Reshaping the corporate reporting system

Over the past few years…

Since 2019 there has been a concerted effort to achieve a global comprehensive corporate reporting system that brings in sustainability reporting. A big part of this has been ensuring consolidation among the many many sustainability standards and frameworks that face preparers. With this in mind, in September 2020, the International Integrated Reporting Council (IIRC) and four of the main sustainability players joined hands and released a Statement of Intent to Work Together to achieve greater alignment  – the other organizations being the Climate Disclosure Standards Board (CDSB), Carbon Disclosure Project (CDP), GRI and Sustainability Accounting Standards Board (SASB). In December 2020, the group (known as the ‘gang of five’) released the Reporting on Enterprise Value – the paper offered a prototype showing how their existing sustainability guidelines plus the TFCD recommendations can all fit together to achieve global standards for sustainability-related financial disclosures in the area of climate change. This paper was significant, offering a prototype for future global sustainability reporting standards (for climate change and then extend to other ESG matters).

The Value Reporting Foundation’s formation and then subsequent consolidation into the IFRS Foundation

In November 2020, the IIRC announced that it will merge with the US-based SASB in June 2021 to form the Value Reporting Foundation.  Their motivation for the merger was that the International <IR> Framework (Integrated Reporting Framework) offers the structure (the how) and the SASB sustainability indicators offer the metrics for measuring impacts and outcomes (the what). For the 9 June 2020 media release click here.

The International Sustainability Standards Board (ISSB)

Starting with a bit of history…..In September 2020, the IFRS Foundation (the ruling governance body of the International Accounting Standards Board (IASB) which issues standards on financial accounting reporting used around the world except in the US which has its own FASB standards) issued a consultation paper on whether or not it should also offer sustainability reporting standards. In February 2021, it announced that there had been positive public feedback and it would continue its initiative of working to establish an International Sustainability Standards Board (ISSB). In April 2021, it released a Feedback Statement summarising the public comments along with an exposure draft covering the necessary proposed changes to its constitution. It stated that it will provide investor-focused global sustainability standards. The standards would initially focus on climate change before being extended to other sustainability areas, biodiversity (nature, human rights or human capital) could be next in line, and that the existing material in the sustainability area will be considered.

The ISSB was officially launched on 3 November 2021 at the COP 26 meeting in Glasgow. The standards are called the IFRS Sustainability Disclosure Standards. Also announced was the consolidation of the technical expertise and resources of the VRF and the Climate Disclosure Standards Board (CDSB) into the ISSB (this process was completed in August 2022 – meaning that the VRF and CDSB are no more and have been completely absorbed). For the 3 November 2021 media release and FAQs click here.

When making the 3 November 2021 announcements, the Technical Readiness Working Group (TRWG) released three prototype papers:  General Requirements for Disclosure of Sustainability-related Financial Information Prototype, Climate-related Disclosures Prototype and its Supplement: Technical Protocols. available on the IFRS website (click here to view). Their significance is that they formed the basis of the Exposure Drafts released by the ISSB on 31 March 2022. The TRWG as a multi-body group (VRF, CDSB, IASB, TCFD and WEF) was tasked by the IFRS Foundation to develop a unified set of recommendations for consideration by the new ISSB.

See the IFRS Foundation website for the chronology and documents here.

The ISSB exposure drafts, standards and agenda consultation

On 31 March 2022, the ISSB released its first two exposure drafts for public comment. The first sets out general sustainability-related disclosure requirements and the other specifies climate-related disclosure requirements. The exposure drafts were open for public comment to 29 July 2022. The ISSB standards aim to be positioned as the global baseline for sustainability disclosure reporting. To access the webpage containing the two exposure drafts, click here. The ISSB received over 1600 public comments. The first two ISSB standards, IFRS S1 and S2, were released on 26 June 2023. The ISSB standards are voluntary unless mandated by a country’s national reporting authority.

On 4 May 2023 the ISSB issued a global survey calling on stakeholders to give input on which of its four short-listed projects it should tackle over the next two years. The four projects were biodiversity (nature), human rights, human capital, and integration in reporting. In May 2024, the ISSB announced that it will work on biodiversity and human capital in its technical programme for 2024/ 25. So these will be their next two standards.

The weighty role of stock exchanges

Relevant to the international developments is the role of IOSCO, the International Organization of Securities Commissions (the global industry body of capital markets regulators), whose membership regulate the national securities markets in 170 jurisdictions. IOSCO put its influential weight behind the IFRS Foundation‘s formation of the ISSB. IOSCO chairs the IFRS Monitoring Board which oversees the IFRS Foundation Trustees, which in turn oversees the IASB and the ISSB. In July 2023, IOSCO endorsed the ISSB standards; a significant move as each stock exchange will now have to decide if and how they use the standards in their markets.

The IASB’s Management Commentary Practice Note

In (im)perfect timing, the IASB in May 2021 released its Exposure Draft on the Management Commentary Practice Note for public comment to November 2021. For the IASB documents, click here. The IASB and ISSB will need to consider this document in the light of the Integrated Reporting Framework.

