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A4S response to the proposed IFRS Sustainability Disclosure Standards

Dear International Sustainability Standards Board,

We welcome the ISSB’s consultation on the recently published Exposure Draft IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and Exposure Draft IFRS S2 (Climate-related Disclosures). The disclosure of robust, comparable and decision-useful information is essential as part of the urgent response needed to mitigate climate, and other environmental and social risks and opportunities.

To underpin this, sustainability disclosure standards must:

  1. Align with relevant existing and emerging sustainability reporting standards to ensure harmonization and convergence, to the greatest extent possible.
  2. Consider the dynamic, industry-specific nature of materiality and provide clarity around the assessment of users’ expectations on what constitutes enterprise value, recognizing that investors need disclosures on broader social and environmental impacts to assess risk and inform investment decisions.
  3. Have clear definitions and guidelines that enable preparers to report in a transparent, consistent and comparable manner.
  4. Recognize that reporting is a means to an end, not an end in itself. Unless the practical challenges around data accuracy and completeness are recognized and addressed within reporting and assurance standards, there is a risk that companies will avoid setting the ambitious targets needed to drive innovation and will divert effort into reporting instead of action.
  5. Connect to financial reporting standards and promote integrated thinking as illustrated through frameworks such as the Integrated Reporting Framework.
  6. Address the broad set of environmental, social and economic issues that materially impact decision making.

A global set of sustainability disclosure standards will not address all disclosure and reporting requirements that organizations face. Further, it should be accepted that standards may need to evolve quickly over time while remaining true to their original principles. It is critical that the ISSB protects and promotes the principle-based nature of standards and avoids falling into prescriptive rules that could significantly reduce the scale and speed of action to address pressing social and environmental risks. As an example, the scientifical and political consensus are issues such as climate change is evolving at a rapid pace and therefore self-embedded mechanisms must be created upfront that allow for regular, yet agile reviews and updates.

The ISSB is uniquely suited to establishing the comprehensive, yet agile global baseline required for a global sustainability disclosure system to provide investors and other capital market participants with the information that they need, while enabling and empowering companies to take action. We commend the work to date by the ISSB and the intention to move quickly towards the global adoption of a set of sustainability disclosure standards.

Accounting for Sustainability (A4S)

As background, Accounting for Sustainability (A4S) was established in 2004 to mobilize action and leadership by the finance and accounting community to make sustainable business, business as usual.

We work with the finance and accounting community to:

  • Inspire finance leaders to adopt sustainable and resilient business models
  • Transform financial decision making to enable an integrated approach, reflective of the opportunities and risks posed by environmental and social issues
  • Scale up action across the global finance and accounting community

A4S has worked with organizations, investors, accounting bodies, regulators and other representatives from across the finance and accounting community on reporting for many years, including setting up the International Integrated Reporting Council in 2010 and helping establish the Taskforce on Climate-related Financial Disclosure (TCFD). As part of this activity, we work closely with organizations and institutional investors to understand the practicalities of preparation and use of sustainability disclosures to enable better informed decisions.

Our consultation response to the ISSB is informed by this work with the finance and accounting community globally. In our dialogue with preparers, a consistent message we hear is the need for the rapid adoption of a consistent set of sustainability reporting standards that allows them to report information once to fulfil different stakeholder needs including, but not limited to, investors, while recognizing that different social and environmental issues will be relevant to different companies. From our work with investors, asset owners and others across the capital markets community who are reliant on company disclosures for their own decision making, a consistent demand is for globally available, sector specific, comparable and assured sustainability information. Similarly, accounting bodies across the world, tasked with educating future generations of finance professionals and providing continuing development to their members, have underlined the need for global alignment and strong connectivity with financial reporting.

We welcome the ISSB’s consultation on the Exposure Drafts for the IFRS sustainability disclosure standards as an important step to meeting these differing needs, in particular where there are clear links to financial reporting. The ISSB and the IFRS Foundation are uniquely placed to build upon existing expertise in developing robust, reliable and independent global standards, and to ensure that sustainability-related disclosures connect and, as relevant, integrate with existing IFRS standards.


In response to the ISSB’s consultation, we offer the following observations and perspectives, building upon the characteristics of sustainability disclosure standards outlined above, to deliver the information needed to enable informed decision making in relation to social and environmental issues. We hope the ISSB will consider these perspectives as they progress the current Exposure Drafts and develop additional sustainability disclosure standards in the near future.

