Harmonised global sustainability reporting framework offers comprehensive “running start” in standardised disclosure.
Leaders from five sustainability reporting standards-setting bodies, colloquially known as the ‘group of five’, have encouraged companies to begin producing climate-related financial disclosures in line with their sustainability standards prototype, published late last year.
The group of five consists of CDP, Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB). The prototype is the first attempt by the five organisations to combine their existing standards frameworks to build a universal system for reporting the impact of sustainability factors on enterprise value.
“We’ve put forward what we consider to be the best and fastest path to a comprehensive reporting system that addresses both enterprise value and sustainability-related risk,” said Janine Guillot, CEO of SASB, in a webinar hosted by Impact Management Project (IMP) today.
CDSB Managing Director Mardi McBrien further noted that industry needs to “keep up the momentum” around sustainability reporting initiatives that built towards the end of last year, including the EU Taxonomy and International Financial Reporting Standards (IFRS) Foundation consultation papers.
“Our prototype makes it easier for industry to use frameworks that already exist. There’s no time to slow down. Use this report to leverage off and give yourself a running start ahead of what will be coming from the EU and IFRS Foundation in due course,” she continued.
While companies can voluntarily begin applying this framework to their sustainability-related reporting, the group of five said they would like to see more involvement from policymakers – making such standards compulsory rather than optional.
Collaborating with the IFRS Foundation
Guillot emphasised that the group of five’s prototype framework is not “in competition” with proposals put forward by the IFRS, but rather an extension of them.
“We see ourselves as a resource for the IFRS Foundation to use,” Guillot explained. “We are collectively ready to collaborate with them when they move from conversations around ‘should we move forward’ to ‘how do we move forward’.”
The organisations all reiterated their support of the IFRS Foundation’s proposals, including the suggested implementation of a Sustainability Standards Board (SSB).
What the prototype offers
The prototype is designed to bring together existing frameworks into one cohesive unit, Guillot explained. It builds on the Task Force of Climate-related Financial Disclosure’s (TCFD) four pillars of reporting: governance, strategy, risk management, and metrics and targets.
The framework proposes three areas of focus: sustainability matters that reflect an individual company’s positive or negative contribution to sustainable development; sustainability issues that influence enterprise value; and sustainability matters that influence monetary amounts disclosed in financial statements.
“There are two main perspectives to think about when it comes to reporting, and that’s something we’ve endeavoured to make very clear in our prototype,” added Eric Hespenheide, Chair of the Board of Directors at GRI.
“Beyond thinking about the internal impact of environmental or other sustainability issues, it’s critical we are able to identify and measure the impact companies have on wider society.”