Your source of news from the Global PwC network
Welcome to the September 2023 edition of our global newsletter.
The sustainability reporting landscape is rapidly evolving, with two previously draft sustainability reporting standards finalised. Both the International Sustainability Standards Board (ISSB) and the European Commission (EC) have finalised their respective sustainability reporting standards.
On 26 June 2023 the ISSB issued its inaugural IFRS® Sustainability Disclosure Standards: IFRS S1, ‘General Requirements for Disclosure of Sustainability-related Financial Information’; and IFRS S2, ‘Climate-related Disclosures’. The issuance of these first two standards marks an important milestone for the ISSB. Although the need for high-quality standards is non-negotiable, the litmus test to a truly comprehensive global baseline for sustainability reporting is going to be the practical application of these standards. With the standards being endorsed by the International Organisation of Securities Commissions (IOSCO), there is an expectation of more regulators adopting these standards. As a result, more entities will report in accordance with the IFRS Sustainability Disclosure Standards, so the quality of sustainability reports is expected to continue to increase.
The ISSB has followed its stated aim of issuing a thematic standard as well as a standard which covers all other sustainability risks and opportunities. However, investors and other stakeholders will continue to need more detailed, reliable and comparable disclosures of other sustainability areas. So we encourage the ISSB to react to the responses to its Agenda Priorities exposure draft and produce additional thematic standards as soon as it is able. We acknowledge that the Board has directed the staff to develop educational material to explain and illustrate how an entity might apply some requirements in IFRS S2 to disclose information about some nature- and social-related aspects of climate-related risks and opportunities.
From a European perspective, on 31 July 2023, the EC adopted the final Delegated Act which includes the final European Sustainability Reporting Standards (ESRS). The European Parliament and the Council of the European Union (EU) now have a two-month scrutiny period (with a possible two-month extension) to assess the final delegated act. Once the scrutiny period is over and assuming there are no objections, the Delegated Act will be applicable from 1 January 2024, with phased application of the standards based on the Corporate Sustainability Reporting Directive (CSRD) scoping requirements.
On 4 September 2023, the European Financial Reporting Advisory Group (EFRAG) and the Global Reporting Initiative (GRI) issued a joint statement regarding interoperability between ESRS and GRI standards. In addition, the EC has tasked EFRAG to debate and develop non-authoritative implementation guidance regarding the materiality assessment and an entity’s value chain. Both of these announcements are intended to ease the reporting burden on entities applying ESRS.
While we wait to see the final proposed rule on climate-related disclosures from the United States Security and Exchange Commission (SEC), we welcome the IFRS Sustainability Disclosure Standards and the ESRS as a vital part of strengthening trust in corporate disclosures around sustainability. We also recently released our latest In depth ‘Navigating sustainability reporting: Practical application and analysis’ which provides helpful insights and guidance to preparers who will have to report on one (or more) of these sustainability reporting frameworks.
From an auditing perspective, in June 2023, the International Auditing and Assurance Standards Board (IAASB) issued a sustainability assurance standard for public comment. The IAASB explained that the draft standard was to further promote the trust and confidence that investors, regulators and other stakeholders have in sustainability disclosures. The exposure draft is formally known as ‘International Standard on Sustainability Assurance (ISSA) 5000 ‒ General Requirements for Sustainability Assurance Engagements’.
Interestingly, ISSA 5000 was developed to be applied to any sustainability assurance engagement (that is, it is sustainability topic and framework agnostic) by both professional accountants and non-accountant assurance practitioners. Considering the broad scope of ISSA 5000, what it will apply to and who can apply it, we expect that many will respond to the IAASB’s request for comment before the deadline of 1 December 2023.
As these and other sustainability reporting and assurance frameworks are finalised, there is no time like the present to start the process of determining the potential implications of these frameworks for your business and future reporting requirements.
- Andreas Ohl
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