Agenda Paper 2: Feedback summary—Users of general purpose financial reporting

Background

The ISSB’s request for information (RFI) Consultation on Agenda Priorities, to inform its work plan for the next two-year period, was published in May 2023 with the comment period ending on 1 September 2023. The ISSB received 70 responses from users which included 13 from representative groups and 57 from individual organisations. These users were from all geographic regions, the majority coming from North America (40%) and Europe (40%).

Summary

Respondents were asked to answer the following questions within the scope of the ISSB’s work:

• Question 1—Strategic direction and balance of ISSB activities:
  • Most users ranked supporting the implementation of IFRS S1 and IFRS S2 as the highest priority. They expressed the need for the ISSB to work with policymakers and regulators, companies, and investors across jurisdictions worldwide to help facilitate global implementation of the standards, with a few noting the need to prioritise the global south, emerging economies and smaller and medium-sized entities in the ISSB’s implementation efforts.
  • Users emphasised that the ISSB should support on interoperability, connectivity and stakeholder engagement.
• Question 2—Criteria for assessing sustainability reporting matters that could be added to the ISSB’s work plan:
  • Almost all respondents agreed with the appropriateness of the criteria that the ISSB has identified. Some users suggested amendments or additions to the proposed criteria, and those suggestions were overall similar to those made by all other respondents. Of those users some suggested adding a criterion focused on interoperability with other sustainability-related standards and frameworks. They also suggested to add a new criterion around the market’s readiness and capacity to prepare disclosures on a specific sustainability-related reporting matter.
• Question 3—New research and standard-setting projects that could be added to the ISSB’s work plan:
  • A small majority recommended that the ISSB work on more than one project. The rest recommended that the ISSB work on a single project that covers human capital and integration in reporting.
• Question 4—New research and standard-setting projects that could be added to the ISSB’s work plan: Biodiversity, ecosystems and ecosystem services (BEES):
  • Many commented that they would prefer the ISSB take a holistic approach when undertaking a research project on risks and opportunities related to BEES without prioritising a single subtopic or a subset of the subtopics proposed in the RFI.
  • Most mentioned ‘land-use and land-use change’, while many mentioned ‘freshwater, marine resources and ecosystems use’, ‘pollution’ and ‘resource exploitation’ as priority subtopics.
• Question 5—New research and standard-setting projects that could be added to the ISSB’s work plan: Human capital:
  • Almost all said disclosures relating to risks and opportunities associated with diversity, equity and inclusion are important, because of the subtopic’s strong link to entities’ ability to attract, retain and motivate a high-quality and talented workforce.
  • Most identified labour conditions in the value chain (including child labour), worker wellbeing (including mental health and benefits), workforce composition and costs, and employee engagement as important subtopics for the ISSB to consider.
• Question 6—New research and standard-setting projects that could be added to the ISSB’s work plan: Human rights:
  • Many suggested that the ISSB prioritise in its research project a consideration of human rights due diligence because it is important for investors to access information on due diligence processes, including supply chain considerations. Many underlined the importance of covering value chain and supply chain management in a human rights-related research project.
• Question 8—Other comments
  • Comments made on this question were added to other questions above.

Users’ feedback on Question 7, which sought feedback on the proposed research project on integration in reporting, is not included in this paper. As the feedback on the proposed research project on integration in reporting is of interest to both the ISSB and IASB, detailed feedback on this project, including the perspective of users, will be presented to the ISSB and IASB for joint discussion by the boards in January 2024.

ISSB discussion

Multiple ISSB members emphasised the significance of understanding respondents’ characteristics and reasoning to better incorporate feedback into the ISSB’s work plan. 

Several ISSB members noted users were not interested in additional standards but focused on improving existing standards by incorporating feedback into the ISSB’s work plan.

ISSB members agreed that the highest priority for both users and the ISSB is the implementation of IFRS S1 and IFRS S2 across markets. This will help set a consistent global baseline of implementation, adoption and enforcement of those standards across industries for users. ISSB members agreed to work with regulators to ensure consistency across markets and to support the adoption and application of IFRS S1 and IFRS S2 until there is a common point of understanding to prevent confusion for users and investors. ISSB members pointed to the importance of the adoption policy being developed for each market and its importance for different users.

Several ISSB members also highlighted the importance of understanding the different types of users and their perspectives in granular detail to truly understand feedback provided. The ISSB plans to do more to identify “users”—asset owner vs. asset manager, to better understand what is driving investor’s decisions across different user perspectives.

For future proposed projects related to sustainability risks for BEES, and human capital and rights, ISSB members will focus on one project using a more wholistic social approach and leverage existing materials, like SASB Standards, for support.

Overall, ISSB members noted that the majority of the feedback is on the criteria and implementation of IFRS S1 and IFRS S2. Once more users have adopted the standards, the ISSB will continue to do more to understand  what the market wants and what investors need.

ISSB members were not asked to make any decisions at this meeting. The staff will continue to evaluate the responses received from the RFI for discussion and analysis by ISSB members in future meetings.