IFAC calls for the IFRS Foundation to create an International Sustainability Standards Board (ISSB). This new Board could leverage the independence and success of IFRS governance to develop global standards and rationalize the current fragmented ecosystem. As with the IASB, clear support from global institutions like IOSCO and appropriate funding would be critical to success. Under the structure the IFAC envisions, the IASB would remain focused on financial reporting standards and coordinate with the ISSB to avoid overlaps and gaps.

Veronica Poole, Global IFRS Leader and Head of Corporate Reporting at Deloitte, said: “Transparent measurement and disclosure of sustainability performance is a fundamental part of effective business management and is essential for preserving trust in business as a force for good. IFAC’s vision is fully aligned with the joint vision of the leading standard-setters on how their current standards and frameworks could complement IFRS Standards and US GAAP, and serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system.”

“We now have a unique opportunity to accelerate progress and house all the relevant standards under one roof as suggested by IFAC, to connect sustainability disclosure standards focused on enterprise value creation to financial GAAP. Integrated reporting together with the IASB’s work on Management Commentary can provide a framework for this connectivity. IOSCO has stated its commitment to bring about the system change for the capital markets and the IFRS Foundation trustees indicated that they are going to consult on introducing a sustainability focused standard-setter under the umbrella of the IFRS Foundation—the stars are lining up to bring about the fundamental shift in reporting that investors, business and society at large have been calling for.”

The ISSB itself would adopt a “building blocks” approach, working with and leveraging the expertise and disclosure requirements of leading initiatives, including CDP, CDSB, GRI, IIRC, and SASB. These building blocks would consist of:

• Requirements for material non-financial information focused on company performance, risk profile, economic decisions and enterprise value creation.
• Collaboration with respect to reporting requirements designed to address broader, material sustainable development and company impacts on economy, environment, and people. These requirements may ultimately be incorporated or endorsed into ISSB standards.
• Supplemental jurisdictional requirements to support local public accountability.

Financial and non-financial information would be connected through a common conceptual framework.

The IFAC notes that the time for a global solution is now — to answer the demand from investors, policymakers and other stakeholders for a reporting system that delivers consistent, comparable, reliable, and assurable information relevant to enterprise value creation, sustainable development and evolving expectations. A fragmented approach would perpetuate inefficiency, increased cost, and a lack of trust. Therefore, the IFAC argues, that important work that is currently underway should be continued, but with the aim of ultimately contributing to the emerging global system.

Review the Enhancing Corporate Reporting: The Way Forward on the IFAC's website.