClimateDisclosure

StandardsBoard

2021TO2022

In2021,muchprogresswas

made,withtheVRFformedas

amergeroftheIIRCandthe

SASBinJuneandtheISSB

subsequentlylaunchedatthe

COP26summitinGlasgowin

November.During2022,the

CDSB,followedbytheVRF,

werebothconsolidatedinto

theIFRSFoundation.

VRF

ValueReporting

Foundation

ISSB

InternationalSustainability

StandardsBoard

POST2022

TheISSBstandardsarebased

ontherecommendationsofthe

TCFD,whichwasdisbandedin

2023followingthe?nalisation

ofthe?rsttwoISSBstandards.

TheISSBworkstogetherwith

theGRIunderacollaboration

agreement.

ISSB

InternationalSustainability

StandardsBoard

GRI

GlobalReporting

Initiative

TCFD

Disbanded

8

4

4.KEYSTANDARD-SETTINGLESSONS

CLARITYOFPURPOSE

ANDINTENDED

AUDIENCE

4.1

KEYFEATURESOFEFFECTIVE

ACCOUNTINGSTANDARDSETTING

TheIASB’sConceptualFrameworkexplains

thattheobjectiveofgeneralpurpose?nancial

reportingisto“provide?nancialinformationabout

thereportingentitythatisusefultoexistingand

potentialinvestors,lendersandothercreditorsin

makingdecisionsrelatingtoprovidingresources

totheentity”.Whileotherparties–including

governments,regulators,ratingagencies,customers,

employeesandmembersofthepublic–may?nd

generalpurpose?nancialreportsuseful,theyare

notconsideredtheprimaryusersofsuchreports.

Seekingtoaddresstheneedsandinterestsofallthe

otherusersrisksaddingmoreandmoreinformation

totheannualreporttothepointwhereitobscures

whatisimportanttoitsprimaryusers.

TheIASB’sConceptualFrameworkalsoclearly

de?nesmateriality,explainingthatinformationis

materialif“omitting,misstating,orobscuringit

couldreasonablybeexpectedtoin?uencedecisions

thattheprimaryusersofgeneralpurpose?nancial

reportsmakeonthebasisofthosereports”.

TheseIASBde?nitionsarecritical.Theymakeitclear

who?nancialreportingisforandhowentitiesshould

assesswhatinformationshouldandshouldnotbe

includedintheir?nancialstatements.Assuch,they

promotetheobjectivethat?nancialstatements

arefocusedontheprimaryusers’decisionsabout

providingresourcestotheentityandarenot

crowdedwithinformationnotmaterialtothemin

makingthosedecisions.

Effectivestandardsettingmustseekabalance

betweenrelevance,comparabilityandenforceability.

Balancingthesecompetingobjectivescritically

dependsonwhatthereportedinformationistobe

usedfor.Clarityofpurposeisparamount.

CHALLENGESFACEDBY

SUSTAINABILITYSTANDARD-SETTERS

TheISSB’ssustainabilitydisclosurestandardshave

beendesignedspeci?callytoprovidereliable

informationtoinvestors.Theyaimtohelpcompanies

communicatehowtheyidentifyandmanagethe

sustainability-relatedrisksandopportunitiesthey

faceovertheshort,mediumandlongerterm.The

standardsrelyontheconceptof?nancialmateriality.

Assuch,theysharethesameapproachtomateriality

astheIASB’saccountingstandards,withdisclosures

onlyrequirediftheyarereasonablyexpectedto

in?uencedecisionsoftheprimaryusers(investors).

Despitethisclearlyarticulatedapproachand

intendedaudience,confusionremainsaboutthe

purposeofsustainabilityreportingstandardsmore

generally.Wehaveidenti?edtwoissuesthatare

contributingtothisconfusion.

Firstly,thereisalackofconsensusamong

stakeholdersaboutwhatsustainabilityreporting

isandwhoitisfor.SomeagreewiththeISSB’s

approachandseeitasawayofhelpingbusinesses

focusoncreatinglong-termvalueforinvestorsby

encouragingthemtobehaveinamoresustainable

way.Othersseeitasameansofsharinginformation

abouthowthebusiness’sactivitiesimpacton

sustainabledevelopmentsothatstakeholderscan

makeinformeddecisionsaboutwhotheywantto

interactwith,buyorsellto,workforandsoon.There

arealsothosewhoseeitasawaytohelpcountries

andcompaniesgettonetzeromorequickly.Perhaps

itencompassesallthesethings.However,there

seemstobelittleclarityaboutandagreementon

therealpurposeofsustainabilityreportingamong

businessesandotherstakeholders.

IncontrasttotheISSB’sapproach,theESRSand

GRIstandardsareaimedatmeetingtheneedsof

abroadergroupofstakeholders.Thisincludes

notonlyinvestorsbutalsocustomers,suppliers,

employees,localcommunities,regulatorsand

others.Conse