On 31st January 2022, the Climate Disclosure Standards Board (CDSB) was consolidated into the IFRS Foundation to support the work of the newly established International Sustainability Standards Board (ISSB). While this site and its resources remain relevant for preparers looking to improve sustainability disclosure until such time as the ISSB issues its IFRS Sustainability Disclosure Standards on such topics, no further work or guidance will be produced or published by CDSB. For further information please visit the IFRS website.

People and Planet in the Accounts: non-financial disclosures – the rubber’s not hit the road… yet

Mardi McBrien says that when it comes to putting people and planet into the accounts, the moment of truth is still some way off but is fast approaching.

“It’s time to harmonise and make the reporting eco-system a much less complicated place,” says McBrien. “We often hear companies talk about too many frameworks and they are not sure which ones to use. We’ve got some for impact, some for sustainability reporting, some for financial reporting. It’s a busy space and can appear confusing.”

Earlier this year, the Climate Disclosure Standards Board (CDSB), the CDP, the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) – all recognised as the five largest global ESG standard-setters – were brought together by the Impact Management Project to see what could be done to bring about a comprehensive corporate reporting system. “The idea was to demonstrate to the market how those five pieces fit together to help business communicate how it creates value in the short, medium and long term, but also report the impact on wider stakeholders,” says McBrien.

“We also wanted to demonstrate that they are not necessarily competing initiatives. They are all quite complementary – although there were some challenges.”

But the challenges were not insurmountable. “We got together and agreed how each of these reporting frameworks and standards fitted together around enterprise value creation and wider value to stakeholders,” she says. There was also the “jurisdictional” layer to acknowledge as part of this process. For example, in Europe, the focus is on delivering net zero by 2050, the Sustainable Development Goals and a European standard that overlays the global standards – they all must be in the mix.

The output of this thinking was an open letter to Erik Thedéen – Director General of Finansinspektionen, Sweden, and Chair of the Sustainable Finance Task Force of the International Organization of Securities Commissions (IOSCO) – from CDP, CDSB, GRI, IIRC and SASB.

The letter built on the joint statement of intent, co-published by the five collaborating organisations, which presents a shared vision of the elements necessary for comprehensive corporate reporting. It also explained how these organisations’ frameworks and standards complement Financial GAAP and provided the natural starting point for progress towards a globally coherent solution. The organisations also set out how IOSCO could play a leading role.

So why write to IOSCO? “We wanted to draw appropriate parallels to IOSCO’s important role two decades ago in the establishment of the IFRS Foundation, which made great strides in standardising financial reporting globally through an independent market-based technical process ultimately accountable to public authorities,” says McBrien. 

And it was some of that influence that the group wanted now. “We thought that IOSCO had been super powerful in doing that and what we really wanted as a group was for IFRS to start to consider how they could work with this statement of intent and get behind it,” she says. “We were looking to IOSCO to endorse the approach we were taking.”

In essence, IOSCO represents the capital markets. It is a body that has power to leverage and, at the same time, look after investor interests as well. That is a powerful mix and is exactly what is needed to help produce a step-change.

McBrien points out convergence in this area is no less challenging than it has been for the IFRS Foundation over the last 20 years or more. She points out: “We already have globally accepted practice from many of these frameworks and standards. That’s already in the market being used. You already have in place principles and requirements that cut across ESG, you’ve got very specific requirements through TCFD and CDSB, and you’ve got metrics that align with investor needs from SASB. So as a broad base there is a good foundation and market practices to start from.”

It all comes down to consistency. “We’re driving more consistency between broader stakeholder reporting and financial reporting,” she says. “If we can align the language and align the approach it’s much easier for everyone.”

She is adamant that ESG reporting in this way must become business as usual and connected to financial impacts. “That’s where reporting is really falling short,” she says. “It isn’t connecting to the financials.”

The open letter from IOSCO has already received a positive response. Thedéen welcomed efforts to align sustainability reporting, noting that it is important that the initiatives head towards convergence. In addition to more harmonisation in ESG reporting standards, IOSCO highlighted its desire to see the standard-setters and IFRS Foundation’s process on establishing a new Sustainability Standards Board coming together.

“In an ideal world, you wouldn’t have a sustainability standards board and an accounting standards board. There would just be one standards board,” says McBrien. “That is probably one big step too far, but we need to go on a journey.”

She says that all these efforts really add up to one thing: creating sustainable resilient businesses. “But it is also about resilient planning,” she adds.

And let’s not forget that the march toward harmonised financial and non-financial reporting is not just about action taken by standard-setters, the market will resolve a large part of this puzzle. What we see time and again is that market practice must be in place before the mandatory framework can be developed. 

“Common practice is really important. It informs what is most important as well as what might need to change,” she says. 

While all this is going on, the IFRS Foundation is consulting on a global approach to sustainability reporting and on a possible Foundation role. The rubber is definitely getting closer to the road.


This article was published on 30 November by the the Institute of Chartered Accountants in England and Wales in their article series "People and Planet in the Accounts."

Click to read more articles in this series.