Are We Headed Toward a New Sustainability Standards Board To Harmonize Corporate ESG Disclosure? - Some Important Developments You Should Know About

The public discourse about the current (and future) state of corporate sustainability / ESG disclosure and reporting continues to steadily expand, especially in Europe and North America, Asia, and other regions. What new or expanded accounting standards might be developed to create more harmony in corporate disclosures? To establish more comparability, standardization and credibility for public company reporting?

The developments parallel the expansion of chatter about “which reporting frameworks or standards to use” for ESG disclosure, accompanied by the continuing expansion of possible disclosure approaches to adopt for expanding issuers’ non-financial disclosure, and the rising complaints about “disclosure fatigue” in the corporate sector.

The European Commission, individual EU states, and the International Accounting Standards Board (IAS) and IFRS Foundation have proposed and/or adopted more guidance for consideration by both sides of the capital markets – for corporate issuers, and asset owners and managers. And for national accounting standards boards, sovereign state regulators, and others involved in the public debate about the future directions of corporate sustainability disclosure.

The United States is inching toward “something” for encouraging or even requiring in some way ESG-focused corporate disclosure. (It’s like a caterpillar slowly making its way from here to there. And suddenly it is out of sight.) Perhaps, as a growing number of asset owners and managers have been hoping, with new chair and commissioners the Securities & Exchange Commission will adopt ESG guidance, recommendations, new or expanded disclosure rules, for public-traded entities. This is possible with a new administration in charge in Washington, DC.

The securities regulators of the world have their own membership organization – IOSCO, the International Organization of Securities Commissions – and the group’s Sustainability Task Force (the STF – more initials for you) has been working on recommendations for the global and respective nations’ securities regulators consideration. There is an urgent need, says IOSCO, to improve the consistency, comparability, and reliability of sustainability reporting, beginning with climate change risks and opportunities. (The task force notes that companies are selectively using different frameworks for their sustainability-related disclosures.)

IOSCO members include the Securities & Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the United States; both agency’s heads are members of the board. The EU’s European Securities and Market Authority, and China’s Securities Regulatory Commission are members.

There are three priorities set out for the member nations’ regulators to consider: (1) encouraging globally-consistent standards; (2) promotion of comparable metrics and accompanying narratives; (3) coordination across approaches to drive international consistency of disclosures.

Among the recommendations to the broad membership of sovereign regulators, the task force recommends teaming with the IFRS Foundation – this involves putting the next phase of work under the foundation umbrella to help establish a new Sustainability Standards Board (SSB) to work alongside the International Accounting Standards Board (IASB) to develop “an effective system architecture for setting sustainability disclosure standards”. (With us so far?)

And then there is a sweeping set of actions that could be taken by the involved organizations in the IOSCO announcement – we’ve included the news release in the Top Story roundup for you.

The IFRS Foundation is a London-based entity, incorporated in the U.S. (Delaware) to develop and promote the IFRS (International Financial Reporting Standards) through the IASB, which it oversees. The aim is to develop a single set of high-quality global accounting standards to bring transparency, accountability, and efficiency to global financial markets. The IFRS (standards) are required in more than 140 jurisdictions. The foundation is governed and overseen by trustees who are accountable to a monitoring board of capital market authorities; that’s a means of linking the work of the IFRS to the Foundation to the broad universe of public regulatory and accounting authorities.

Recently the foundation trustees floated the idea of establishing a new Sustainability Standards Board to build on the existing work of other organizations to create climate-related disclosure standards - to harmonize and standardize ESG metrics, frameworks, and disclosure requirements. This new body would leverage the decades of work of the IASB and IFRS Foundation, at least in the jurisdictions using IRFS Standards.

(The pioneering accounting body members of the IASB five decades back included Australia, Canada, France, Germany, Mexico, the Netherlands, UK, Ireland, and the United States, to consider adopting standards for cross-border stock market listings; in 2000 the IASB became a full-time standards body with a three-tiered governance structure.)

Elements of public discourse about all of this is presented in this week’s newsletter. Complicated story – we’re sharing for you the recent news about where this might lead. The G&A Institute team’s work is all about helping corporation navigate the many ESG disclosure frameworks and standards to leverage the leading standards’ recommendations to provide fulsome data and narrative on ESG performance for investors and other stakeholders. We closely follow developments in the field and share information with our global colleagues – such as in this issue of the newsletter. Lots going on!

This is just the introduction of G&A's Sustainability Highlights newsletter this week. Click here to view the full issue.