Connecting businesses and investors on sustainability impacts
As highlighted in the 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.
This paper has been designed as a summary of a specific standard or framework. It has been 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.1
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
The Sustainability Accounting Standards Board (SASB), based in the United States, was established in 2011 with the original intent of providing standards for the U.S. capital markets. The majority (52%) of companies using the standards are currently domiciled within the United States.2 However, the reach of the SASB is increasingly global, and its mission is, ‘to help businesses around the world identify, manage and report on sustainability topics that matter most to their investors’ with a focus on what is financially material. The standards were launched in 2018.3
In September 2020, as outlined in Sustainability Standards and Frameworks: Evolution Overview, five of the leading sustainability and integrated reporting organizations issued a Statement of Intent to Work Together Towards Comprehensive Corporate Reporting.4
Following the launch of this Statement of Intent, the SASB and the IIRC joined forces to create the formation of the Value Reporting Foundation (VRF).5 The VRF has three core resources, the SASB Standards, the Framework, and the Integrated Thinking Principles, which were published in December 2021.
Very much as a result of efforts outlined in the Statement of Intent, coincident with the COP 26 meeting in November 2021, the IFRS Foundation announced the formation of the International Sustainability Accounting Standards Board (ISSB) to develop a ‘comprehensive baseline of high-quality sustainability disclosure standards’.6 In connection with the formation of the ISSB, the IFRS Foundation also announced its plans to complete the consolidation of the CDSB and the VRF into the new board by June 2022. They also announced the publication of two prototype climate and general reporting standards.
While the VRF will be consolidated into the IFRS Foundation, the SASB Standards will continue to be the primary input source for industry-specific requirements that will be established by the ISSB. Since these industry-specific standards will be subject to ISSB due process requirements, the existing SASB Standards, as outlined in the next section, will continue to be relevant.