ISSB Gives Companies an Extra Year on General Sustainability Reporting to Allow Focus on Climate Disclosure
Companies reporting under the new climate disclosure standards being developed by the International Sustainability Standards Board (ISSB) of the IFRS Foundation will be given an additional year to provide disclosure on some sustainability-related risks, in order to enable them to first focus on climate-related reporting, according to an announcement by the ISSB following its most recent meeting.
The ISSB was officially launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards, in order to provide a global baseline of disclosure requirements that can be used by jurisdictions on a standalone basis or incorporated into broader reporting frameworks. The board released the first exposure drafts for its first two reporting standards, covering general requirements for sustainability-related financial information and climate-related disclosures in March 2022, and recently announced that the new standards will be effective as of January 2024, with companies beginning to issue disclosures against the standards in 2025.
The new transitional relief introduced by the ISSB follows its announcement in December that companies will also be given an additional year to report on Scope 3 emissions, or those originating in a company’s value chain and beyond its direct control.
In a statement following the meeting, the ISSB said that the new relief is being added as “investors have indicated that while they need consistent, comprehensive sustainability-related information across all risks and opportunities to inform their investment decision-making, the need for disclosures about climate-related risks and opportunities is the most urgent.”
Under the reliefs now in place, companies using the new standards will be required to report on climate-related risks and opportunities in the first year of reporting, but will have an extra year to provide disclosure on other sustainability-related risks, provide annual sustainability-related disclosures at the same time as the related financial statements, disclose Scope 3 emissions or use the Green House Gas Protocol to measure emissions.
The ISSB also decided at its meeting to give an extra year to companies reporting on climate-related risks and opportunities to provide comparative information about their sustainability-related risks and opportunities beyond climate.
Emmanuel Faber, Chair of the ISSB, said:
“The upcoming introduction of the ISSB’s Standards establishing the global baseline is being welcomed by companies urgently looking for tools to meet the information needs of their investors. This transitional relief ensures companies can phase in their approach, initially focusing on the quality of the climate-related information they provide.”