by Kamayani Barshilia | March 25, 2024
The IFRS Foundation, a nonprofit organization, aims to create globally accepted accounting and sustainability disclosure standards that are high-quality, understandable, and enforceable. These standards are developed by two standard-setting boards: the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). In 2023, ISSB issued its inaugural sustainability standards IFRS S1 and IFRS S2 to create a common reporting language for disclosing the effect of sustainability and climate-related risks and opportunities on a company’s prospects to its investors.
The IFRS organized a sustainability symposium in New York in February 2024, bringing together over 1,000 investors, corporations, consultants, regulators, and policymakers worldwide to share experiences, gain practical insights on IFRS implementation, anticipate future trends in sustainability-related disclosures, and discuss the consolidation of sustainability disclosure landscape.
Here are the top four takeaways from the symposium attended by ClimeCo’s Sustainability, Policy, and Advisory team members, Kamayani Barshilia and Kat Kam:
1. Creating a global baseline for sustainability disclosures, reducing complexity and duplication for companies
To move away from the ‘alphabet soup’ of disclosures, IFRS S1 and S2 incorporate and harmonize various reporting frameworks –TCFD, SASB, Integrated Reporting, GRI, EU ESRS, CDSB, and WEF metrics. This consolidation ensures standard interoperability, easing the reporting burden for companies utilizing IFRS and other frameworks. In summary, the comparability of information in company-investor dialogue is the holy grail that ISSB is after.
2. Working with jurisdictions to foster adoption
The ISSB is collaborating closely with jurisdictions to promote regulatory adoption of its Standards, aiming to facilitate compatibility and minimize confusion for information users. The decision to mandate the use of IFRS Sustainability Disclosure Standards issued by the ISSB lies with jurisdictional authorities. However, the ISSB encourages voluntary adoption of its Standards, especially in jurisdictions where IFRS Accounting Standards are not mandated but investors seek relevant sustainability disclosures. In February, the ISSB released a preview of the Inaugural Jurisdictional Guide, aiming to assist jurisdictions in planning their journey of adoption of IFRS Standards. A comprehensive guide will follow the preview in the first half of 2024.
3. Continuing to garner global momentum
The Brazilian Ministry of Finance has announced the adoption of IFRS Standards into the country’s regulatory framework. Following an initial period of voluntary adoption starting in 2024, the Standards will transition to mandatory use, commencing in January 2026.
Other countries such as Singapore, Australia, Canada, Japan, Hong Kong, Turkey, Malaysia, Nigeria, and the United Kingdom are all gearing up for implementation as early as 2025.
4. Coordinating among different regulators may overstretch companies
IFRS S2, the climate-focused standard, presents an opportunity for some companies to stay ahead of existing regulatory reporting requirements emerging from the State of California, the European Union with CSRD and EU Taxonomy, as well as the finalized United States Securities and Exchange Commission (SEC) rule, among others. However, it also introduces additional pressure for coordination across different regulatory expectations, making coordination crucial in this landscape.
ClimeCo supports companies in aligning with IFRS and other sustainability reporting regulations and frameworks. To learn more, please contact us.
Glossary
- Climate Disclosure Standards Board (CDSB)
- Corporate Sustainability Reporting Directive (CSRD)
- European Sustainability Reporting Standards (ESRS)
- Global Reporting Initiative (GRI)
- International Financial Reporting Standards (IFRS)
- Sustainability Accounting Standards Board (SASB)
- Task Force on Climate-Related Financial Disclosures (TCFD)
- World Economic Forum (WEF)
About the Author
Kamayani Barshilia is a Senior Manager on ClimeCo’s Sustainability, Policy, and Advisory team. Her background is in helping businesses with their sustainability strategy from ideation to identifying priorities (materiality assessments) to target setting to reporting. She has worked with various industries, across different geographies.
