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What is the International Sustainability Standards Board (ISSB)?

Launched at COP26 in Glasgow in 2021, the ISSB is bringing clarity, consistency and comparability to sustainability reporting. Its goal is to inform capital allocation by providing investors with decision-useful information about companies’ sustainability risks and opportunities.

CREATING A COMMON SUSTAINABILITY LANGUAGE

The ISSB is a new standard-setting body established by the not-for-profit IFRS Foundation. The Foundation already houses the International Accounting Standards Board (IASB), which developed a common language for accounting on global capital markets some 20 years ago, setting out how companies prepare their financial statements. Today, IFRS Accounting Standards are required in more than 140 countries.

The ISSB is developing a global baseline of sustainability disclosure standards so that reporting is comparable across industries and geographies — a common language enabling investors to assess companies’ sustainability risks and opportunities. IFRS Sustainability Disclosure Standards set out how a company publicly discloses information about sustainability-related factors that may help or hinder long-term value creation.

Support for the ISSB’s efforts is growing, including from the G7 and G20, global financial regulatory authorities, the IMF, the UN and others. Ultimately, the ISSB is a vehicle for incentivizing sustainable business activities, tackling “greenwashing” and enabling the allocation of capital toward more sustainable investments.

Rarely do governments, policymakers and the private sector align behind a common cause. However, all agree on the importance of high-quality, globally comparable sustainability information for the capital markets.

– Emmanuel Faber, chair, ISSB

WHY IS THE ISSB IMPORTANT?

Against the backdrop of our climate and ecological crises, leaders around the world increasingly recognize the business imperative of sustainability. For businesses, sustainability is not a fleeting trend: it will determine their long-term viability. Yet companies today report on their sustainability performance using a variety of different metrics, indicators and reporting standards, leading to confusion among stakeholders. Crucially, the lack of a common language and consistent reporting prevents investors from understanding the financial, reputational and systemic risks of different companies, inhibiting the acceleration of sustainable investment that is so vital to climate action and achieving the Sustainable Development Goals.

The complicated status quo also facilitates so-called “greenwashing,” allowing some companies to exploit sustainability rhetoric without matching words with meaningful action. “Greenwashing is exactly the enemy that we want to fight,” affirmed ISSB chair Emmanuel Faber in an August 2022 interview with Halla Tómasdóttir, CEO of The B Team (video below).

Building on the important work of the Task Force on Climate-Related Financial Disclosures (TCFD), the ISSB will help cut through the noise of the current sustainability reporting landscape, bringing clarity, consistency and comparability via its global baseline of disclosures.

The ISSB could be a game changer for sustainable investment, providing capital markets with reliable and consistent ESG data to enable cross-company comparisons.

– Oliver Bäte, CEO, Allianz

WHY SHOULD BUSINESS LEADERS SUPPORT THE ISSB?

Once seen as a “nice to have,” sustainability is now essential to business performance. Whether it is staff and customers questioning a company’s commitment to impacted communities or an investor scrutinizing a company’s exposure to climate change risks, CEOs cannot afford to overlook sustainability.

But how many CEOs and boards have a genuine, 360-degree understanding of how sustainability is impacting their business? How many are approaching it in a holistic manner? How many are able to effectively communicate their sustainability performance to stakeholders?

LEADER INSIGHTS

Marc Benioff,
chair, co-CEO & co-founder, Salesforce

It’s not just about words, but about companies setting clear metrics, measuring our progress and holding ourselves accountable. Only then can we provide long-term growth for our shareholders, build trust with all stakeholders and truly improve the state of the world.

Hiro Mizuno,
UN Special Envoy on Innovative Finance and Sustainable Investments

For investors to get behind businesses that are serious about reducing their carbon footprint, slowing biodiversity loss and advancing a regenerative economy, they need reliable data and tools to differentiate between virtue signaling and real impact.

QUESTIONS TO ASK

Is your business approaching sustainability in a holistic manner?

Are you able to effectively communicate your sustainability performance to stakeholders?

WHY IS THE ISSB IMPORTANT?

Against the backdrop of our climate and ecological crises, leaders around the world increasingly recognize the business imperative of sustainability. For businesses, sustainability is not a fleeting trend: it will determine their long-term viability. Yet companies today report on their sustainability performance using a variety of different metrics, indicators and reporting standards, leading to confusion among stakeholders. Crucially, the lack of a common language and consistent reporting prevents investors from understanding the financial, reputational and systemic risks of different companies, inhibiting the acceleration of sustainable investment that is so vital to climate action and achieving the Sustainable Development Goals.

The complicated status quo also facilitates so-called “greenwashing,” allowing some companies to exploit sustainability rhetoric without matching words with meaningful action. “Greenwashing is exactly the enemy that we want to fight,” affirmed ISSB chair Emmanuel Faber in an August 2022 interview with Halla Tómasdóttir, CEO of The B Team (video below).

Building on the important work of the Task Force on Climate-Related Financial Disclosures (TCFD), the ISSB will help cut through the noise of the current sustainability reporting landscape, bringing clarity, consistency and comparability via its global baseline of disclosures.

By building a common sustainability language, the ISSB will enable business leaders to better understand risks and opportunities. The disclosure standards will position C-suites to more easily navigate the complex sustainability reporting landscape, reducing their reporting burden while improving reliability. Businesses making meaningful efforts to become more sustainable will be rewarded by investors. This, in turn, will incentivize long-term thinking and business resilience — priorities that have been brought to the fore in recent years, amid climate breakdown and the Covid-19 pandemic.

Standardized and mandatory non-financial reporting is critical to creating a new form of capitalism.

– Alan Jope, CEO, Unilever

90%

of investors attach greater importance to companies’ ESG performance since the pandemic

90%

of major US companies mentioned ESG in their 2019 SEC filings

2,600+

organizations have expressed support for TCFD recommendations

CALL TO ACTION

Companies that embrace transparency and accountability are best positioned to gain the trust of key stakeholders and would-be investors. Supporting the ISSB — and mandatory disclosure according to the global baseline of disclosure standard — is an important contribution to that end.

Business leaders can showcase their support in a number of ways:

  1. Engage formally with the ISSB as it develops its reporting standards, ensuring that supportive business voices are seen and heard;
  2. Advocate publicly and privately for the adoption of the ISSB baseline, engaging policymakers such as the European Commission and the US Securities and Exchange Commission; and
  3. Commit to voluntary adoption of the ISSB’s standards, demonstrating to policymakers and markets that business leaders stand ready to use, and be accountable to, a common sustainability language.

Efficiency sometimes is the enemy of resilience. And we have learned through many crises, including the COVID crisis and climate change, that the name of the game is going to be resilience.

– Emmanuel Faber, chair, ISSB

The sustainability financial disclosures of ISSB will be the language of resilience for the capital markets.

– Emmanuel Faber, chair, ISSB

Halla Tómasdóttir, CEO of The B Team, speaks with B Team member Emmanuel Faber about his journey to lead the ISSB and how business leaders can support a new global baseline for sustainability disclosure standards

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