As highlighted in Sustainability and business — the call to action: build back better report, we have embarked on a programme of thought leadership exploring accountancy and sustainability. This is part of a series of briefs exploring the topic of sustainability, business and the finance professional’s key role. These briefs will help organisations consider the sustainability issues, how to integrate them into their long-term decision-making, and how to incorporate these issues into internal and external reporting.
One component of this initiative is a collection of summaries of specific standards or frameworks, written from the management accounting perspective. As a finance professional, you are likely to encounter one or many of the sustainability frameworks and standards. It is a crowded and fragmented landscape, with slightly different terms, inconsistent language and various measures between the numerous methodologies. Adding to the confusion is whether adoption is voluntary or mandatory, and that some organisations work with combinations of standards and frameworks at the same time. Finally, the approaches to reporting also differ. They range from annual reports, integrated reports, sections on an organisation’s website aimed at a specific audience or a stand-alone sustainability report.
Fortunately, there are several initiatives underway to address this fragmented accounting and reporting landscape and build a coherent global approach to corporate reporting that encompasses both financial and non-financial reporting. This brief is intended to capture highlights of significant recent developments on this front.
A framework or a set of standards? The difference A framework is a set of principles-based guidance for how information can be structured and prepared, and what broad topics should be covered. A set of standards are specific, replicable and detailed requirements for what should be reported for each topic. They are rules-based requirements.
Background In September 2020, recognising the urgent need to address the confusion around sustainability information and the need for a comprehensive solution, five of the leading sustainability and integrated reporting organizations issued a Statement of Intent to Work Together Towards Comprehensive Corporate Reporting.1
The five leading organizations, which have become frequently referred to as the ‘Group of Five’, issuing the statement included CDP, Climate Disclosures Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Committee (IIRC) and Sustainability Accounting Standards Board (SASB). Their Statement summarizes discussions that were facilitated by the Impact Management Project (IMP), World Economic Forum (WEF) and Deloitte.
The statement asserted that the GRI, SASB, CDP and CDSB, along with the TCFD recommendations for climate-related reporting, guide the overwhelming majority of both quantitative and qualitative sustainability disclosures; also that the IIRC provides the integrated reporting framework that connects sustainability to reporting on financial and other capitals.
The intent of the collaboration was stated to provide:
Guidance on how their ‘frameworks and guidance can be applied in a complementary and additive way’,
A joint vision of how these elements can connect to financial accounting principles and serve as a starting point for a more coherent reporting system, and
A joint commitment to drive toward this goal through an ongoing work programme and willingness to work collaboratively with other stakeholders.2
In November 2020, the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) announced their intention to merge into a combined organisation, The Value Reporting Foundation (VRF), which was consummated in June 2021.3 The VRF has three core resources, the SASB Standards, the (IR) Framework and a prototype for Integrated Thinking Principles published in December 2021.4
