Sustainability Reporting Standards: Introduction
Welcome to Play It Green’s weekly business education, your go-to resource, where this week we look at the new sustainability reporting standards. By staying informed, you can gain a competitive edge and lead the way towards a greener future.
As sustainability becomes an increasingly important consideration for businesses, adopting robust reporting standards is crucial. Understanding the latest developments is essential for organisations that strive to enhance their environmental, social, and governance (ESG) performance.
Join us as we dive deep into the realm of sustainability reporting standards and gain valuable insights that can help your organisation make informed decisions.
Sustainability Reporting Standards: New Baselines
By releasing its first sustainability reporting standards, IFRS S1 and IFRS S2, the International Sustainability Standards Board (ISSB) has created history. With the help of these standards, investors will be better equipped to make decisions on sustainability-related disclosures provided by businesses.
The ISSB guidelines offer a common vocabulary for communicating the effects of climate-related risks and opportunities on a company’s prospects for the first time. This development is crucial in addressing the growing need for consistent and transparent reporting of sustainability factors.
The IFRS Foundation’s annual conference served as the venue for the Standards’ official launch. As well as this, it was accompanied by a number of activities held by stock exchanges all over the world. This global rollout demonstrates the need for thorough disclosures connected to sustainability. Furthermore, it emphasises the significance of having a consistent understanding of how sustainability elements affect a company’s performance.
Sustainability Reporting Standards: What Are They
Companies may disclose sustainability-related risks and opportunities over the short, medium, and long term thanks to IFRS S1’s (the first standard) disclosure requirements. IFRS S2 (the second standard) is intended to be used in conjunction with IFRS S1 and focuses on financial disclosures connected to climate change. This is in keeping with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
The ISSB’s guidelines make sure that information about sustainability is included in financial statements. This enables a comprehensive reporting package. These standards were created to supplement current accounting requirements and are based on the IFRS Accounting Standards. This means that they have global applicability and set a uniform standard for sustainability reporting all across the world.
Sustainability Reporting Standards: A Global Standard
With the release of IFRS S1 and IFRS S2 on the 26th of June 2023, the ISSB will work with governments and businesses to speed adoption. With that in mind, they are forming a Transition Implementation Group and starting capacity-building projects. The ISSB will continue working with jurisdictions interested in incremental disclosures. As well as with GRI in order to increase reporting efficiency when integrating the ISSB Standards with other reporting frameworks.
The International Organisation of Securities Commissions (IOSCO), the Financial Stability Board, and the G7 and G20 support the standards. As well as finance ministers and governors of central banks from more than 40 countries.
Emmanuel Faber the ISSB chair said: “Today represents the outcome of more than 18 months of intense work. Work to deliver an inaugural set of sustainability disclosure standards for the global capital markets. The ISSB Standards have been designed to help companies tell their sustainability story> They can now tell it in a robust, comparable and verifiable manner. We have consulted closely with the market to ensure the Standards are proportionate and will result in disclosures that are relevant for investment decision-making.”
Companies should embrace sustainability reporting and adopt the new ISSB standards for several compelling reasons.
Firstly, sustainability reporting enhances transparency and accountability, allowing businesses to showcase their environmental, social, and governance (ESG) performance to stakeholders. Not only that, but by demonstrating a commitment to sustainability, companies can build trust and attract investors who prioritise sustainable practices.
Secondly, sustainability reporting helps identify and manage risks and opportunities related to climate change and other sustainability issues. The new ISSB standards provide a common language and framework for disclosing climate-related information. This means companies are enabled to assess and address potential risks. Not only that, but they can capitalise on emerging opportunities in the transition to a low-carbon economy.
Lastly, embracing sustainability reporting and the new standards positions companies at the forefront of a global movement towards sustainable business practices. It allows organisations to align with international best practices and stay ahead of regulatory requirements. By integrating sustainability reporting into their business strategies, companies can drive innovation. As well as that, they can foster long-term resilience, and contribute to a more sustainable future for both their business and the planet.
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