Along with the release of the Exposure Drafts, International Sustainability Standards Board (ISSB) Chair Emmanuel Faber and Vice Chair Sue Lloyd have communicated plans for building upon the SASB Standards and for embedding SASB’s industry-based standards development approach into the ISSB’s standards development process.
As the IFRS Foundation Trustees committed when launching the ISSB, it will build on the work of existing investor-focused reporting initiatives to become the global standard-setter for sustainability disclosures for the financial markets. The ISSB made substantial progress toward this goal this week when it issued Exposure Drafts of two proposed standards General Requirements for Disclosure of Sustainability-related Financial Information and Climate-related Disclosures. These exposure drafts consolidate content from the TCFD, CDSB, SASB, Integrated Reporting, and the WEF IBC’s stakeholder capitalism metrics into a coherent whole.
SASB’s industry-based standards development approach identifies the sustainability disclosure topics most relevant to enterprise value for the typical company in an industry, enabling companies to provide decision-useful information about a range of sustainability-related risks and opportunities to investors and other capital market participants. SASB Standards, including the industry-based approach used by the SASB, will be built upon and supported in the following ways.
Industry-based approach to standards development:
The ISSB will embed the industrybased approach used by the SASB into its standard-setting process. The industry-based approach used by SASB is valued by investors for producing decision-useful information and by preparers for producing cost-effective standards.
Inclusion of SASB standards in the Exposure drafts:
a. Climate-related Disclosures Exposure Draft (Climate ED) – the SASB Standards are the source of the industry-based requirements in the Climate ED. On finalisation, these would become a required component of the ISSB’s Climate Standard
b. General Requirements for Sustainability-Related Disclosures Exposure Draft (General Requirements ED) – the General Requirements ED proposes that entities provide material information on all significant sustainability-related risks and opportunities necessary to assess enterprise value. In the absence of specific IFRS Sustainability Disclosure requirements, this ED requires companies to consider SASB Standards to identify sustainability-related risks and opportunities and to develop appropriate disclosures. This enables IFRS Sustainability Disclosure Standards to make use of the range of sustainability-related risks and opportunities covered by the SASB Standards from inception with the status of implementation guidance.
Commitment to improving international applicability of SASB Standards
SASB Standards will serve as the starting point for the ISSB’s industry-based requirements.
a. On consolidation of the VRF the SASB Standards will become materials of the IFRS Foundation with the status of implementation guidance (consistent with the status proposed in the General Requirements ED).
b. On consolidation of the VRF, the ISSB will assume responsibility for the evolution and enhancement of SASB’s 77 industry-based Standards.
Starting point for ISSB industry-based requirements
SASB Standards will serve as the starting point for the ISSB’s industry-based requirements.
a. On consolidation of the VRF the SASB Standards will become materials of the IFRS Foundation with the status of implementation guidance (consistent with the status proposed in the General Requirements ED).
b. On consolidation of the VRF, the ISSB will assume responsibility for the evolution and enhancement of SASB’s 77 industry-based Standards.
Current SASB projects
Ongoing projects by the SASB will be transitioned to the ISSB and continued. The SASB is expected to publish proposed changes arising out of several of its ongoing projects prior to the ISSB assuming responsibility for the SASB Standards and these proposed changes, as well as the climate and human capital research projects and other current SASB projects will be transitioned to the ISSB.
The IFRS Foundation intends to progress these projects as currently resourced, while the consultation on the ISSB’s agenda planned for 2022 will inform their detailed delivery plan.
Encouragement to use SASB Standards
The ISSB actively encourages preparers and investors to continue to provide full support for and to use the SASB Standards in this transition phase.
The IFRS Foundation is a not-for-profit organization created to serve the public interest by developing globally accepted financial reporting standards that meet investors and other capital market participants’ need for reliable, transparent and comparable information to make economic decisions. Our standards―IFRS Accounting Standards and IFRS Sustainability Disclosure Standards—are developed by the International Accounting Standards Board (IASB) and the newly created International Sustainability Standards Board (ISSB). The boards are overseen by the IFRS Foundation Trustees, who in turn are accountable to the IFRS Foundation Monitoring Board of public authorities with responsibility for corporate reporting. Our governance arrangements are set out in our Constitution. IFRS Accounting Standards, set by the IASB, are required in more than 140 jurisdictions. In January 2022, the Climate Disclosure Standards Board became part of the IFRS Foundation. The planned consolidation of the Value Reporting Foundation (which houses Integrated Reporting and SASB Standards) into the IFRS Foundation is due to complete in June 2022.
A wide range of constituencies—including investors, companies, policy makers, regulators, NGOs, and civil society—use corporate sustainability reporting to inform a wide range of decisions. A dynamic ecosystem of organizations has evolved to meet these various information needs. Disclosure standards and frameworks, including the SASB Standards and Integrated Reporting Framework, are the foundation of this ecosystem. They facilitate the disclosure of comparable, consistent, and reliable ESG information. Using this information, data providers and rating agencies can build tools, analytics, and resources for the capital markets.
It is important to distinguish between sustainability frameworks and sustainability standards. Frameworks provide principles-based guidance on how information is structured, how it is prepared, and what broad topics are covered. Meanwhile, standards provide specific, detailed, and replicable requirements for what should be reported for each topic, including metrics. Standards make frameworks actionable, ensuring comparable, consistent, and reliable disclosure. Frameworks and standards are complementary and are designed to be used together.
SASB Standards identify the sustainability information that is financially material, which is to say material to understanding how an organization creates enterprise value. That information – also identified as ESG (environmental, social, and governance) information – is designed for users whose primary objective is to improve economic decisions.
GRI and SASB have been working together to support companies that want to communicate with their various stakeholders using both the GRI Standards and SASB Standards. In this publication we highlight the ways in which companies are already using the two sets of standards together, demonstrate the complementary nature of the GRI and SASB Standards, and provide reporters with valuable insights from peer companies to support their sustainability reporting and disclosure journeys.