The International Sustainability Standards Board (ISSB) has fired the starting gun on its first agenda consultation with the release of a Request for Information.

ISSB chair, Emmanuel Faber, said: “Through this consultation, we aim to research topics and, if appropriate, issue standards that will ensure entities meet the information needs of investors on sustainability topics beyond climate.”

The paper, which was published yesterday, seeks feedback on four potential sustainability-related research projects:

  • biodiversity, ecosystems, and ecosystem services (BEES);
  • human capital;
  • human rights; and
  • integration of sustainability-related financial information with other financial information.

Faber warned, however, that expectations on the board to embark on new research and standard-setting projects must take account of the limits on the board’s resources to carry out so-called foundational work.

The consultation document defines foundational work in paragraph 16(a) as “committed work and activities to build upon the foundation created by IFRS S1 and IFRS S2”.

The document explains that this will involve:

  • supporting the implementation of IFRS Sustainability Disclosure Standards;
  • researching targeted enhancements to those standards; and
  • enhancing the Sustainability Accounting Standards Board (SASB) Standards.

The board has identified seven criteria for assessing the relative merits of each candidate project. These include the pervasiveness of an issue, its importance to investors, and whether the board and its stakeholders have the resources to make timely progress on the issue.

The board’s proposed project on BEES would involve developing a framework for BEES definitions, identifying material information for investors on BEES-related risks and opportunities, and understanding existing metrics used to measure and disclose sustainability-related information.

Alongside this, the board is also looking for views on a potential research project into human capital.

The board defines this as an entity’s workforce and its competencies, capabilities, experience, and motivations to innovate, all of which can affect its ability to create value over the long term.

The consultation paper noted that human capital management includes a range of issues, such as workforce composition, diversity, equity and inclusion, training, development, health, safety, well-being, and compensation.

Third, the ISSB wants to hear views on whether it should undertake work on human rights – an issue it acknowledges overlaps or complements both climate-related issues in IFRS S-2 and the proposed human capital research project.

This project, the consultation paper explained, “could focus on human rights to identify sustainability-related risks and opportunities and related information relevant to investors”.

Emmanuel Faber at ISSB

Emmanuel Faber at ISSB

The board noted that all three research projects could draw on existing thinking from either the Global Reporting Initiative or the Climate Disclosure Standards Board (CDSB) among others.

For example, the human capital project proposes leveraging the Integrated Reporting Framework and the SASB’s evidence-based framework on human capital, both of which were developed by legacy organisations of the ISSB, and using the latest version of the CDSB Framework covering the disclosure of social information.

Finally, the board’s integration in reporting proposals aims to build on the connections that now exist between traditional IFRS financial reporting and sustainability reporting through shared concepts and terminology.

This would involve a consideration of an entity’s broader wealth-creation process by examining how it manages not only its own resources but also the synergies that process creates in its operating environment and among its stakeholders.

In other words, by considering the synergies that its activities create, an organisation can gain a better understanding of how it is creating value for all of its stakeholders. This information can then be used to improve its performance and to make better decisions about its future direction.

The project could lead to the creation of a corporate reporting framework that integrates disclosure across one or more documents.

The consultation paper explained that work already conducted within the IFRS Foundation, such as the Integrated Reporting Framework and the International Accounting Standards Board’s (IASB) Exposure Draft Management Commentary could form the foundations for this project.

Equally, the board could pursue this project as a formal joint project with joint decision making with the IASB or coordinate with the IASB to exchange information and obtain input to inform its own decision-making.

The ISSB acknowledged, however, that this endeavour would be a substantial draw on its time and resources and asks respondents to its consultation to rank the project’s priority relative to the other three potential research projects.

Interested parties have until 1 September 2023 to comment on the proposals.

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