The IFRS Foundation’s International Sustainability Standards Board (ISSB) today announced a series of actions aimed at harmonizing corporate sustainability reporting requirements, with a focus on areas such as the disclosure of corporate climate transition plans and the measurement of greenhouse gas (GHG) emissions across the value chain.
As part of the new initiative, which is part of the ISSB’s new two-year work plan, the ISSB announced that the IFRS Foundation would assume responsibility for the Transition Task Force’s disclosure framework and that it had signed an agreement with the GHG Protocol to ensure compatibility between the organizations’ greenhouse gas reporting standards.
The ISSB was launched in November 2021 at the COP26 climate conference with the aim of developing IFRS standards on sustainability disclosure. This is driven by demand from investors, companies, governments and regulators. The aim is to create a global basis for disclosure requirements that enables a consistent understanding of the impact of sustainability risks and opportunities on companies’ prospects.
One of the main objectives of the ISSB was to reduce the complexity of the different sources of sustainability reporting initiatives. At its creation, the ISSB consolidated the Climate Disclosure Standards Board (CDSB), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). Last year, the IFRS Foundation announced that it would take over responsibility for monitoring the progress of corporate climate-related disclosures from the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD).
The ISSB issued its first general reporting standards on sustainability (IFRS S1) and climate (IFRS S2) last year and subsequently launched a consultation on its priorities for the next two-year work plan. The Board recently announced that its future activities will focus on the following priorities: connecting the IFRS standards on sustainability and financial disclosure and interoperability between its sustainability standards and others. In addition, the Board plans to launch new research and standardization projects, support the implementation of IFRS S1 and IFRS S2, improve the SASB industry standards and engage stakeholders.
The creation of the Transition Plan Taskforce (TPT) was also announced at COP26 by then Chancellor of the Exchequer and current British Prime Minister Rishi Sunak and officially launched in April 2022. The Taskforce published its TPT Disclosure Framework in October 2023, which aims to provide a “gold standard” for companies to develop and report on their climate change plans.
According to the ISSB, the IFRS Foundation’s adoption of the TPT’s disclosure-specific materials comes as a growing share of climate-related corporate disclosures include reporting on targets for the transition to a lower-carbon economy. The move aims to support the application of these disclosures – including IFRS S2’s requirement to disclose information when a company has a transition plan – and reduce the fragmentation of information provided in the market. The materials will now be hosted on the IFRS Sustainability Knowledge Hub. The IFRS Foundation intends to use them in the short term to develop educational materials and establish compatibility with IFRS S2, and in the longer term as part of its efforts to consider the need to improve application guidance within IFRS S2.
Amanda Blanc, Group CEO of Aviva Group and co-chair of the Transition Plan Taskforce, said:
“Companies developing and disclosing transition plans need clear and consistent guidance. Today’s announcement that the International Sustainability Standards Board will leverage the resources we have developed in the Transition Plan Taskforce is great news and an important step toward greater consistency and clarity.”
The GHG Protocol establishes a comprehensive global standardized framework for measuring and managing greenhouse gas emissions from private and public sector operations, value chains and mitigation measures. Under the new agreement, the IFRS Foundation and the GHG Protocol will establish governance arrangements to enable the ISSB to participate in updates and decisions related to the GHG Protocol standards and guidelines. A representative of the ISSB will be appointed as an observer to the GHG Protocol’s independent Standards Board.
The Chair of the GHG Protocol Independent Standards Board, Professor Alexander Bassen, said:
“This alignment between the IFRS Foundation and the GHG Protocol is an important step towards standardising greenhouse gas reporting worldwide. Deepening cooperation between the two parties will be of great benefit to companies seeking to measure, manage and report their greenhouse gas emissions, and close collaboration with the IFRS Foundation will be invaluable to the process of updating the GHG Protocol standards for the corporate standards suite.”
The new announcements are the latest in a series of actions by the ISSB to harmonize sustainability reporting. These actions include a recently announced alignment with CDP and GRI and an agreement to explore how to build on the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD).
ISSB Chairman Emmanuel Faber said:
“As we implement our new two-year plan to strengthen and expand the global foundation for sustainability-related financial reporting, I am grateful to our sustainability reporting partners for their commitment to delivering an efficient and effective sustainability reporting system to capital markets.”