1. Align with relevant existing and emerging sustainability reporting standards to promote harmonization and convergence, to the greatest extent possible (IFRS S1 Questions 3, 14)

There is an urgent need for a global set of internationally recognized sustainability disclosure standards. There is already a small number of globally recognized sustainability disclosure standard setters and framework providers, such as GRI, SASB, IIRC and TCFD, whose standards are widely adopted by companies, investors, regulators and other stakeholders. We believe global sustainability disclosure standards should build upon the work of these existing bodies, enabling continued convergence and promoting widespread global adoption.

The ISSB has a critical role in leading the promotion of harmonization with existing and emerging standards to the greatest extent possible. We support the ISSB’s alignment to a number of existing standards and frameworks – which is apparent within the Exposure Drafts – and urge it to continue in its efforts. We applaud the ISSB’s recent consolidation of the Value Reporting Foundation and the recent Memorandum of Understanding with the GRI. We believe the ISSB is well suited to establish a comprehensive baseline that can enhance compatibility and interoperability to deliver a global sustainability disclosure system. However, this requires the ISSB to undertake additional work with other standard setters and discussion with global regulatory bodies to accelerate alignment on concepts, terminology, definitions and effective dates to the greatest extent possible. It will also require the ISSB to think about practical mechanisms to maintain consistency and avoid duplications into the future, including as additional sustainability-related topics are addressed. Reporters need clear guidance and complimentary sets of standards to be able to provide decision-useful information efficiently and effectively. The ISSB’s working group to enhance compatibility between its global baseline and jurisdictional initiatives / requirements aimed at broader stakeholder groups is a positive step in this direction. This continued focus and engagement will be essential for the development of a global baseline.

2. The materiality of sustainability-related risks and opportunities is dynamic and industry-specific and provide clarity around the assessment of users’ expectations on what constitutes enterprise value, recognizing that investors need disclosures on broader social and environmental impacts to assess risk and inform investment decisions. (IFRS S1 Question 8)

The ISSB has decided to focus on enterprise value to assess the materiality of sustainability-related risks and opportunities. Our experience with sustainability disclosure finds that materiality is dynamic, with sustainability-related risks and opportunities moving across the materiality spectrum. In some cases, issues that are initially of interest to society and other stakeholders can quickly become material to the enterprise value of an organization. As a result, under the ISSB’s definition, preparers may find themselves ‘guessing’ primary users’ expectations on what constitutes enterprise value.

We highlight that a substantive number of investors will continue to draw on standards such as those developed by the GRI which use an impact lens to determine materiality in order to understand fully the impact of investee organization activities and of their investments, and to channel finance towards sustainable outcomes. Further, providing transparency to engage with and meet the needs of a broader set of stakeholders will continue to be seen as important by most organizations and is being required by regulators in a number of jurisdictions. As a result, organizations will need to continue to report using these standards. Moreover, recognizing the dynamic nature of materiality for sustainability-related issues and aligning, where possible, with multistakeholder reporting will reduce the risk of divergence and duplication for preparers and support global alignment.

To the extent that the ISSB’s view of materiality remains focused on enterprise value rather than broadening to meet investor needs, we strongly encourage the ISSB to work with other bodies to ensure complementarity between the disclosures required under different definitions of materiality set by different standard setters, including those that are focused on wider stakeholder needs.

Our experience has also found that the materiality of sustainability-related risks and opportunities can vary based on an organization’s business model, industry and geography. Careful consideration should be given to sector and geographical sustainability issues as standards are developed. It is important that the nuances and detail are addressed. We welcome the industry-specific reporting requirements included in the Exposure Drafts. However, with reference to Appendix B in IFRS S2, they are largely unchanged from the existing SASB standards, which were developed initially for the US market. A detailed review is required to ensure that the standards are updated to make them appropriate for international adoption and develop plans to maintain their relevance and applicability, aligned with the ambitious timelines of ISSB.

Finally, in contrast with the ISSB’s comments in IFRS S1 BC66, we believe that primary users would benefit from the disclosure of how materiality assessments are made. This would allow users to assess the soundness of an entity’s risk management processes as these relate to materiality.

3. Have clear definitions and guidelines that enable preparers to report in a transparent, consistent and comparable manner. (IFRS S1 Questions 1, 2, 7)

Investors and other stakeholders require disclosures to be comparable to allow informed decision making. Reporting entities require clear guidance to prepare such disclosures, particularly in regard to applying consistent definitions, assessing enterprise value, using estimates and disclosing assumptions, while also avoiding the need for lengthy notes on data limitations. Regulators proposing assurance requirements on sustainability disclosures require clear guidance that will facilitate assurance.

