ISSB Updates Standards in a Further Step Towards a Common Global Standards

The International Sustainability Standards Board (ISSB), the standard-setting body working to establish a globally recognised set of sustainability reporting standards, has published amendments to the US-based Sustainability Accounting Standards Board (SASB) to further align the two sets of standards.

The ISSB, which has to date released two sets of standards, the IFRS S1 released in June this year which outline standards for companies to disclose information about its sustainability-related risks and opportunities in financial reports, and the other IFRS S2, a topic-based standard that outlines more specific disclosures relating to climate risk. The two are designed to be applied together.

The ISSB has been working on a program to make its standards interoperable with the SASB standards, which are already widely used around the world by more than 3,200 companies. The ISSB’s standards already encourage reference to the SASB standards but the recent amendments are designed to help companies to apply the SASB standards better. 

The amendments mark another step towards a single set of international reporting sustainability standards, with the US-based SASB passing its ongoing projects and responsibility for its sustainability metrics rulebook to the International Financial Reporting Standards (IFRS) Foundation, which set up the ISSB, in June 2022. The ISSB has committed to building on the industry-based SASB Standards and embedding SASB’s industry-based approach to standards development.

The updated SASB standards can be accessed on the usual SASB site here.

The technical basis for the changes can be found here.

The ISSB standards, which now effectively incorporate the SASB standards, are just one of the sets of standards in use however. The other major sets of widely used standards are those developed by the Global Reporting Initiative (GRI), which was formed in 1997 in the wake of the Exxon Valdez oil spill catastrophe in 1989, to create the first accountability mechanism to ensure companies adhere to responsible environmental conduct principles.

The GRI launched its first set of principles in 2002 and, while updated a number of times since, they are also widely used around the world. There was a major update to its Universal Standards in 2021 and Sector Standards progressively rolled out the same year, with additional specific standards relating to tax in 2019 and waste released in 2020. Based in the Netherlands, GRI claims more than 10,000 companies and organisations in over 100 countries use and make public disclosures against its standards.

Unlike the SASB and ISSB standards, which identify the environmental, social and governance issues most likely to be material to investors, the GRI reporting standards require companies and organisations to disclosure information about their own impact on the environment. The GRI and ISSB say each other’s standards are complementary. The IFRS has described them as two pillars of international sustainability reporting. The ISSB standards being investor-focused capital market standards and the GRI reporting requirements designed to meet multi-stakeholder needs.

The two organisations signed a Memorandum of Understanding in March 2022 to work towards to promote interoperability between the two sets of standards.

 In addition to these two standards, the EU has developed its own set of disclosure standards, the European Sustainability Reporting Standards (ESRS). Developed by the European Financial Reporting Advisory Group (EFRAG) technical group and adopted by the European Commission in July 2023, these standards form the basis of the requirements for many companies operating in the EU to report against starting from 2024.

It is these standards that the EU’s Corporate Sustainability Reporting Directive (CSRD), which entered into force in January 2023, requires companies to report against starting 1 January 2024. The CSRD effectively updates the corporate sustainability reporting requirements throughout the EU where mostly large companies have been required to make sustainability disclosures under the Non-Financial Reporting Directive (NFRD) which became law in 2014. Under the newer CSRD, a broader set of large companies, as well as listed SMEs, will now be required to report on sustainability.

The European Commission and the IFRS have been engaged in talks this year to facilitate the interoperability of the ISSB standards and the ESRS standards, but it is the ESRS standards that will be required for reporting purposes in the EU from 2024.