What should be next for the ISSB?


Charles Henderson


Climate reporting was easy to pick as a top priority but what should be next?

I believe that corporate climate reporting is moving in the right direction. However, it still has a long way to go, as we found out when having our February 2023 CRUF ESG meeting – and discussing the lack of climate accounting suggested by Carbon Tracker’s “Still Flying Blind” report of October 2022. Improving climate reporting should be helped by the publication of the International Sustainability Standards Board’s (ISSB) final sustainability standard IFRS S2 on climate currently expected to be published by the end of June 2023.

But what topics should be a priority for the ISSB to improve corporate reporting on sustainability issues? Should it be one or a number of specific sustainability topics, like reducing plastics and other pollutants, ensuring sustainable water supplies, or managing rare earth resources? It was easy to pick climate as a topic for developing sustainability reporting standards as climate affects everything and everybody. What else affects everything and everybody in a similar way to climate?

E, S or G or all three?

The ISSB was set up to deliver a comprehensive set of global sustainability-related disclosure standards that provide investors and other capital market participants with information about companies’ sustainability-related risks and opportunities to help them make informed decisions. The IFRS Foundation assumed responsibility for the Sustainability Accounting Standards Board’s (SASB’s) Standards when it merged with the Value Reporting Foundation. The ISSB was created to help meet the demand for high quality, transparent, reliable and comparable reporting by companies on climate and other environmental, social and governance (ESG) matters. But do we really think sustainability-related risks and opportunities equals ESG matters? I am not sure we do.

Out of the E, S and G, governance reporting has had a long time, especially in the UK under the Corporate Governance Code, to produce some acceptable practices. Environmental and social matters are the areas we are a lot less used to. Would we include E and S, as a result, within sustainability?

Some aspects of sustainability have been thought about for longer than I have been thinking about it. There are probably places that I do not know about and where we could look for ideas. However, I have noticed over the last year or so that some corporates are including UN Sustainable Development Goals (SDGs) in their business model descriptions in strategic reports; and last year I attended an ICAEW Sustainability & Climate Change Community webinar on using SDGs as a common and accepted framework for individual, societal and global impact in ESG reporting. Can the SDGs provide ideas on what is next for ISSB sustainability standards?

What do CRUF participants think?

Some CRUF participants have responded to a recent CRUF survey on identifying upcoming issues for the ISSB. The resulting top five issues are (in order of importance and with ESG identifiers):

  1. Attracting, retaining & developing talent (S)
  2. Corporate governance (G)
  3. Supply chain responsibility (G)
  4. Water use (E)
  5. Labour relations (S) (G)

Reducing this to at least a few topics may be difficult – there are another 16 topics on the survey list. I am not yet sure that the CRUF participants have discussed what is the objective of the next sustainability standard before prioritising topics? And how material (using the IFRS accounting standard definition) do we feel the topic is for the purposes of international corporate reporting?

We can see that the objective of the proposed IFRS S2 on climate-related disclosures is for corporates to report on their material climate-related physical and transition risks to lower carbon dioxide equivalent risks and opportunities. The same needs to be thought through for the next topics.

There are also the E and S components of the SDGs. It may be worth deprioritising the purely G relevant topics as being covered elsewhere in corporate reporting as mentioned above. During the recent CRUF ESG meeting in February, it was discussed whether it may be worth consulting the list of SASB standards, of which there are 77 industry sustainability disclosures standards as a useful source and a participant has pointed out nine of those as being particularly important (again not in any priority order):

  1. Consumer Goods – Appliance manufacturing (as hard to recycle)
  2. Extractive and Minerals Processing – Construction materials (as cement is a high CO2 producer)
  3. Extractive and Minerals Processing – Iron and Steel producers (as again a high CO2 producer)
  4. Extractive and Minerals Processing – Oil and gas – refining and marketing (as an obvious industry affecting greenhouse gas (GHG) emissions)
  5. Food and Beverage – Processed foods (as single use plastics involved)
  6. Infrastructure – Electric utilities and power generators (as high CO2 producers)
  7. Technology and Communications – Hardware (high use of energy)
  8. Transportation – Automobiles (contribution to GHG emissions)
  9. Transportation – Road transportation (contribution to GHG emissions).

So, what should be next?

In preparing this article and thinking about what CRUF (and CRUF ESG) would suggest to the ISSB as part of their upcoming agenda consultation, there are multiple variables that need thinking about. It would help if someone helped me to decide what the next big sustainability topics are after climate. My inclination is to focus on environmental issues on the basis that governance has progressed some way and has had longer to develop in corporate management and reporting and social may be covered by how we all interact with and behave towards each other in our societies.

Using the SDGs as a source and my personal assessment of the issues within these that are material, my choices for the next topics for the ISSB to focus on (and therefore for CRUF ESG to get their heads around as well) are (not yet in priority order):

  1. Food security, nutrition and sustainable food production (SDG 2)
  2. Sustainable management of water and sanitation (SDG 6)
  3. Sustainable consumption and production (management of natural resources and reduction in waste) (SDG 12)
  4. Reduce marine pollution (SDG 14).

I will leave it up to CRUF ESG and CRUF participants to determine what CRUF thinks should be next for ISSB sustainability standards. Based on thinking through this article I would select one or more of the following:

  1. Sustainable management of water and sanitation
  2. Food security
  3. Construction materials
  4. Processed foods
  5. Automobiles and road transportation.

Charles Henderson is co-chair of the CRUF ESG sub-group and a participant of CRUF UK. He is a chartered accountant who takes an active interest in corporate reporting, including auditing, corporate governance and ESG from an investor perspective. He is chairman, member of, and policy team member of the UK Shareholders’ Association, a member of the FRC’s Advisory Panel, an associate of Falcon Windsor and a member of the Pre-emption Group. He retired from Invesco after 25 years at the end of May 2019.      

Disclaimer: The views expressed in the blog are those of the author and do not necessarily represent the views of all CRUF participants. To read more about the CRUF’s views on this and other topics, please visit the ‘Our Views’ section of this website.


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