13 December 2022
by Brooke Steedman
- Related topics
- Accounting Standards & Assurance
In response to the growing global demand for more consistent and comparable disclosures of sustainability-related financial information, the International Sustainability Standards Board (ISSB) was established to develop a comprehensive global baseline of sustainability disclosures for capital markets.
In March 2022, ISSB released the first of two proposed standards. One sets out general sustainability-related disclosures, and the other sets out climate-related disclosure requirements.
What are the new requirements?
The proposed standards have specified how and what information is required to be disclosed in the financial statements for reporting entities. The disclosures have been split into four sections. Below is a summary of the disclosures for the general sustainability-related disclosures – in our next InDepth newsletter we will provide an overview of the climate-related disclosure requirements.
|Section||What to disclose|
|Governance||The governance processes, controls and procedures the entity uses to monitor and manage sustainability-related risks and opportunities|
|Strategy||The approach for addressing sustainability-related risks and opportunities that could affect the entity’s business model and strategy over the short, medium and long term|
|Risk management||The processes the entity used to identify, assess and manage sustainability-related risks|
|Metrics and targets||Information used to assess, manage and monitor the entity’s performance in relation to sustainability-related risks and opportunities over time|
The proposed standard requires an entity to disclose material information about all the significant sustainability-related risks and opportunities to which it is exposed. Importantly, the proposed standard specifies that an entity will include a complete, neutral and accurate depiction of its sustainability-related financial information.
When will this be required?
The consultation period for the exposure drafts is now finished, and the ISSB are collating feedback, and expect to release these two standards before the end of the year. We expect the standards will apply to all reporting entities, or entities that prepare general purpose financials reports in accordance with International Financial Reporting Standards (IFRS) and other Generally Accepted Accounting Principles (GAAP).
For Australia, the Australian Accounting Standards Board (AASB) intends to use the IFRS Sustainability Standard as a baseline, with modifications for Australian stakeholders. We expect (and hope!) that the AASB will release their version of the Sustainability Standard in the New Year. At this stage we don’t expect that it will be a requirement for disclosure in financial statements, but rather be included in the broader ‘general purpose financial reporting’.
Why are we interested?
Last month our Partners Kurt Baker and Geoff Tierney attended a TAG Alliances (one of the world’s largest multidisciplinary alliances of independent professional services firms) Conference in Dublin. Environmental, Social and Governance (ESG) issues were a major theme. Accountants around the world are talking about this and the impact these changes will have on sustainability-related disclosures and the way we (all) do business in the future.
We will continue to keep our valued clients updated on changes to sustainability reporting. We have developed expertise in this area – if you have any questions or need assistance, please reach out to your ESV Engagement Partner.