ACCA welcomes ISSB standards but warns greater guidance is required

ACCA has warned that draft standards from the International Sustainability Standards Board (ISSB) are urgently needed to provide a consistent global base line for companies reporting on sustainability-related financial information. 

While welcoming the two exposure drafts (EDs), ACCA has noted that it is imperative that reporting drives the necessary systematic change in sustainability reporting and that operational changes take place in companies and that investors use the information provided to allocate capital more efficiently and responsibly.  

The global accountancy body is also calling for standard setters to give greater guidance on how entities will determine materiality when reporting on sustainability issues as the ACCA is also calling for a clear definition of the meaning of sustainability-related financial information.

While agreeing with the requirements, ACCA reportedly warned that proposed disclosures about risks and opportunities emerging from companies’ supply chains, including Scope 3 emissions, will present new disclosure challenges for many companies as will working out how to provide forward looking information.  

It is also reported that as part of its work to directly inform the ISSB’s standard-setting efforts, ACCA is undertaking a joint research project with the University of Glasgow on climate-related disclosures in the chemicals and construction materials industries. 

Preliminary findings have been presented to ISSB staff, and the final report will be published in September. 

Sharon Machado, head of sustainable business at ACCA, said: “The ED does not define what is ‘sustainability-related’. As a result, the breadth and scope of the risks and opportunities that need to be considered and disclosed is left to the judgement of the preparing companies, to the detriment of consistent application, comparability, as well as cost and effort in reporting. 

“We would urge the ISSB to provide a clearer indication, both in the standard and through illustrative examples, as to what sustainability might cover. ACCA suggests the ISSB could look to the six integrated reporting capitals to serve as useful framing for a broad and holistic understanding of ‘sustainability.’’ 

Machado added: “A phased approach to implementation that reflects the size of entities and the resources required to dedicate to implementation may be appropriate. Smaller non-listed entities will require the longest lead time before the requirements become mandatory for them.  

“We would expect that companies would want to have a dry run before being required to fully comply with the standards. The implementation roadmap should reflect this, with a period of voluntary adoption before the standards are adopted on a mandatory basis.”