The integrated report and the Integrated Reporting Framework

The IASB and the ISSB are the new bodies responsible for the Integrated Reporting Framework. The IFRS Foundation has encouraged continued use and adoption of the Framework in the interests of high-quality reporting. Also recognised is the international popularity of the Framework and integrated reporting. So, organisations should carry on using the Framework for their integrated reports. The staff of the old IIRC have been absorbed into the IFRS Foundation group and support for the Framework continues. The old IIRC Council (the broad group of global organisations that supported integrated reporting and the Framework) is now called the Integrated Reporting and Connectivity Council and is positioned as an advisory body to the IFRS Foundation on integrated reporting and integrated thinking.

The EU’s European Sustainability Reporting Standards (ESRS)

On 29 April 2022, the EU’s twelve exposure drafts European Sustainability Reporting Standards (ESRS) were released for public comment to 8 August 2022. The exposure drafts are based on double materiality. They cover: general principles, general disclosure requirements, climate, pollution, water and marine resources, biodiversity and ecosystems, resource use and circular economy, own workforce, workers in the value chain, affected communities, consumers and end-users, governance, and business conduct. Click here to access.

After considering the public comments received, the updated exposure drafts were released as twelve draft ESRS standards on 22 November 2022 and submitted to the European Commission for consideration. The European Commission adopted the standards in July 2023 (for the Q&A click here). They will apply to many EU organisations as well as some non-EU companies operating in the EU that meet certain threshold criteria. The standards will apply from financial years 2024 in a phased-in approach based on company size. New proportionate standards for non-listed SMEs and sector-specific standards can be expected in the future.  In June 2024, EFRAG issued useful implementation guidance documents on materiality assessment, the value chain and ESRS datapoints.

The GRI Standards

After taking part in the initial coming together of the ‘gang of five’ in September 2020, the GRI (Global Reporting Initiative) has retained its independence as a global body and has been issuing its sustainability reporting standards since 1997 to meet the information needs of stakeholders (i.e. multi-stakeholders, including investors). This perspective is a big differentiating factor from the ISSB standards, however, the ESRS is in line with the GRI perspective. The GRI standards are voluntary standards.

Many of the GRI Standards were used in the development of the ESRS and there is a high level of interoperability. The GRI has memorandum of understanding with the ISSB in a bid to achieve interoperability and alignment among their standards.


The various sustainability standards, guidance and directives have different materiality perspectives – this is significant as it determines the information to disclose. In the ISSB standards, materiality is based on the premise that information is material if omitting, obscuring or misstating it could be reasonably expected to influence investor decisions – this aligns with the IASB’s definition of materiality in financial statements (‘financial materiality’). ‘Impact materiality’ is an organisation’s material (actual or potential, positive or negative) impacts on people or natural environment (used in the GRI standards). ‘Double materiality’ combines financial materiality and impact materiality (used in the ESRS). See the IRC FAQ: Explaining Materiality in Corporate Reporting for explanation of these terms.

Putting everything together using the ‘global baseline’ approach for sustainability reporting and Interoperability

The ISSB is promoting its standards to be the ‘global baseline’. Broadly, this positions the ISSB standards (that meet the needs of investors) as the starting off point, to which other information can be ‘layered’ (this other information being for instance, regional sustainability reporting requirements such as the ESRS, the SEC climate disclosures, multi-stakeholder standards such as the GRI, plus a country’s specific national requirements and corporate governance needs).

The main standard-setters have been working on the interoperability of their standards, i.e. the commonality and the incremental disclosures, to reduce the reporting burden on organisations. The ESRS-ISSB Standards Interoperability Guidance was issued in May 2024. The ISSB-GRI Standards Interoperability Guidance is currently being developed.


A part of the move to ensure sustainability disclosures are on the same level as financial disclosures is the element of assurance. The International Auditing and Assurance Standards Board (IAASB) is developing a new overarching standard, the International Standard on Sustainability Assurance (ISSA) 5000 General Requirements for Sustainability Assurance Engagements. ISSA 5000 is a standalone standard that leverages the existing standards and guidance of the IAASB (including ISAE 3000 (Revised) and ISAE 3410 Assurance Engagements on Greenhouse Gas Statements). ISSA 5000 covers all elements of an assurance engagement for limited and reasonable assurance. It provides more specificity for certain priority areas and the assurance of the integrated report. ISSA 5000 applies to sustainability information across any sustainability topic and prepared under multiple frameworks. Further, the International Ethics Standards Board for Accountants is developing ethics (including independence) standards to support credible assurance of sustainability-related information. Both standards are not specific to any profession and are expected to be finalised by late 2024. There have also been developments in internal auditing with the Committee of Sponsoring Organisations of the Treadway Commission issuing supplemental guidance, Achieving Effective Internal Control of Sustainability Reporting.