A quest for consistency, comparability and reliability

October 15, 2021

Published: The Accountant

As the IFRS Foundation works to establish the International Sustainability Standards Board (ISSB), Joe Pickard speaks to ACCA’s head of sustainability, Emmeline Skelton, about the importance of a comparable set of standards 

The Accountant: There are currently a range of sustainability standards available. How impactful do you think the establishment of the ISSB will be?

Emmeline Skelton: Competing standards and frameworks can be confusing to investors, and choosing a standard to measure against may not show a true reflection of companies’ climate risks.

The ISSB aims to address the need for sustainability data that is crucial for organisations’ value creation, which is globally consistent, comparable and reliable. The opportunity of ISSB setting up a single set of standards that companies can report against is welcomed in a time where companies need to report on their impact on climate change.

As the ISSB purpose sets out: “These standards should require high-quality, transparent and comparable information in corporate reports to help investors and other participants in the world’s capital markets in their decision-making, and connect with multi-stakeholder sustainability reporting.”

TA: Do you think the standards set by organisations such as GRI and the Value Reporting Foundation will still be used after the establishment of the ISSB? Will they still be relevant?

ES: Organisations such as CDP, CDSB and GRI have inputted in the ISSB working group, where these complementary frameworks can be built on when developing the ISSB.

It would be a helpful step for the IFRS foundation to define the meaning of terms ‘enterprise value’ and ‘sustainability’ in the context of the standard-setting proposals more clearly, highlighting that the name ‘IFRS sustainability standards’ may not accurately reflect the intended scope of the future standards.

There is a need for a global baseline of standards on a wide range of topics, extending beyond financial performance and position, but equally beyond environmental or social impact. They include intangibles not recognised on the balance sheet, such as innovative processes, know-how and corporate culture as represented by the six interconnected capitals in the International Integrated Reporting (<IR>) Framework.

TA: Do you see further alignment between these standard setters in a similar manner to the creation of the Value Reporting Foundation?

ES: The creation of the Value Reporting Foundation was a merger between the Sustainability Accounting Standards boards and the International Integrated Reporting Council. They were complementary tools where companies used them together because the integrated reporting framework provides principles-based guidance for how a report should be structured and what kind of content it should include, and then the SASB standards provide more detail.

The Value Reporting Foundation is participating in the IFRS foundations technical readiness group to feed in to plans for the ISSB. In addition, the ‘group of five’ – including CDP, CDSB and GRI – have inputted in to the ISSB working group. There is a building block of information that the ISSB can develop based on these complementary standards. Just like the creation of the Value Reporting Foundation, there are complementary tools for the ISSB to build on.

TA: How strong is the appetite for sustainability standards among your members?

ES: To have a single set of standards will help our members to report their organisations’ impacts on climate change. Members will welcome the standards at a time when investment in companies that prioritise sustainability is increasing.

Since 1904, being a force for public good has been embedded in our purpose. In December 2020, we made commitments to the UN Sustainable Development Goals which we are measuring and will report on in our annual integrated report.

No other profession can exert as much influence on the future direction of business or be in the strategically sensitive position to highlight the importance of rigorous non-financial disclosure, and to act as champions for sustainability.

TA: How can accountants position themselves to advise clients on sustainability issues?

ES: Accountants are in a unique position to make real, impactful change and be at the centre of delivering on the SDGs. From reporting on CO2 emissions to measuring social impact, the skills, judgement, and all-round, data-informed view of business possessed by professional accountants make them a catalyst for delivering this prosperity.

We have a short timeline to meet these ambitious goals, but we also have a sound framework to start future-proofing business and working our way towards a more sustainable world.

TA: What more can the accountancy profession be doing to improve sustainability reporting?

ES: <IR> is a framework for corporate reporting that encourages companies to think holistically about their actions, looking beyond the financial bottom line to their social, economic and environmental footprints.

The accountancy profession can improve sustainability reporting through applying their professional expertise in measurement and management to all forms of capital – natural, social, and not merely financial.

A well-managed business in the 21st century is one that has a holistic view, and that acknowledges the depletion of non-sustainable assets and the downsides of non-sustainable practices. Companies that have already adopted this approach are financially outperforming their counterparts in many cases.

Perhaps surprisingly to some outside the profession, accountants have been bold pioneers for creating mechanisms for robust and comparable wider reporting. We now have a number of useful frameworks for measuring, monitoring and reporting on non-financial information.

Many subgroups of the accountancy profession are involved in the development of natural capital accounting and reporting initiatives, working with bodies and initiatives like the Global reporting Initiative, the Sustainable Accounting Standards Board, the Prince of Wales’s Accounting for Sustainability, and management accounting tools like the Natural Capital Protocol to develop a framework for accounting for social natural capital and sustainability in financial reporting.

While natural capital has just reached the periphery of traditional financial reporting standards, many of those in the profession are voluntarily accounting for and reporting on all the capitals on which an organisation relies and affects.

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