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Sustainability has become a critical aspect of successful future business operations. As companies develop their environmental, social, and governance (ESG) strategy, they find it imperative standardize their sustainability reporting. To accomplish this, the International Sustainability Standards Board (ISSB) has established a globally recognized, comprehensive framework that is positioned to shape the future of sustainability reporting.
Understanding the ISSB Standard:
Before we explore the future, let’s briefly recap the ISSB standard. The ISSB is an independent global standard-setting body that aims to develop a unified set of sustainability reporting standards. These standards will provide organizations with a consistent and transparent way to measure, manage, and report their sustainability performance. The ISSB’s approach is rooted in the belief that standardized reporting is essential for effective decision-making, risk management, and stakeholder engagement.
The Future of ISSB Standard:
- Enhanced Consistency and Comparability: The ISSB’s future standard will bring much-needed consistency and comparability to sustainability reporting. Currently, organizations often face challenges when comparing their sustainability performance with others due to varying reporting frameworks. According to the independent research from McKinsey and Gartner, 85% of investors believe that consistent and comparable ESG data is crucial for making informed investment decisions. The ISSB’s unified standard will enable businesses to benchmark their progress against industry peers, fostering healthy competition and driving continuous improvement.
- Expanded Scope and Materiality: The ISSB is expected to broaden the scope of sustainability reporting beyond environmental factors. The future standard will encompass social and governance aspects, providing a holistic view of an organization’s sustainability performance. Additionally, the ISSB will continue to emphasize materiality, an important requirement of the EU’s CSRD and US’s proposed SEC regulations, ensuring that companies focus on reporting issues that are most relevant to their stakeholders and have the greatest impact on sustainability outcomes. Research from Diligent indicates that 75% of companies that use its standards report on material ESG issues, highlighting the importance of focusing on what truly matters.
- Integration with Financial Reporting: The future of sustainability reporting lies in its integration with financial reporting. The ISSB aims to bridge the gap between financial and non-financial information, enabling investors and stakeholders to make informed decisions based on a comprehensive understanding of a company’s performance, bringing further legitimacy to the concept of a “triple bottom line”. This integration will enhance transparency and accountability, ultimately driving sustainable investment practices. This year, Jurisdictions representing over half the global economy by gross domestic product (GDP) have announced steps to use or fully align their sustainability disclosure standards with those of the ISSB. Looking ahead, over 100,000 companies are projected to use the ISSB standards.
- Technological Advancements: As technology continues to evolve, the ISSB will leverage digital tools and innovations to streamline sustainability reporting processes. Automation, artificial intelligence, and blockchain technology will play a crucial role in collecting, analyzing, and verifying sustainability data. This will not only reduce reporting burdens for organizations (a key pain point) but also enhance data accuracy and reliability. Many firms have published reports recently such as LSEG, PwC, and EY supporting the idea that technology will significantly improve the quality and efficiency of their ESG reporting.
- Global Adoption and Harmonization: The ISSB’s future standard is expected to gain widespread global adoption, leading to harmonization of sustainability reporting practices. As more countries and organizations embrace the ISSB standard, it is positioned to become the go-to framework for sustainability reporting. This harmonization will facilitate cross-border comparisons, enable global benchmarking, and drive international collaboration towards achieving the United Nations Sustainable Development Goals. The ISSB’s influence is already evident, with its standards being referenced in over 180 countries[1], underscoring the potential for global alignment.
The future of the ISSB standard holds immense promise for businesses, investors, and stakeholders. By establishing a unified framework for sustainability reporting, the ISSB will enhance consistency, comparability, and transparency. The integration of financial and non-financial information, along with technological advancements, will galvanize the way organizations measure and report their sustainability performance. At CSE, we encourage businesses to stay informed and prepare for the future of sustainability reporting by aligning their practices with the best frameworks and standards.
Together, we can create a more sustainable and resilient future.
