ISSB to focus on climate disclosures in first reporting year
The International Sustainability Standards Board (ISSB) has decided to prioritize climate-related information in its first reporting year, part of a series of measures designed to ease the burden on companies from the new disclosures.
The ISSB has agreed that companies need not ‘provide disclosures about sustainability-related risks and opportunities beyond climate-related information’ in the first year of reporting, according to a statement from the organization.
Companies would be expected to provide ‘full reporting on sustainability-related risks and opportunities, beyond climate, from the second year,’ it adds.
The announcement beefs up the relief measures for companies as they start disclosing under ISSB. In the first year of reporting, companies will also not need to:
- Provide annual sustainability-related disclosures at the same time as the related financial statements
- Provide comparative information
- Disclose Scope 3 greenhouse gas emissions
- Use the Green House Gas Protocol to measure emissions, if they are currently using a different approach.
In addition, the ISSB has clarified that comparative information would need to cover climate issues only in the second reporting year. The organization notes, however, that companies would still need to use the S1 standards in their first reporting year where the information relates to climate.
‘For example, S1 sets out the approach to materiality and requirements for connectivity of information with that in the financial statements, which are relevant to the disclosure of climate-related information,’ it says.
The ISSB is currently developing two sets of sustainability reporting standards: S1, which focuses on general requirements; and S2, which covers climate-related disclosures. It plans to issue both sets of standards by the end of June this year.
The reporting body has said the new standards will be effective from January 2024, meaning the first reporting under ISSB would appear in 2025. But individual jurisdictions will decide whether and how to adopt the standards into their own reporting regime, meaning dates could differ. Some companies may also choose to adopt the standards early.
The ISSB has consolidated the work of several reporting groups, including the SASB Standards and the Integrated Reporting Framework, and aims to build a ‘global baseline’ of investor-focused sustainability disclosures.
But concerns have been raised about the growing burden on companies from different sustainability reporting initiatives, such as Europe’s own set of standards and the SEC’s proposed climate disclosure rule.
‘The upcoming introduction of the ISSB’s standards establishing the global baseline is being welcomed by companies urgently looking for tools to meet the information needs of their investors,’ Emmanuel Faber, chair of the ISSB, says in the announcement. ‘This transitional relief ensures companies can phase in their approach, initially focusing on the quality of the climate-related information they provide.
‘That said, companies around the world are not all starting from the same place. We expect many of the companies that already disclose information beyond climate to continue to do so, including the 2,500-plus companies already applying the SASB Standards.’