A new day for ESG reporting and disclosure

Northampton, MA –News Direct– BSR

Through Aron Cramer

While some of the drama may be missing from the zero net and deforestation commitments that were already made at COP26, today’s announcement by the International Financial Reporting Standards Foundation (IFRS) that it intends to consolidate the Value Reporting Foundation (VRF) and the Climate The Disclosure Standards Board (CDSB) may well prove to be one of the most important developments in Glasgow.

For transparency purposes: I sit on the board of directors of the Value Reporting Foundation, and before that, on the board of directors of the International Integrated Reporting Council. The unwavering focus of these organizations on prioritizing results over institutional interests has been fantastic to see: their leaders deserve immense credit for this vision.

Since ESG reporting and disclosure began over 20 years ago with the launch of the Global Reporting Initiative (GRI), all participants in the reporting “system” have rightly decried the confusion, duplication and inconsistencies in reporting standards and frameworks.

Some of this duplication is to be expected. We have witnessed and participated in the creation of a new form of value measurement and transparency. The significance of this is massive, important, and complicated.

The times have changed. Fragmentation does not serve anyone’s interests. As ESG grows and becomes more urgent, the era of “letting a thousand flowers bloom” is no longer suitable. It is time to integrate sustainability considerations into the basic workings of capital markets. This will only happen with universal disclosures that allow consistency.

The work of the International Sustainability Standards Board (ISSB), which will be significantly strengthened by the consolidation announced today, will progress towards obtaining comparable, consistent and reliable information on climate and other sustainability issues.

Much remains to be done and demonstrated. It will be essential that a rapidly changing landscape is adopted in the new ISSB to ensure that the reports reflect the expectations of society. This is especially true when it comes to the “S” of ESG, which is sometimes more difficult to quantify: equity is not as easy to measure as carbon emissions. The new ISSB would be wise to take into account the “double materiality” model which encompasses not only things that are financially material today, but also those that are material to society, and often will become so financially tomorrow. And other key players, including the GRI, the Climate-Related Financial Reporting (TCFD) Working Group, the World Economic Forum’s International Business Council and others, can and should be involved in shaping and the implementation of the ISSB.

Today’s news from Glasgow may well mark a real turning point in the functioning of the markets. A harmonized and universal system will align incentives, promote wider adoption and allow comparability. Consolidation should also do three other essential things:

  • Free up the company’s focus on creating long-term value for all stakeholders.

  • Allocate investor capital to companies that take a long-term approach.

  • To enable the public and policy makers to understand which companies are truly up to the task in the pursuit of a just and sustainable world.

We celebrate all the new commitments from COP26. We also know that commitments alone won’t do the job. The alignment announced today may well provide the basis on which ambition can be turned into action.

See additional multimedia and more ESG storytelling from BSR at 3blmedia.com

See the source version on newsdirect.com: https://newsdirect.com/news/the-vrf-and-ifrs-foundation-join-forces-a-new-day-for-esg-reporting-and-disclosure-685221635

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