IFAC warns against regulatory fragmentation, especially on matters of materiality
11 Jul 2023
As the global voice of the accountancy profession, the International Federation of Accountants (IFAC) has commented on the draft delegated regulation regarding sustainability reporting standards released for comment by the European Commission in June 2022.
In its response, IFAC supports corporate reporting that better addresses a company’s ability to create long-term value and is decision useful for investors and other stakeholders. IFAC welcomes the European Sustainability Reporting Standards (ESRS) while noting significant concerns regarding the need for interoperability that supports a global system for reporting. IFAC notes that all international and regional approaches must align key concepts, terminologies, and metrics to avoid regulatory fragmentation, especially on matters of materiality. The response states:
We strongly support efforts by the European Commission and ISSB to find areas of interoperability in their standards, starting with climate. However, substantive differences remain, so collaboration must continue. [...] ISSB standards should function as a global baseline for all jurisdictions, including the EU for financial materiality, to adopt or align with.
The response also notes that implementation by companies and enforcement by regulators of the new standards are essential to ESRS success. Therefore, IFAC urges additional transitional reliefs to allow companies sufficient time to implement governance, processes, reporting capacity, and internal controls.
Please click to access the full response on the European Commission website.