As sustainability issues have become more mainstream, stakeholders have put increasing pressure on companies to report consistent and comparable sustainability information. That’s easier said than done, however, given there’s no internationally recognised agreement on what that ‘consistent and comparable’ information should look like.

Reassuringly, there are a number of initiatives underway to consolidate the huge range of sustainability standards and frameworks and form some sort of consensus. But the landscape remains complex. Here’s our round-up of the progress of each of these initiatives – but it comes with a disclaimer: unlike our other Reporting Horizons briefings on ESEF and TCFD, this article may be more ‘light snack’ than bitesize.

Value Reporting Foundation

The Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC) recently announced their intent to merge into the ‘Value Reporting Foundation’. Their combined aim is to offer investors and companies a comprehensive corporate reporting framework to drive global sustainability performance. 

What’s next?

The Value Reporting Foundation expects to ratify its merger in June 2021. In the meantime, the FRC has encouraged UK public interest entities to report using the SASB metrics relevant to their sector. Investors are increasingly expecting to see SASB compliance.

WEF’s ‘Stakeholder Capitalism Metrics’

A paper by the World Economic Forum (with input from prominent business leaders and the Big Four accounting firms) proposes a core set of metrics and recommended disclosures to align mainstream reporting on environmental, social and governance (ESG) indicators. The metrics are based on existing standards and divides disclosures into four pillars – principles of governance, planet, people, and prosperity.

What’s next?

In January 2021 over 60 global companies (including Dow, Unilever, Nestlé, PayPal and Sony) had already committed to implementing reporting on the Stakeholder Capitalism Metrics. While there is growing momentum to support the principles of stakeholder capitalism, it is still unclear whether the framework will be widely adopted and whether it will create a base level of transparency and comparability.

‘Reporting on enterprise value’

After a joint statement of intent to work together towards developing a ‘comprehensive corporate reporting system’, leading sustainability and integrated reporting organisations CDP, CDSB, GRI, IIRC and SASB have published a paper demonstrating how current frameworks and standards (including TCFD) can be used to provide a starting point for the development of global standards for sustainability-related financial disclosure.

What’s next?

They state ‘we offer this content in the form of prototypes so that it can serve as useful technical input, both for the Trustees of the IFRS Foundation and also for current thinking by global, regional and jurisdictional policymakers’.

IFRS sustainability standards

After a consultation in 2020, the IFRS Foundation and IOSCO have announced the intention to work together to establish a new board for ‘setting sustainability reporting standards that meet the needs of the capital markets’. The Trustees of the IFRS Foundation have indicated they will build on existing frameworks, including considering the ‘reporting on enterprise value’ prototype described above.

What’s next?

We suspect it will be a few years yet before standards are agreed upon and published, but a lot of eyes are eagerly watching for developments – this has the potential to hold a lot of weight internationally. Published next steps state ‘the Trustees remain on track to make a final determination about a new board in advance of the November 2021 United Nations COP26 conference, including the detailed analysis of feedback on the requirements for success outlined in the 2020 Consultation’.

EFRAG’s EU mandatory sustainability standards

The European Financial Reporting Advisory Group (EFRAG) has been tasked by the European Commission to develop mandatory sustainability reporting standards for the EU. EFRAG recognises the importance of coordinating the development of EU sustainability reporting standards with existing and emerging global initiatives, but also that ‘standard-setting for sustainability reporting must reflect the needs embedded in the EU’s evolving sustainable development and sustainable finance policies and already enacted legislation’.

What’s next?

The first set of ‘core’ standards is expected for the reporting year 2023 (i.e. for reports published in 2024). A second more extensive set of standards will follow a year later.

That’s the scoop - but what to make of it?

While it’s a big positive that so many of these leading organisations are taking steps towards consolidation, it remains frustrating to see so many concurrent initiatives trying to achieve the same thing. We’re encouraged to see commitment for further collaboration but suspect it will be a few years before the landscape settles down.

A lot of these initiatives are longer-term and have yet to publish solid conclusions. Nonetheless, now is the ideal time to review which sustainability frameworks you follow across your corporate reporting suite, consider if they are right for you and, critically, setting you up for success in light of the ongoing developments. Perhaps you want to comply with SASB for the first time and don’t know where to start. Or maybe you’re interested in following the WEF’s ‘Stakeholder Capitalism Metrics’? Our sustainability team can help you take those first steps.

As always, the best reporting comes when disclosure isn’t generic and tick-box but told through the bespoke lens of your company. That’s the tricky bit – and where we love to help. For more information on sustainability standards or to chat about any of your reporting challenges, get in touch.

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