The move towards consolidated, aligned, sustainability disclosure requirements, long identified as an essential element of sustainability efforts, took a major step forward last week. On 24 March 2022, the International Financial Reporting Standards Foundation (“IFRS Foundation”) and the Global Reporting Initiative (“GRI”) announced a collaboration agreement, the purpose of which is to seek to align their capital market and multi-stakeholder focussed sustainability disclosure regimes (the “Agreement“). The Agreement represents the latest development in the IFRS Foundation’s efforts to consolidate the plethora of – sometimes disparate – international sustainability reporting regimes into a consolidated, more cohesive, framework, for the benefit of companies, investors and society at large.
The background to the Agreement
As discussed in our blog post published in January this year, the IFRS Foundation announced, at COP26, the establishment of the International Sustainability Standards Board (“ISSB”), tasked with developing a comprehensive global baseline of investor-focused Sustainability Disclosures Standards for the capital markets. We have also discussed in an earlier blog post the IFRS Foundation’s developments in sustainability reporting projects.
The GRI, of course, has already developed globally accepted standards for sustainability reporting through its Global Sustainability Standards Board (“GSSB“), widely perceived to be the leading global multi-stakeholder focussed sustainability reporting standards. Those standards have been central to the development of many jurisdictions’ own multi-stakeholder sustainability reporting regimes.
The significance of the Agreement
Both the IFRS Foundation and GRI recognise the considerable public interest in reducing the reporting burden for companies and further consolidating the sustainability reporting landscape at an international level, in order to encourage alignment and, of course, transparency. As part of these consolidation efforts, the IFRS Foundation has already announced its consolidation with the Climate Disclosure Standards Board (an initiative of Climate Disclosure Project) and the Value Reporting Foundation (which houses the International Integrated Reporting Council and the Sustainability Accounting Standards Board) by June 2022. The Agreement is an important milestone in furthering these consolidation efforts.
Under the Agreement, the IFRS Foundation and the GRI have agreed to align their respective work programmes, standard-setting activities, terminology and guidance. Representatives of the two organisations will also join each other’s consultative bodies related to sustainability reporting activities.
The consolidation will provide a two-pillar international sustainability reporting – a first pillar representing ISSB’s investor-focussed capital markets Sustainability Disclosure Standards, and a second pillar of GRI’s multi-stakeholder focussed standards. This is a critical step to ensuring the compatibility, interconnectedness and harmonisation of sustainability reporting regimes at an international level.
The ISSB will shortly publish its proposed Climate and General Sustainability-related Disclosure requirements. Once finalised, these requirements will form the baseline for its climate-related Sustainability Disclosure Standards.
This is an important area of activity which will see significant developments over the coming months, and which will be highly consequential for stakeholders – in the capital markets and beyond – as they continue to grapple with the fast-evolving landscape of sustainability disclosures.