The International Sustainability Standards Board (ISSB) has fixed an effective date of 1 January 2024 on its first two sustainability reporting standards.
All 14 board members voted in favour of the staff recommendation for the effective date.
Staff told the meeting: “When making our recommendation, the staff considered key factors relating to jurisdictional adoption, application of the standards by preparers, the urgent need for climate-change disclosure standards, and interoperability with other jurisdictional developments.”
The decision means that entities applying International Financial Reporting Standards S1, General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2, Climate-change Reporting, will file reports under the two standards from early 2025.
Jurisdictions can, however, fix local effective dates for the new standards and decide whether to make the standards mandatory or not.
Entities will be permitted to apply the standards early if they apply both in tandem.
ISSB chair Emannuel Faber noted that the proposed effective date of 1 January 2024 was, in his view, tantamount to early adoption.
The ISSB’s technical strategy lead, Rommie Johnson, signalled during a recent online outreach event that the board would publish the two standards before the end of June this year.
The board originally planned to issue the standards before the end of last year.
The next major hurdle for the board to clear once it has published the standards is to secure an endorsement decision from the International Organization of Securities Commissions (IOSCO).
ISSB member Verity Chegar said she wanted to emphasise “how essential it is that IFRS S1 and S2 come out at the same time”.
Her board colleague Tae-Young Paik added that applying the new standards was “not actually that easy to do” because preparers will need to start building systems, hire personnel and, in the case of Korea, translate them following a due process.
Staff noted in paragraph 26 of their meeting paper, however, that “jurisdictions are likely to consider appropriate effective dates for application domestically at the time of adoption”.
They said this might “allow some or all entities to start applying the standards later than the standards’ effective date”.
Meanwhile, ISSB member Jeff Hales said the standards did not break entirely new ground and leveraged existing reporting frameworks.
ISSB member Veronika Pountcheva, however, said she was concerned that the quality of reporting would be mixed and wanted to know how assurance would work.
Staff responded that the assurance was outside the remit of the ISSB and that International Auditing Assurance Standards Board (IAASB) “has a timeline in place that will follow our standards”.
The board said: “We are working with the IAASB to support their journey as well but at the same time […] we can’t wait for assurance standards to be in place before we put these standards out.”
IASB vice chair Sue Lloyd said that while the IAASB was looking at developing focused assurance guidance around sustainability disclosures, there were already resources to consider. “It is not like there is a vacuum out there,” she said.
Lloyd added that she expected the “level of assurance [to increase] over time […] starting with a lower level of assurance.”