More than 80 CFOs from the world’s largest companies have signed an open letter calling for the International Sustainability Standards Board (ISSB) to improve upon its proposed sustainability disclosure standards.
In a letter submitted to the ISSB, signatories including CFOs from GlaxoSmithKline, Mars, Chanel and Levi Strauss have based their recommendations for how to improve sustainability disclosure standards on their experience of non-financial reporting.
“Businesses and investors need transparency and consistency to be able to invest in a sustainable future,” George Quinn, Group CFO at Zurich, a signatory to the response said. “The adoption of a common set of sustainability standards is pivotal in meeting these needs and no one is better positioned than the ISSB to play this role globally.”
Means to an end
The ISSB published its first set of global guidelines on corporate sustainability disclosures in March, with the organisation looking to issue the new standards later this year.
According to the letter, which was convened by Accounting For Sustainability (A4S), the sustainability reporting standards must “recognise that reporting is a means to an end, not an end in itself”.
The sustainability board must address the practical challenges within reporting and assurance standards otherwise there is a risk that companies will divert efforts into reporting instead of setting ambitious sustainability targets, it said.
Therefore, it is “essential” for the board to provide sufficient time and provisions for companies to put appropriate processes, controls and technology in place.
“Reporting is not an end in itself,” said Jessica Fries, executive chair at Accounting For Sustainability (A4S).
“Global alignment on sustainability disclosure standards is needed so that organisations can focus on action, rather than reconciling the ‘alphabet soup’ of requirements across jurisdictions.
“This is why the IFRS and other standard setters need to listen to the call from CFOs and investors to establish a common set of global standards which will provide the information needed to deliver ambitious targets and action.”
While the ISSB is “well-suited” to establish a comprehensive baseline, “it will need to accelerate work with other existing and emerging standard setters to align strongly the concepts, terminology, definitions and effective dates”, the letter said.
At present, the Securities and Exchange Commission (SEC) is introducing new rules later this year for public companies to provide certain climate disclosures including Scope 1-3 emissions in its annual reports.
Moreover, the EU’s Corporate Sustainability Reporting Directive (CSRD) – which comes into force in January 2023 – requires companies to report on “double materiality” going beyond the current proposals currently outlined by the ISSB.
“Time is running out and the business and finance community need to meet the moment,” said Quinn. “Let’s seize this opportunity to achieve global alignment through the proposed ISSB standards so that companies and investors can focus on action.”
To hear more on this topic from Nasrin Moola, director, ESG reporting assurance at KPMG, register for the CFO Executive Dialogue this October.