What’s what with the ISSB? Everything you need to know about your favourite new acronym

For years now, companies have struggled with a lack of unifying advice when it comes to climate reporting.

The likes of TCFD, GRI, SASB and CSRD have felt like an alphabet soup to businesses, with disclosures which can feel like they are pointing you in many different directions. But, this is where the introduction of the ISSB can help bring some clarity and unification for businesses and their investors, at a global scale.

First announced at COP26, the International Sustainability Standards Board (ISSB) is a standard-setting body established under the International Financial Reporting Standards (IFRS) Foundation with a unifying and globalising mandate. The standards the board creates will represent a comprehensive global baseline of high-quality sustainability disclosure standards to meet investors’ information needs.

The ISSB has set out four key objectives:

• to develop standards for a global baseline of sustainability disclosures;
• to meet the information needs of investors;
• to enable companies to provide comprehensive sustainability information to global capital markets; and
• to facilitate interoperability with disclosures that are jurisdiction-specific and/or aimed at broader stakeholder groups.

Mary Schapiro, Head of the TCFD Secretariat, said:

“Development of the ISSB’s global baseline will deliver transformative change in sustainability disclosures for the financial markets. The TCFD welcomes the formation of the ISSB, which builds upon the foundation of the globally accepted TCFD framework and the work of an alliance of sustainability standard setters. The ISSB represents a major step forward in establishing consistent, comparable global reporting standards.”

In 2023, we will see the launch of two sustainability disclosure standards. The first sets out general sustainability-related disclosure requirements (IFRS 1), and the other specifies climate-related disclosure requirements (IFRS 2).

Since their announcement, there have been numerous versions drafted and subsequent consultations, but at its inaugural Sustainability Symposium in February 2023, IFRS announced that the two standards will come into force in January 2024. Final drafts of the standards are expected to be published at the end of Q2 2023. This means that we will likely see the first corporate reporting in 2025.

So how does it fit into the current puzzle of reporting tools?

Clip’n’carry: Your reporting standards table

Sustainability reporting standards table

	International Sustainability Standards Board (ISSB)	Taskforce on Climate-Related Financial Disclosures (TCFD)	Sustainability Accounting Standards Board (SASB)	Global Reporting Initiative (GRI)	Corporate Sustainability Reporting Directive (CSRD)
Set up by?	International Financial Reporting Standards	Financial Stability Board	Sustainability Accounting Standards Board	Global Reporting Initiative	Climate Disclosure Standards Board
Summary?	The ISSB is a standards setting board.	The TCFD is a framework for businesses to disclose the risk and opportunities climate change poses to their business activities*	The TCFD is a framework for businesses to disclose the risk and opportunities climate change poses to their business activities*	The GRI Standards enable organisations to understand and report on their impacts on the economy, environment and people in a comparable and credible way.	CSRD requires 49,000 companies across Europe to disclose in their management report on ESG matters.
Jurisdiction?	Global	National (the UK is the most advanced reporting market)	Global	Global	EU
Mandated?	Standards in development. Global governments are in the process of adopting ISSB standards, with varying dates in different jurisdictions.	Yes, currently for companies in the UK over a certain size.	Not mandatory.	Not mandatory.	Yes, for companies over a certain size.
Interaction with ISSB?	N/A	TCFD has provided the core structure and the building blocks for ISSB, with the ISSB requirements falling under the same four pillars of the TCFD (Governance, Strategy, Risk, Targets and Metrics).	The ISSB has committed to building on, and embedding, the SASB industry-based approach to standards development. SASB should continue to be used until they are replaced by the ISSB standards.	The IFRS Foundation and Global Reporting Initiative (GRI) have adopted a formal agreement to collaborate and coordinate on the development of standards for the sustainability-related disclosures.	The CDSB framework has been incorporated into the ISSB standards, with the CDSB water-related and biodiversity-related disclosures recommended as a source of guidance companies can consider.

*The Taskforce on Nature-related Financial Disclosures takes a similar approach to the TCFD but focusses on issues such as biodiversity, ecosystem services and the preservation of natural resources. The final recommendations and framework are expected to be released in September 2023.
Find out more about nature risks here.

Limitations?

There are, however, some limitations that we are starting to see in the proposed ISSB standards which may decrease the impact it intends to have. The first of these limitations is the very definition of sustainability provided by ISSB: 

“The ability for a company to sustainably maintain resources and relationships with and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term. Sustainability is a condition for a company to access over time the resources and relationships needed (such as financial, human, and natural), ensuring their proper preservation, development and regeneration, to achieve its goals.”

This is some distance away from the UN’s definition of sustainability which is: 

“Meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

The definition given by the Bruntland Commission and adopted by the UN is far more holistic than the ISSB's, which could be considered as more appropriate for an 'ESG standard' than a 'sustainability standard'. Given the urgency of the need to act on the climate crisis and drive sustainable business, this definitional starting point feels weaker than it could have been.

The standards have also opted not to introduce double materiality as an underlying requirement. At the same time, the incoming European CSRD standard does promote double materiality (as do we at Ever, with all our materiality assessments starting with a double materiality lens) but such a difference between the two standards on this key issue could lead to more fragmentation, and more complexity, for companies around sustainability disclosure.

Key takeaways for your business

When to disclose?

It has recently been announced that the ISSB standards will require companies to publish their sustainability disclosures at the same time as their financial disclosures. This answers the question we hear from many corporates and reporting professionals as to when in the year they should be releasing their sustainability reporting. There is, however, expected to be a one-year relief for this requirement.

Include Scope 3 emissions!

For those businesses who have been only disclosing Scope 1 and 2 emissions for measuring and reporting impact, they need to start working on getting a handle on their Scope 3 emissions. Scope 3 emissions reporting requirements will be incorporated into the final Sustainability Disclosure Standards. 

Some light relief…

There are some other transitional reliefs being considered for the two standards that will give business leaders some time to get their heads around these new requirements:

• firstly, entities will only need to report sustainability risks and opportunities in relation to climate in the first year, extending this to the complete range of sustainability risks and opportunities in the second year; 
• secondly, entities will also not need to use the GHG Protocol to measure footprint in the first year where they are currently using a different approach; and 
• finally, there will be a one-year relief period for disclosing scope 3 emissions.

Similarly to other reporting frameworks, this gives the entities a year to become familiar with the requirements.