The International Sustainability Standards Board (ISSB) is meeting in Montreal to advance the IFRS Sustainability Disclosure Standards ahead of their publication in 2023 and made progress on several topics relevant for the work of COP15 on Biodiversity, simultaneously taking place in Montreal, Canada.
From ESG to sustainability
To evolve from the currently fragmented ESG disclosure landscape, that lacks connectivity and has conflicting concepts, to a truly global common language of sustainability-related financial disclosures, the ISSB agreed during its October 2022 meeting that it would be beneficial to ground its standard-setting work by clearly articulating the relationship between sustainability matters and financial value creation.
In its session on 13 December 2022, the ISSB agreed how to describe sustainability and clarified that a company’s ability to deliver value for its investors is inextricably linked to the stakeholders it works with and serves, the society it operates in, and the natural resources it draws on.
The decision builds on concepts from the Integrated Reporting Framework, which helps companies articulate how they use and effect resources and relationships for creating, preserving and eroding value over time.
Sustainability will be described in the ISSB’s General Sustainability-related Disclosures Standard (S1) as the ability for a company to sustainably maintain resources and relationships with and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term. Sustainability is a condition for a company to access over time the resources and relationships needed (such as financial, human, and natural), ensuring their proper preservation, development and regeneration, to achieve its goals.
By referring to this articulation of the value creation process, a company will be better placed to explain to its investors how it is working sustainably within its business ecosystem—addressing the impacts, risks and opportunities that can affect its performance and prospects—to ultimately deliver financial value for investors.
Chair of the ISSB, Emmanuel Faber said: “The ISSB was created to change the current fragmented ESG disclosure landscape into a global common, consistent language of sustainability-related financial disclosures. Our clarification of the fundamental articulation between financial value creation and sustainability, borrowed from concepts in the Integrated Reporting Framework, will ground our standard-setting work and make clear that while our focus is on information for investors, financial value creation is affected by the proper preservation, development and regeneration of all the resources and relationships (including natural and human) needed for a company to achieve its goals.”
