November 12, 2021
Published: Accountancy Europe
Accountancy Europe applauds Commissioner McGuinness’ approach to sustainability standards announced at COP 26 and the consolidation of VRF and CDSB under the IFRS Foundation
Accountancy Europe fully supports the European Green Deal ambitions. The world needs to transform its business model if we are to become sustainable. Reporting will help policymakers, financial markets and other stakeholders support and drive this change.
We welcome the approach by Commissioner McGuinness, including the objective of close alignment with global standards. This is particularly important as the IFRS Foundation launched the International Sustainability Standards Board (ISSB) and the Value Reporting Foundation (VRF) and Climate Disclosure Standards Board (CDSB) consolidation within the ISSB. We commend all parties involved for putting the global public interest ahead of their own respective agendas.
The IFRS Foundation move is a significant step to build a global eco-system for sustainability reporting that delivers more transparent and comparable sustainability information for investors. It will also bring much needed consolidation of sustainability disclosure standards on a global scale. We therefore welcome the prototype climate and general disclosure requirements
Borrowing the Commissioner’s words, we welcome “the IFRS Foundation initiative to develop a common global baseline” […] “global standards should be a common floor, not a ceiling that limits those that want to go further and faster”. We will continue to support the EU’s efforts.
Facilitating EFRAG’s work to achieve the CSRD objectives
Proper standards setting is resource intensive and specialised expertise is in high demand. The ISSB will represent considerable additional resources devoted to sustainability reporting that EFRAG should take into account in its own work under the EU Corporate Sustainability Reporting Directive (CSRD).
The much-awaited IFRS Foundation decision is a game changer and can make Europe and the world save considerable time and efforts. In a field where resources, talent and expertise are scarce, rapid progress will depend on effective cooperation and we share the importance of two-way cooperation outlined by the Commissioner.
We therefore welcome the choice of Frankfurt to locate the ISSB’s Board and Chair’s offices which should help enhancing close cooperation with Europe.
Accountancy Europe has long called for consolidation in sustainability reporting as multiple standards and frameworks confuse stakeholders and preparers. The European Commission was right to initiate the consolidation process and give EFRAG an essential mandate. We encourage the EU to continue exercising global leadership and foster more rapid progress.
Building on international standards
We fully support the Commissioner’s objective to “build on what exists, and seek as much alignment as possible, while also meeting Europe’s ambitious goals”.
To this end, the EU should keep the possibility to use the international standards that, after a robust assessment and due process, meet its needs. This will ensure smooth adoption, accelerate the take-up by business while minimising costs for European entities and standards-setters.
Where relevant, international standards should be assessed on their contribution to the European common good. In particular, it will be essential to accelerate the EU’s Green Deal ambitions and protect the European social model. Preserving the EU’s strategic autonomy and sovereignty choices will be equally important. Europe has large SMEs and public sectors that also need to be supported in their transition. The EU economy financing is less dependent on financial markets than other areas of the world, especially regarding its large SME sector where banking plays a critical role. Therefore, the EU’s holistic multi-stakeholder approach is critical. Accountancy Europe has long called to move reporting to a stakeholder centric approach and will continue to support the EU’s efforts.
Following a building block approach, the EU will be able to make additions to global standards to meet its goals and own requirements, provided EFRAG is appropriately financed. Differences from international standards should be duly assessed to ensure consistency, cost efficiency and smooth adoption. It is also important to pay attention to terminology, structure and reporting format. Deviations in these areas can create delays, confusion and unnecessary costs.
Businesses’ financial and non-financial information only make sense together. We encourage the EU to aim for a system that connects both to foster economic transformation, noting that reporting is not a magic bullet.
Leadership and cooperation for consistent standards
The EU and the ISSB should fully engage in two-way cooperation. We call on all players to exercise leadership and responsibility and cooperate genuinely to deliver a globally consistent set of standards as soon as possible.
It is time companies report on their impacts and progress in a comparable and verifiable way. The climate time bomb continues ticking, natural resources are rarefying, and vital biodiversity destruction is accelerating. The European Commission, Parliament and Member States can count on the accountancy profession to help transform the EU into a modern, resource-efficient and competitive economy.