A look ahead: The ISSB's initial consolidated sustainability standards

In February, the ISSB made its final decisions on the technical content of its initial consolidated sustainability standards.

The long-awaited standards could provide a way forward for sustainability reporting that is streamlined, decision-useful and comparable across the globe.

These standards will be important to consider for early adoption, and, with that in mind, here is what we know ahead of the release:

We now know that the standards are being released at the end of Q2 2023. The initial IFRS Sustainability Disclosure Standards (S1 and S2) will become effective from January 2024 with the first disclosures expected in 2025.

Before their release, the standards will need to go to a ballot draft. During the ballot draft, new issues with the standards may arise. If that happens, ‘sweep issues’ will be discussed at a public board meeting and decided upon before finalising the document for publication.

Sweep issues are one aspect of a wider due process that provides all stakeholders with the opportunity to scrutinise and contribute to the standards.

We know that the Climate Disclosure Standards Board (CDSB), the Task Force for Climate-related Financial Disclosures (TCFD), the Integrated Reporting Framework, industry-specific SASB standards, and the World Economic Forum’s stakeholder capitalism metrics are all being considered in the final draft of the standards. 

SASB has been highlighted as having a high level of integration with the consolidated framework. S1 will require companies to consider the SASB in the absence of a specific ISSB Standard, whilst S2 will provide disclosures from SASB as illustrative guidance. The SASB Standards are expected to be supported by the IFRS for a period after the standards come into effect. 

In February, ISSB members voted to refer to the European Sustainability Reporting Standards (ESRS) in an appendix to S1 as a source of guidance to be considered by companies if they do not have an industry-specific ISSB standard. This alternative should help reporters to identify metrics and disclosures that meet the needs of their investors and stakeholders. 

The IFRS has also laid out plans to work on the following areas as a priority once S1 and S2 are published:

• Upcoming consultation on agenda priorities.
• Four projects to seek further feedback: biodiversity, ecosystems and ecosystem services; human capital; human rights; and connectivity in reporting.
• Producing supportive material for uptake of standards after release.

With the release of the standards on the near horizon, here are some of the things we hope to gain from these new consolidated guidelines:

We are hoping for a set of standards that are both uniform and progressive, where clients see benefits from the baseline’s efficiency and comparability. Those who have started to report against SASB, GRI and/or TCFD will be rewarded by being ahead of the curve.

We hope the jump from existing frameworks to the consolidated framework will be an easy one, where aspects of previous standards are seamlessly recognised and adapted. 

To realistically achieve the global baseline, jurisdictions will have to adopt the ISSB standards. With built-in proportionality, reliefs and guidance to determine the approach to providing information, we hope these standards will be straightforward and flexible to adopt. 

At Jones and Palmer we encourage clients to report in a way that is material and authentic to their business. We hope that the consolidated framework will support this drive towards authenticity and focus. 

The ISSB has the potential to be a unifying force in the sustainability reporting landscape, helping reporters to make meaningful disclosures that enable improvement, and creating decision-useful content for investors and other stakeholders. 

We will see if all of our hopes come true at the end of Q2. In the meantime, if you would like to discuss how we can help with your sustainability story, then get in touch with a member of our team.