{"id":1126,"date":"2023-08-08T19:28:13","date_gmt":"2023-08-08T23:28:13","guid":{"rendered":"https:\/\/councilgreatlakesregion.org\/2023\/08\/08\/issb-sets-the-new-standard-for-sustainability-the-not-just-the-numbers-reporting-requirements\/"},"modified":"2024-11-16T14:04:45","modified_gmt":"2024-11-16T19:04:45","slug":"issb-sets-the-new-standard-for-sustainability-the-not-just-the-numbers-reporting-requirements","status":"publish","type":"post","link":"https:\/\/councilgreatlakesregion.org\/issb-sets-the-new-standard-for-sustainability-the-not-just-the-numbers-reporting-requirements\/","title":{"rendered":"ISSB Sets the New Standard for Sustainability: The Not-Just-The-Numbers Reporting Requirements"},"content":{"rendered":"<p><em><strong>The International Sustainability Board published their inaugural standards detailing the ESG information investors require of companies. Endorsed by IOSCO, the standards are already informing the regulations which will require companies to comply.<\/strong><\/em><\/p>\n<p>The <a href=\"https:\/\/www.ifrs.org\/groups\/international-sustainability-standards-board\/\" target=\"_blank\" rel=\"noopener\">International Sustainability Standards Board\u00a0<\/a>has set the new standard for sustainability. \u00a0Literally.\u00a0 They have spelled out the responsibility of firms to disclose environmental, social, and governance (also known as ESG) information to their investors\u2014whether owners or lenders\u2014irrespective of whether a firm is publicly or privately owned.\u00a0 Those standards\u2014known as IFRS S1 and IFRS 2\u2014are effective January 1, 2024 are already informing regulations that will require companies to use them.\u00a0<\/p>\n<h3><strong>Standards Converge with ISSB<\/strong><\/h3>\n<p>IFRS S1 is the overarching sustainability standard that sets the stage. IFRS S2 is the sustainability standard that specifically addresses climate change. They are designed to:<\/p>\n<ul data-rte-list=\"default\">\n<li>\n<p>Meet the needs of investors (owners or lenders) in the \u2018General Purpose\u2019 Financial Statements, and<\/p>\n<\/li>\n<li>\n<p>Disclose sustainability- (S1) and climate- (S2) related risks and opportunities which \u2018could reasonably be expected to affect the entity\u2019s prospects\u2019 (aka financial performance)<\/p>\n<\/li>\n<\/ul>\n<p>These standards are based on the foundational work of people who have been working in this space for decades, starting with the <a href=\"https:\/\/www.globalreporting.org\/\" target=\"_blank\" rel=\"noopener\">GRI (Global Reporting Initiative)<\/a>, founded by Ceres and UNEP in 1997. Originally developed through a coalition of investors and environmentalists led by Joan Bavaria to find a better way of doing business in the wake of the Exxon Valdez disaster, the GRI standards today meet the needs of multiple stakeholders. They are the most widely used sustainability reporting standards globally.<\/p>\n<p>However, the GRI did not always meet the specific needs of investors, and over time additional standards emerged, including <a href=\"https:\/\/sasb.org\/\" target=\"_blank\" rel=\"noopener\">SASB (Sustainability Accounting Standards Board)<\/a>, IR (Integrated Reporting), <a href=\"https:\/\/www.fsb-tcfd.org\/\" target=\"_blank\" rel=\"noopener\">TCFD (the Task Force for Climate-related Financial Disclosure of the Financial Stability Board)<\/a>, and <a href=\"https:\/\/www.cdsb.net\/\" target=\"_blank\" rel=\"noopener\">CDSB<\/a> (Climate Disclosure Standards Board of the Climate Disclosure Project, now known as <a href=\"https:\/\/www.cdp.net\/en\" target=\"_blank\" rel=\"noopener\">CDP<\/a>).\u00a0<\/p>\n<figure>\n\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"2010\" height=\"1167\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes.png 2010w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes-300x174.png 300w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes-1024x595.png 1024w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes-768x446.png 768w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes-1536x892.png 1536w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/disclosuretypes-1568x910.png 1568w\" sizes=\"auto, (max-width: 2010px) 100vw, 2010px\" \/><figcaption>Multiple frameworks have emerged to meet the needs of various stakeholders. The ISSB worked successfully to bring investor-related sustainability (ESG) information into one set of standards.<\/figcaption><\/figure>\n<p>The ISSB has combined this alphabet \u2018soup\u2019 into cohesive standards, in a remarkable display of collaboration and leadership, which they acknowledge complement the GRI.<\/p>\n<h3><strong>The Essentials of the ISSB Standards <\/strong><\/h3>\n<p>The standards require information structured around 4 thematic areas that represent the core elements of how companies operate: governance, strategy, risk management, and metrics and targets. That\u2019s a direct result of the TCFD recommendations, published in 2017 (and already used by a number of leading firms).