As with any other corporate reporting metric, sustainability standards inform investors and other stakeholders about a company’s performance in sustainability measures. Unfortunately, there are a number of contributing factors which make sustainability disclosure even more complex than financial reporting, including conflicting users of sustainability information, the nature of sustainability topics and the conflation of sustainability information with the expanding eco-system of related things, according to a document released by a group of international sustainability accounting standard-setters.
The five framework and standard-setting institutions include the Carbon Disclosure Project (CDP), Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB). In the document, they commit to developing a comprehensive solution for corporate reporting which, in light of uncountable heat waves, wildfires and hurricanes, is pertinent.
According to Accounting Today, the groups intend to create joint market guidance for applying their frameworks and standards in a complimentary, additive way. Further, a joint vision will be provided for how these elements could complement financial GAAP to create a more coherent and inclusive corporate reporting approach. The International Federation of Accountants (IFAC) is taking this marriage of financial reporting and sustainability reporting one step further by suggesting the formation of an International Sustainability Standards Board to serve alongside and function similarly to the International Accounting Standards Board.
This demonstration of initiative from the IFAC will come as no surprise to those tapped into the elevated role of financial leaders in driving the charge toward sustainability. Just this past January, BlackRock CEO Larry Fink’s annual letter to executives declared the trillion-dollar investor’s intention to immediately cease all investments in companies that pose a high sustainability risk.
“The time for a global solution is now,” IFAC CEO Kevin Dancey stated in a press release on Friday. “Given the momentum that has developed this year…we have a unique opportunity to act in concert to do the right thing in the public interest.” His comments come as wildfires rage along the western border of the United States, largely due to record-breaking heatwaves contributable to climate change.
AICPA President and CEO and IIRC Board Chair Barry Melancon also weighed in on the prospect of a dedicated international board. “IFAC’s recommendations are powerful, coming out at a time when the world is in search of answers… A cohesive approach to reporting is not just more efficient, it is essential to unlock the positive force of value creation. We also need innovation to complete the corporate reporting system, to ensure we have an assurance process that is fit for purpose and the technology to support high quality reporting and governance.”