If key terms are not well-defined and left open to interpretation, preparers and users may apply different judgments to the meaning of the disclosures, impacting comparability and usability. For example, proposals in the Exposure Drafts require an entity to disclose material information about all significant sustainability-related risks and opportunities. It would be beneficial to clarify whether the terms ’material‘ and ’significant‘ have different meanings, or whether instead they are used interchangeably. Other key terms requiring clearer definitions and guidance are ‘sustainability’, ‘enterprise value’, ‘short’, ‘medium’ and ‘long term’, and what information is considered useful or relevant to assess enterprise value (in particular, in light of IFRS S1 paragraphs 6(c) and 61).

In our work with preparers and investors, we observe that there are several challenges to ensuring the comparability of sustainability-related information. This includes differences in the underlying methodologies applied, limited disclosures on estimates and assumptions, and preparers applying their own interpretation of the guidance. Also, we note that the Exposure Drafts do not prescribe specific methodologies, which could lead to a variety of methods and assumptions being adopted. While we appreciate the flexibility in approaches, ensuring consistency over time would be key as the standards are subsequently updated. We often find that even the most experienced reporters and users face challenges with these disclosures – a particularly challenging area relates to Scope 3 emissions, which require estimations and input from a variety of internal and external sources.

One specific area to highlight is the set of provisions under paragraph 54 which refer to the possibility of using metrics associated with disclosure topics from other standard-setting bodies, in the absence of an IFRS Sustainability Disclosure Standard that applies specifically to a sustainability-related risk or opportunity. While reporters may welcome this flexibility at the initial stages of the adoption journey, this openness may result in significant challenges in relation to adoption, comparability and assurability of disclosures. Furthermore, different standards will not have undergone the ISSB’s due process, which could present challenges in relation to adoption in various jurisdictions.

Field testing / piloting should be undertaken at pace to identify application concerns and fully understand practical implications of the requirements before the standards are finalized, similar to the approach followed for some IASB proposals. In addition, the ISSB should work closely with the IAASB, as the globally recognized assurance standard setter, to ensure that its standards constitute suitable criteria for assurance purposes.

4. Recognize that reporting is a means to an end, not an end in itself. Unless the practical challenges around data accuracy and completeness are recognized and addressed within reporting and assurance standards, there is a risk that companies will avoid setting the ambitious targets needed to drive innovation and will divert effort into reporting instead of action. (IFRS S1 Questions 4, 9, 11)

Preparers today are developing the systems and processes required to provide relevant, transparent sustainability disclosures in an effective and efficient way. This includes efforts to improve data quality and to align the robustness of sustainability-related financial reporting more closely with that used for traditional financial reporting. Clarity in the guidance, as discussed above, will support these efforts. However, it will also take time for reporting entities to implement the required systems and to upskill the finance teams to be able to respond in an effective manner. Additionally, it is essential to note that there are some inherent limitations to certain sustainability-related disclosures which will not change over time. This includes the underlying completeness and accuracy of data points, examples of which include emissions measurement, completeness for environmental spills, and the context-specific nature of social capital disclosures, eg based on survey or perception data.

We recommend that the ISSB recognizes the evolving nature of the reporting systems and processes that facilitate sustainability-related financial reporting. As these systems further develop, preparers will be able to provide such disclosures in a more complete and timely manner. Providing the necessary time and provisions for companies to put in place appropriate processes, controls and technology is essential. In the interim, we recommend the ISSB emphasize decision-useful information, and exploring ways to signal to users the quality of disclosures made. Other standards and frameworks, such as the Partnership for Carbon Accounting Financials (PCAF), have provided guidance on disclosing data quality considerations and assessments (also called ‘data quality scoring’) and may serve as a useful model for the ISSB to consider.

In light of the data challenge, we recommend the following:

  • In addition to disclosures on the governance processes, controls and procedures with regards to sustainability-related risks and opportunities, we believe that primary users would benefit from having information around governance over sustainability-related financial reporting. (IFRS S1 Question 4)
  • Considering phasing in some of the most challenging requirements, in particular in relation to the timing and frequency of disclosures, balancing the real world challenges that organizations will face with the urgent need to have timely information available to investors and others. (IFRS S1 Question 9). As the ISSB develops sustainability reporting standards at the pace required, we recommend the ISSB recognize that the data quality underlying such reporting will improve over time and consider this evolution in the development of the standards, in particular with regard to data related to value chains.
  • Maintaining the proposed requirements around comparative information (not required on year of adoption) but strengthening the provisions in paragraph 65 by also demanding disclosures on the reasons why a comparative may not be adjusted. (IFRS S1 Question 11)
  • The ISSB should consider working with international bodies such as IOSCO as well as local jurisdictions to put in place consistent baseline provisions with regards to safe harbour or similar protection for estimates and values which are inherently subject to heightened uncertainty.

