14th March 2024
A couple of weeks ago, Salterbaxter attended the IFRS Symposium in New York, which was an opportunity to hear directly from the IFRS Foundation on the IFRS S1 and IFRS S2.
The all-day conference aimed to provide insights into the ISSB's new sustainability standards (IFRS S1 and S2), exploring how they serve to enhance the consistency, completeness, comparability, and verifiability of sustainability-related information disclosed by companies. It offered a platform for learning about the standards, the IFRS Foundation's implementation plans, and experiences in adopting these new standards.
ISSB's New Standards
Introduced in summer 2023, IFRS S1 and S2 aim to establish a global baseline for sustainability disclosures, focusing on risks and opportunities that companies face. IFRS S1 is about disclosing sustainability-related risks and opportunities, while IFRS S2 focuses on climate-related disclosures. Both standards require companies to assert compliance when applied together.
Alignment with Current Standards and Frameworks
The new standards structurally build upon and align with existing frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, SASB standards, and the Integrated Reporting Framework (IRF). This alignment ensures that companies currently adhering to these frameworks are well on their path to complying with IFRS S1 and S2. However, during the event, it was confirmed that companies should continue to report in alignment with TCFD, while they are working towards the adoption of IFRS S2, where the jurisdictions, such as the US have not mandated these standards.
Global Implementation and Adoption
The conference highlighted the IFRS Foundation's four-pillar strategy to support the global implementation of these standards, focusing on proportionality, transition relief, jurisdictional adoption guidance, and capacity building. This approach aims to facilitate the adoption of the standards worldwide, ensuring that preparers feel comfortable and supported throughout the process.
Corporate Adoption
Early adoption signals from leading companies, including Bank of America, Dow Chemical, J&J, and MasterCard, were discussed, indicating a positive reception and support for the new standards within the business community.
Implications for Stakeholders
For companies already reporting against standards like TCFD and SASB, the transition to IFRS S1 and S2 is seen as a natural progression. However, the broader adoption across jurisdictions suggests that businesses should review the new standards closely to identify any potential gaps and prepare for future regulatory expectations.
Investor maturity
investors are gradually increasing the maturity of their approaches to ESG. As part of integrating ESG into their processes, they’re typically excluding certain high-risk sectors from their investment universe. However, in recent years we’re seeing a gradual increase in investors issuing information requests to investees and asset managers.
Regulatory & reporting pressure
The demand for faster private and governmental action to combat climate change has seen a noticeable increase in the number of reporting requirements for organisations. This is placing increasing pressure on organisations who are already struggling to deal with a string of geo-political and economic shocks. Over the next five years there may be some level of consolidation, but in the interim reporting organisations are relying on reporting efficiencies and overlaps between reporting requirements to alleviate their reporting burden.
Navigating the ever-evolving reporting landscape can be burdensome for companies, especially now where multiple reporting regulations will catch most companies due to their far-reaching corporate structure and operations. At Salterbaxter, we continue to support companies to ensure they can tell their corporate story and report in alignment with recognised and mandatory reporting standards and frameworks. If you are interested in hearing more about how we can support you with a readiness assessment, please contact info@salterbaxter.com.