<\/p>\n<figure>\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/www.fsb-tcfd.org\/publications\/\" target=\"_blank\" rel=\"noopener\"><br \/>\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1719\" height=\"813\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite.png 1719w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite-300x142.png 300w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite-1024x484.png 1024w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite-768x363.png 768w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite-1536x726.png 1536w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/tcfdwebsite-1568x742.png 1568w\" sizes=\"auto, (max-width: 1719px) 100vw, 1719px\" \/>\t\t\t\t\t\t\t\t<\/a><figcaption>The Task Force for Climate-related Financial Disclosures (TCFD)  published initial standards, recommending these four \u2018pillars\u2019 in 2017. Source: https:\/\/www.fsb-tcfd.org\/publications\/<\/figcaption><\/figure>\n<p><strong>Governance<\/strong> answers the question: \u2018Who\u2019s responsible?\u2019 It\u2019s both at least a representation of ownership (board) <em>and <\/em>senior management. \u00a0It also includes the processes for governance and an explicit requirement to assess skills and capabilities and build necessary skill development into the strategy.<\/p>\n<p><strong>Strategy<\/strong> answers the question: \u2018What are you doing (and why)?\u2019 It\u2019s central to the firm\u2014not a \u2018special effort\u2019 led by a group that is \u2018off to the side.\u2019 The standards are very broad\u2014they include business model and value chain and the processes by which strategic decisions are made.\u00a0 In the climate-related standard (S2), it specifically calls for resiliency.<\/p>\n<p><strong>Risk Management<\/strong> answers the question: \u2018What are the (most important) risks <em>and<\/em> opportunities?\u2019\u00a0 And \u2018How do they connect with your business performance?\u2019\u00a0 This standard requires more than a simple list. It requires that firms \u2018connect the dots\u2019 between the sustainability risks and opportunities and the effects on the entity\u2019s financial position.\u00a0<\/p>\n<p>In S1, the standard allows for firms to determine their own overall sustainability risks, but the ISSB strongly recommends the guidance provided by <a href=\"https:\/\/sasb.org\/standards\/\" target=\"_blank\" rel=\"noopener\">SASB<\/a> for industries (they have developed this for 77 industries) and <a href=\"https:\/\/www.cdsb.net\/biodiversity\" target=\"_blank\" rel=\"noopener\">CDSB<\/a>, which spells out water and biodiversity risks.\u00a0<\/p>\n<p>For climate-related risks (S2), there are both physical risks <em>and <\/em>business transition risks.\u00a0 The former seeks to understand the implications of physical risks\u2014e.g., flooding, drought, extreme heat, increasingly volatile weather, etc.\u2014on the business. For business transition risks, the standard recognizes that businesses which rely on \u2018high carbon\u2019 (e.g., fossil fuels) will suffer with a transition to a lower carbon economy, if not appropriately addressed. \u00a0In addition, the standard specifically requires firms to create and share scenarios regarding these risks and opportunities.<\/p>\n<p><strong>Metrics and Targets<\/strong> answers the question: \u2018How are you performing against sustainability-related risks and opportunities (including progress toward any targets)?\u2019\u00a0 <a href=\"https:\/\/sasb.org\/standards\/\" target=\"_blank\" rel=\"noopener\">SASB<\/a>, <a href=\"https:\/\/www.cdsb.net\/\" target=\"_blank\" rel=\"noopener\">CDSB<\/a>, and <a href=\"https:\/\/www.globalreporting.org\/\" target=\"_blank\" rel=\"noopener\">GRI<\/a> all provide guidance for specific metrics that firms may consider using to meet the requirements for S1, but the climate-related standard (S2) specifically calls out for carbon dioxide (CO2) equivalents of the 7 greenhouse gases, as defined by the <a href=\"https:\/\/ghgprotocol.org\/\" target=\"_blank\" rel=\"noopener\">Greenhouse Gas Protocol (GHG Protocol)<\/a>.\u00a0 It requires reporting for all 3 \u2018scopes\u2019:<\/p>\n<ul data-rte-list=\"default\">\n<li>\n<p>Scope 1 includes direct emissions from operations owned or controlled by the company;<\/p>\n<\/li>\n<li>\n<p>Scope 2 includes emissions from the generation of purchased electricity, steam, heating, or cooling used by the company (generally, these are from utilities);<\/p>\n<\/li>\n<li>\n<p>Scope 3 includes the indirect emissions that occur in the value chain of the company, both upstream and downstream, which means it includes both supply chain and any associated emissions with the life of a firm\u2019s product (or service) throughout its use and end-of-life.<\/p>\n<\/li>\n<\/ul>\n<p>All of this must be reported within the context of \u2018general purpose\u2019 financial reports (the ones that are made available to investors).