Deloitte welcomes the role of the IFRS Foundation in sustainability standard-setting
The IFRS Foundation (IFRSF) issued a Consultation Paper on Sustainability Reporting on 30 September 2020, in which it seeks stakeholder views on whether it should broaden its oversight responsibilities to include sustainability reporting, and, if so, establish a separate standard-setting board to undertake this role.
Deloitte welcomes the consultation. There has been a groundswell of calls from capital market participants, regulators and other stakeholders in support of transparent measurement and disclosure of information about sustainability performance. Investors and other stakeholders want to understand how the risks and opportunities faced by business translate into long-term value creation and profitability and how, in turn, these relate to shorter-term financial performance. Such information should be connected to financial information and prepared to the same quality and rigour.
The proposed moves by the IFRSF fit within its core competence, to help ‘investors, other participants in the world’s capital markets and other users of financial information make economic decisions1 by bringing ‘transparency, accountability and efficiency to financial markets around the world2.
In September 2020, the International Federation of Accountants (IFAC) called on the IFRSF to extend its oversight functions and to establish an ‘International Sustainability Standards Board’ to complement the work of the IASB.
Standard-setting should be at a global level because global issues need global solutions. Businesses have global supply and value chains, face global risks and have global investors. Most importantly, issues such as climate change and achieving the UN Sustainable Development Goals require international solutions. Global standards can enable consistent implementation of the TCFD Recommendations, which are widely acknowledged politically and by society as an effective means for climate-related financial risk disclosures.
This IFRSF Consultation follows shortly after the Joint Statement published by the leading sustainability standard-setters and frameworks. This set out a vision of how these elements could complement financial generally accepted accounting principles (including IFRS Standards) and serve as a natural starting point for progress towards a more coherent, comprehensive corporate reporting system. They also made a joint commitment to drive toward this goal, through an ongoing programme of engagement with interested stakeholders, including the IFRSF and IOSCO.
Taken together, these developments can lead to a standard-setting solution for reporting focused on value creation, connected to financial information. This would be a significant step towards a comprehensive corporate reporting system that builds on the well-established efforts of the existing sustainability standards and frameworks.
The scale of the challenges and the increasing momentum from all stakeholders for a global solution for sustainability reporting standards make the undeniable case for immediate action. There is an overwhelming need for urgency, and we therefore welcome this timely consultation.
1 IFRSF Constitution,2(a)
2 Conceptual Framework for Financial Reporting SP1.5