Why the IFRS Foundation’s announcement at COP26 is an important first step towards corporate accountability

At the recent COP26 in Glasgow, the International Financial Reporting Standards Foundation (IFRS) announced that it would be establishing an International Sustainability Standards Board (ISSB). The IFRS also announced that it would be including the Value Reporting Foundation and Climate Disclosure Standards Board in the Board, and the publication of two prototype standards developed by the Technical Readiness Working Group.

Comparable, reliable, and consistent sustainability data is critical for our work at the World Benchmarking Alliance, as it informs our free and publicly available benchmarks. Sustainability disclosures enable different stakeholder groups, including investors, governments and civil society, but also businesses themselves, to understand and compare company performance, create accountability, and drive the necessary change in the private sector to achieve sustainable development. Without comparable data, businesses cannot be held accountable for their role in the systemic transformations needed to rebuild a world that works for people and the planet.

That is why we warmly welcome the IFRS Foundation’s announcement to create a level playing field for sustainability disclosures through globally aligned standards. This is an essential first step in creating the incentives needed to align company performance with global goals. The IFRS Foundation is well placed to develop such standards that can provide a global baseline for the reporting of sustainability information, to ensure consistency and comparability, while giving issuers and jurisdictions that go beyond the limited scope of such standards the opportunity to effectively do so. The multi-locational model of the Board will hopefully contribute to a globally inclusive standard development process for various stakeholders from all regions.

Why it’s great that the IFRS Foundation will continue to build on existing initiatives

The incorporation of the Value Reporting Foundation and the Climate Disclosure Standards Board, both members of our Alliance, also contributes to a simpler and more effective reporting landscape. We have worked with the Value Reporting Foundation, Climate Disclosures Standards Board and Global Reporting Initiative over the past year to advocate for more consistent and comparable corporate disclosure frameworks within the European Union, United States and at the global level, and are thrilled to see this becoming concrete.

The World Benchmarking Alliance’s involvement in the Impact Management Platform – a collaboration between leading providers of public good standards and guidance for managing sustainability impacts – also aimed to drive the demand for a consistent and comparable reporting landscape that addresses stakeholder needs, including companies themselves, investors, civil society and others. As one of the main partners, we are delighted that the Impact Management Platform (IMP) was launched this week. The work of the IMP has been instrumental for the Prototype Standards released by the Technical Readiness Working Group and we are proud to be a member of this initiative.

A balancing act between global alignment and sustainability impacts

The establishment of the ISSB is a first and essential step. However, in order for it to be a meaningful one in the context of sustainable development, many more will have to be taken. The IFRS Foundation has a mandate to develop standards that cover enterprise value with a focus on climate. However, in order to contribute to global agendas such as the Sustainable Development Goals, standards will have to become more ambitious, and sooner rather than later. Firstly, the economic, social and environmental components are equally important for sustainability and need to be addressed together instead of separately. Secondly, in order to contribute to a sustainable future, reporting standards will have to align with such global objectives and move beyond a purely enterprise-value lens. Some jurisdictions, like the European Union, already have plans to move towards an approach that takes into account not just the impact of sustainability information on the business, but also the impact of a company on sustainability outcomes. This is also the information that stakeholders need, including investors – the actors for whom such reporting information should be useful, as per the objective of the IFRS Foundation.

Multistakeholder engagement will be essential moving forward

How do we keep the balance between the need for global alignment on the one hand and standards that contribute to sustainable development on the other? Meaningful multi-stakeholder engagement to develop the ISSB standards, both formally and informally, will be essential. Beyond international organisations such as the United Nations and Organisation for Economic Co-operation and Development, that will already be formally included in the consultation processes, engagement with stakeholders that cover the full range of Environmental, Social and Governance impacts would help the IFRS Foundation to fulfil the potential that international sustainability standards bring. We applaud the setting up of a multi-stakeholder expert consultative committee, but also within the Board itself. A broad range of expertise will have to be represented, so that real economy and sustainable development considerations are at the heart of decisions around the final standards.

At the World Benchmarking Alliance – together with our multi-stakeholder Alliance of over 280 organisations from civil society business platforms, multilateral organisations and investors – we are ready to help ensure that the standards are fit for the future and become effective tools for investors, issuers and other stakeholders, ultimately contributing to sustainable development.

Iris Millenaar is our Public Policy Manager and supports policymakers to translate our benchmark results into public policy action.