<\/p>\n<p>\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"1872\" height=\"818\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable.png 1872w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable-300x131.png 300w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable-1024x447.png 1024w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable-768x336.png 768w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable-1536x671.png 1536w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/IFRStable-1568x685.png 1568w\" sizes=\"auto, (max-width: 1872px) 100vw, 1872px\" \/>\t\t\t\t\t\t\t\t\t\t\t<\/p>\n<p>Mike Wallace, Persefoni\u2019s Chief Decarbonization Officer, has a great insight: \u201cEveryone is someone\u2019s Scope 3.\u201d So even if you aren\u2019t required to track GHG by your investors or regulators, it\u2019s highly likely your customers will be, and they will be coming to you for the information to report <em>their <\/em>Scope 3 emissions.<\/p>\n<p>The standards become effective for reporting January 1, 2024, with transition time built in.\u00a0 The initial demand will likely come first from investors and customers who will require the information, but increasingly, you can expect ISSB standards will also inform regulations around the world.<\/p>\n<p>\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"2049\" height=\"1053\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations.png 2049w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations-300x154.png 300w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations-1024x526.png 1024w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations-768x395.png 768w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations-1536x789.png 1536w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/08\/issbandregulations-1568x806.png 1568w\" sizes=\"auto, (max-width: 2049px) 100vw, 2049px\" \/>\t\t\t\t\t\t\t\t\t\t\t<\/p>\n<p>The International Organization of Securities Commissions\u2014also known as <a href=\"https:\/\/www.iosco.org\/news\/pdf\/IOSCONEWS703.pdf\" target=\"_blank\" rel=\"noopener\">IOSCO<\/a>\u2014has already endorsed the standards.\u00a0 The ISSB has also worked closely with American, European, Japanese, and Chinese officials to develop its rules as a global baseline and work on interoperability between jurisdictions, but it won\u2019t be perfect. For example, in the US, the still-to-be-finalized Securities and Exchange Commission rules are expected to be a lighter touch than the ISSB (IFRS S1, IFRS S2) standards.\u00a0 <a href=\"https:\/\/finance.ec.europa.eu\/news\/commission-adopts-european-sustainability-reporting-standards-2023-07-31_en\" target=\"_blank\" rel=\"noopener\">The EU Sustainability Reporting Standards, published<\/a> July 31, 2023, will require more. They do require companies to provide information for investors to understand the sustainability impact of the companies in which they invest, as articulated by the ISSB, but they also require more disclosure, particularly for stakeholders beyond investors (with a specific acknowledgement to the GRI).<\/p>\n<h3>WholeWorks Webinar Recording Available<\/h3>\n<p>This post is based on the WholeWorks Webinar \u2018ISSB: Setting the New Standard for Sustainability,\u201d presented on August 2, 2023. The link to the full recording is here: &lt;<a href=\"https:\/\/us06web.zoom.us\/rec\/share\/wkqjH-3L1_fM5i4Hu5AI-o3IkMPIrRVNsOXezDboq2BJU4xZRLkJ6XdJ98EfUxur.MYyQ0jSK9E6TWqWc?startTime=1691083528000\"><strong>link<\/strong><\/a>&gt; and includes practical advice to address the new, global requirements. The webinar also gave an overview of a method for developing clear connections to ESG-related risks and opportunities to create and\/or preserve value via a Sustainable Value Creation Map. There with more information <strong>&lt;<\/strong><a href=\"https:\/\/www.wholeworks.com\/blog\/introducing-the-sustainable-value-creation-map\"><strong>here<\/strong><\/a><strong>&gt;<\/strong> for the map, including a <a href=\"https:\/\/www.wholeworks.com\/svcm-whitepaper-download\">detailed white paper<\/a> on the application for readers to apply to their own firms.<\/p>\n<p>WholeWorks offers a short online course for <a href=\"https:\/\/www.wholeworks.com\/esg-fundamentals-essentials\"><strong>ESG Fundamentals<\/strong><\/a>\u00a0and a longer, simulation-based professional certification course <a href=\"https:\/\/www.wholeworks.com\/esg-program\"><strong>Strategic ESG: Creating Sustainable Value<\/strong><\/a> for leaders and professionals who want to accelerate their ability\u2014and the ability of their organizations\u2014to meet the new standard for sustainable business.<\/p>\n<h3>P.S. A Word on Auditing<\/h3>\n<p>One of the top questions in the webinar\u2019s Q &amp; A session was based on the \u2018audit-ability\u2019 of the new standards.<\/p>\n<p>And almost like they were listening in, the <a href=\"https:\/\/www.iaasb.org\/\" target=\"_blank\" rel=\"noopener\">International Auditing and Assurance Standards Board (IAASB<\/a>) published their proposal August 7 regarding a sustainability assurance standard.\u00a0 As David Carlin, Head of Climate Risk and TCFD, UNEP Finance Initiative, points out, \u2018External assurance plays a key role in enhancing trust and confidence in financial reporting. It can do the same for sustainability reporting.