MoU seeks to “reduce the reporting burden” for companies and harmonise the sustainability reporting landscape.
The IFRS Foundation and Global Reporting Initiative (GRI) have adopted a formal agreement to collaborate and coordinate on the development of standards for sustainability-related disclosures.
The IFRS Foundation announced the establishment of the International Sustainability Standards Board (ISSB) at COP26 last November, with the intention of developing a global baseline for investor-focused sustainability disclosures for the capital markets.
Although widely welcomed as providing a uniform standard for sustainability disclosures to investors, the ISSB’s focus on enterprise value was seen by some as insufficient for wider stakeholder needs and potentially detrimental to the use of standards developed by GRI’s Global Sustainability Standards Board (GSSB), which take a ‘double materiality’ approach, requiring disclosures to cover firms’ impact on people and planet.
There was also thought to be the possibility of a geographic split on use of sustainability disclosure standards, with the GRI jointly developing reporting requirements for the planned European Corporate Sustainability Reporting Directive (CSRD) and the ISSB’s rules building partly on the work of the US-based Sustainability Accounting Standards Board (SASB).
Under a new collaborative agreement, the IFRS Foundation and the GRI said they will seek to coordinate their work programmes and standards-setting activities, including joining each other’s consultative bodies relating to sustainability reporting activities.
Announcing the agreement, the organisations said the new ‘two-pillar’ approach to sustainability reporting standards recognised the need to align terminology and guidance “to reduce the reporting burden for companies and to further harmonise the sustainability reporting landscape” globally.
“At COP26 we heard strong support for consolidation in the sustainability reporting landscape. This agreement with GRI will help ensure capital market standards are developed in a way that minimises reporting burden for those companies also using GRI Standards,” said Erkki Liikanen, Chair of the IFRS Foundation Trustees.
Eelco van der Enden, Chief Executive Officer of the GRI, said the agreement sent a “strong signal” about the creation of a comprehensive reporting framework combining financial and impact materiality. “Aligning GRI’s standards for sustainability impacts with the investor-focused standards being developed by the ISSB will benefit both companies and investors, as well as a wide range of stakeholders around the world,” he added.
The memorandum of understanding between the IFRS Foundation and the GRI follows a period of rapid consolidation among voluntary sustainability standards bodies.
SASB announced plans to merge with the International Integrated Reporting Council (IIRC) in November 2020 to form the Value Reporting Foundation, which began the process of being integrated into the ISSB toward the end of last year, alongside the Climate Disclosure Standards Board (CDSB). All these bodies, plus GRI, participated in a project coordinated by the Impact Management Project to develop prototypes which could be used by the ISSB.
The ISSB published prototype general disclosures for climate disclosure requirements in November and the results of the public consultation process are due before the end of Q1 2022. Once reviewed and approved by the International Organisation of Securities Commissions, national securities regulators are expected to incorporate the ISSB’s standards into requirements for issuers.
Earlier this month, the European Parliament recommended that implementation of CSRD should be delayed, meaning in-scope companies will be required to disclose in line with the new rules as of 2024, publishing their reports in 2025.