VRF to be “Gravel Under the Road” to Harmonised Sustainability Reporting

IIRC, SASB merger formalised, but “foundational layer” for globally accepted standards remains elusive.

Standards-setting bodies need to better integrate their sustainability reporting frameworks to satisfy demands from institutional investors for more clarity and simplicity. This is according to Janine Guillot, CEO of the new Value Reporting Foundation (VRF), speaking at the foundation’s official launch webinar today. Guillot spoke alongside VRF Co-Chairs Richard Sexton and Robert Steel.

The International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) first announced that the two bodies would be merging to form the VRF last year, in order to provide investors and corporates with a more comprehensive and blended sustainability reporting framework.

Prior to the merger, the IIRC provided an integrated framework for reporting that connected financial- and sustainability-related information, whereas SASB provided industry-specific standards for reporting on enterprise value.

Now that the merger is complete, the VRF plans to work with other standards-setting bodies, global policymakers, investors and corporates to clarify ESG terminology and support initiatives pushing for global sustainability standards, the panellists said. The foundation will also guide members which previously reported in line with either SASB or IIRC through the VRF’s integrated thinking principles which unite the two prior frameworks.

However, the sustainability reporting landscape is currently missing that “foundational layer of globally accepted standards that exists in the financial accounting world”, said Guillot, who was previously CEO of SASB.

“We’re hoping to create the gravel under the road by providing standards focused on the baseline information needs of global capital markets, such as how sustainability issues impact enterprise value,” Guillot added. Having a strong and stable underlayer will allow for more accelerated progress towards globalised sustainability reporting, she said.

Panellists reiterated their support for the global accounting body International Financial Reporting Standards (IFRS) Foundation’s work towards building a global sustainability standard, including its proposed International Sustainability Standards Board (ISSB), which is currently seeking nominations for the roles of Chair and Vice-Chair until 30 June, 2021.

In March 2021, the VRF joined the IFRS Foundation working group that will help refine efforts for a global sustainability reporting standard that focuses on enterprise value.

However, opinions differ as to what a global sustainability reporting standard should look like.

The European Financial Reporting Advisory Group (EFRAG) is currently leading Europe’s efforts to develop a European sustainability reporting standard, which will closely align with the Global Reporting Initiative’s (GRI) double materiality framework, rather than with the IFRS Foundation.

Experts previously told ESG Investor that a global sustainability standard focusing more on enterprise value than double materiality risks doing more harm than good.

“If we are to deliver a reporting system that’s fit for the 21st century – one that delivers holistic information across the full range of capitals and dimensions, properly explains value creation, maintenance and erosion, responds to stakeholder needs, and uses leading-age approaches and technologies to make the information easy to navigate and digest – then we still have a way to go,” said Sexton.

Steel was previously a member of SASB’s board of directors and Sexton was the Non-Executive Director for the IIRC.

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