Ultimately, disclosures are intended to support action. The focus should therefore be maintained on decision useful information, which in some cases does not require ‘perfect’ data. If disclosure requirements act as a barrier to setting the ambitious targets needed to drive innovation, diverting efforts into reporting instead of action, they are likely to be counterproductive. Enabling organizations to report in a transparent, decision-useful way in spite of quality constraints will be essential.

5. Connect to financial reporting standards and promote integrated thinking as illustrated through frameworks such as the Integrated Reporting Framework. (IFRS S1 Question 6, IFRS S2 Question 6)

The environmental, social and economic issues covered by sustainability disclosure standards frequently have implications for financial reporting. For example, sustainability factors may impair goodwill, reduce the value and useful life of an asset or have implications for an entity’s inventory balances.

We welcome the recognition by the ISSB of the need for reporting entities to assess and disclose the connectivity between traditional financial reporting and sustainability-related financial reporting. However, we note that there are limited details on when this would be required and how it would be done, in particular with regards to the disclosure of quantitative information (eg potential financial impacts of climate-related risks). One example is in relation to IFRS S2 question 6: while we are supportive of the inclusion of the requirement to disclose current and anticipated financial effects from climate-related risks and opportunities, we expect significant challenges as raised in the TCFD 2021 status report. The consideration of whether an item has a significant risk or opportunity on its financial position in the future should be consistent with the results of the materiality assessment and more guidance on how to assess financial impacts would be helpful. (IFRS S2 Question 6). Other areas will also require clarification on the alignment with the provisions for financial reporting, for example for segment reporting and consolidation rules for joint ventures, operations or associated companies.

We encourage the ISSB to work in close collaboration with the International Accounting Standards Board (IASB) further to align standards where they connect. A common conceptual framework utilized by the IASB and ISSB can lay the foundation for an aligned approach to standard setting, which will also promote aligned reporting.

6. Address the broad set of environmental, social and economic issues that materially impact decision making.

It is necessary to move quickly to other topics after climate to capture the interconnectedness of all sustainability topics.

Given the urgency of the climate crisis, as well as significant investor demand for climate-related disclosures, we welcome the Exposure Draft IFRS S2 on climate-related disclosures. We also support the inclusion of disclosure for Scope 1, 2, and 3 emissions based on the GHG Protocol as this is consistent with current disclosure practices and reflective of the approach needed for preparers and users to comprehensively understand climate-related risks and opportunities. However, further work may be needed to ensure that the methodology required provides clarity on technical aspects that may need to be addressed to ensure consistency with other financial reporting, such as boundaries and the treatment of divestments and acquisitions.

We note that other pressing environmental and social risks are closely integrated and connected with climate and a focus on climate only will not provide the complete sustainability reporting standards needed by investors and other stakeholders. We encourage the ISSB to move forward quickly with other sustainability disclosure standards in the near future, leveraging the significant body of sustainability disclosure standards used on a voluntary basis today and working in close cooperation with other standard-setters to achieve consistency and alignment.


The draft proposed IFRS sustainability disclosure standards represent an important step forward towards ensuring that investors and other organizations have the information needed to address significant sustainability-related risks and opportunities. There will, however, likely still be regional variation in reporting requirements, as well as demands from investors and other stakeholders for additional disclosure, in particular addressing an organization’s broader impact. Companies will also continue to receive reporting requests from the growing set of ESG ratings and indices.

Moving forward, it will be essential that the ISSB is agile. It must respond to real world feedback on the practical application of its standards, and incorporate evolving risks and opportunities associated with social and environmental factors, so that the standards maintain relevance and deliver on user needs.

Thank you for the opportunity to respond to this consultation. We would be delighted to discuss any of our comments in more detail should further input be of assistance, and look forward to continuing to support CFOs, investors, accountants and the wider finance community in navigating this rapidly evolving landscape.

Yours faithfully,

Jessica Fries, Executive Chair, A4S

Martina Tessari, Senior Manager, A4S

Accounting for Sustainability is a Charitable Incorporated Organization, registered charity number 1195467. Accounting for Sustainability is part of the King Charles III Charitable Fund Group of Charities.
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