\u2019 The proposed standard will apply to sustainability information reported across any ESG topic and prepared under multiple frameworks, including ISSB. It\u2019s open for consultation now, until December 1, 2023. IAASB welcomes comments &lt;<a href=\"https:\/\/www.iaasb.org\/publications\/proposed-international-standard-sustainability-assurance-5000-general-requirements-sustainability\" target=\"_blank\" rel=\"noopener\">here<\/a>&gt;.<\/p>\n<p><strong><em>This article and imagery was originally published on the <a href=\"https:\/\/www.wholeworks.com\/blog\/issb-sets-the-new-standard-for-sustainability\" target=\"_blank\" rel=\"noopener\">WholeWorks website<\/a> and is re-published here with permission.<\/em><\/strong><\/p>\n<p><strong>About the Author:\u00a0<\/strong><\/p>\n<p>\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" width=\"300\" height=\"300\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/05\/Laura.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/05\/Laura.png 300w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/05\/Laura-150x150.png 150w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>\t\t\t\t\t\t\t\t\t\t\t<\/p>\n<p><strong>Laura Asiala, MSOD<\/strong><\/p>\n<p><a href=\"https:\/\/www.linkedin.com\/in\/laura-asiala-8777b78\/\" target=\"_blank\" rel=\"noopener\"><em>Laura Asiala\u00a0<\/em><\/a><em>is the Chief Sustainability Officer of <\/em><a href=\"https:\/\/www.wholeworks-lst.com\/affiliates\" target=\"_blank\" rel=\"noopener\"><em>WholeWorks, LLC<\/em><\/a><em> and the Lead Facilitator for \u2018<\/em><a href=\"https:\/\/www.wholeworks.com\/esg-program\"><em>Strategic ESG: Creating Sustainable Value\u2019<\/em><\/a><em> Professional Certification Program\u2014in which experienced professionals and leaders accelerate their ability to integrate ESG issues across their companies, creating value and transforming a traditional business to sustainable, via a realistic team simulation. She also curates and edits \u2018<\/em><a href=\"https:\/\/www.wholeworks.com\/blog\"><em>WholeWorks Connects<\/em><\/a><em>,\u2019 a publication amplifying the work of leaders in the field of sustainability, including alumni of WholeWorks programs.\u00a0\u00a0<\/em><\/p>\n<p><b><i>CGLR\u2019s business and sustainability network programming is supported by the\u00a0<a href=\"https:\/\/www.erbff.org\/\" target=\"_blank\" rel=\"noopener\">Fred A. and Barbara M. Erb Family Foundation<\/a>.<\/i><\/b><\/p>\n<p>\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/www.erbff.org\/\" target=\"_blank\" rel=\"noopener\"><br \/>\n\t\t\t\t\t\t\t<img decoding=\"async\" width=\"600\" height=\"207\" src=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/11\/small-Erb-Family-Foundation-logo-2-1-1.png\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/11\/small-Erb-Family-Foundation-logo-2-1-1.png 600w, https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2022\/11\/small-Erb-Family-Foundation-logo-2-1-1-300x104.png 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\" \/>\t\t\t\t\t\t\t\t<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The International Sustainability Board published their inaugural standards detailing the ESG information investors require of companies. Endorsed by IOSCO, the standards are already informing the regulations which will require companies &#8230;<\/p>\n<a class=\"excerpt-read-more\" href=\"https:\/\/councilgreatlakesregion.org\/issb-sets-the-new-standard-for-sustainability-the-not-just-the-numbers-reporting-requirements\/\" title=\"ReadISSB Sets the New Standard for Sustainability: The Not-Just-The-Numbers Reporting Requirements\">Read more<\/a>","protected":false},"author":5,"featured_media":1127,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[81,70],"tags":[242,465,605,156,255,461,604],"class_list":["post-1126","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-profile","category-sustainable-business","tag-council-of-the-great-lake-region","tag-esg","tag-issb","tag-sustainability","tag-sustainable-business","tag-webinar","tag-wholeworks"],"acf":[],"jetpack_featured_media_url":"https:\/\/councilgreatlakesregion.org\/wp-content\/uploads\/2023\/12\/issb-sustainability-glefo-post-1.png","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/posts\/1126","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/comments?post=1126"}],"version-history":[{"count":1,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/posts\/1126\/revisions"}],"predecessor-version":[{"id":1406,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/posts\/1126\/revisions\/1406"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/media\/1127"}],"wp:attachment":[{"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/media?parent=1126"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/categories?post=1126"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/councilgreatlakesregion.org\/wp-json\/wp\/v2\/tags?post=1126"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}