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ISSB Promises Standardization for ESG Reporting, How Organizations Can Prepare

Aerial view of a very green orchard in England. The trees are planted very uniformly. A narrow road cuts diagonally across the field with red tractor and farm equipment parked in the middle.

While the recent 2021 UN Climate Change Conference (COP26) yielded mixed results in terms of unified climate action, the International Financial Reporting Standards’ (IFRS) decision to create the International Sustainability Standards Board (ISSB) points to one area of standardization and unification. The ISSB is a much-needed leap forward in reducing the complexity of the sustainability reporting landscape and will create a comprehensive baseline of high-quality, investor-grade sustainability disclosures for global financial markets.

For too long, ESG reporting has been an alphabet soup of frameworks, many of which are voluntary, which has resulted in an overload of options and new players constantly entering the market. Rather than adding insight and clarity, this proliferation of frameworks has become counter-productive. Over-burdened sustainability leaders now face a 6-8 month reporting season to satisfy framework requirements, often spending more time collecting and reporting data than actually harnessing insights and applying strategic change. Despite all this reporting effort, we still didn’t have harmonization, clear oversight, and benchmarks, which is exactly what the ISSB promises. Here’s what to expect with the new standards board: 

Harmonization

ISSB takes the myriad of frameworks and articulates a unified reporting standard. As the leading framework across corporations, industries, and geographies, ISSB will provide sustainability leaders with clear direction and requirements. This clarity will result in time and resource savings that will reduce the reporting burden and allow sustainability leaders to focus on their strategic and leading-edge initiatives. 

Regulation

ISSB will impart accounting level rigor to ESG reporting. To date, sustainability performance has largely been measured by subjective narratives in reports. By unifying the leading framework agencies under the IFRS umbrella, we are approaching a standard methodology and application that will rise to meet objective mandate requirements of the SEC, GAAP, and other accounting standards.   

Benchmarking

Today, it is nearly impossible to compare ESG performance across geographies, industries, or companies. While ESG performance impacts financial performance, investors are left without the tools to compare potential investments and drive better decision-making. The ISSB will provide a standard that will allow for real benchmarking and better insights into ESG performance that will drive more informed investment decisions, based on investor-grade data.

The ISSB is coming, and future-focused organizations will want to prepare for this major shift in reporting requirements. So what can sustainability leaders do now to get started?  

Review the Prototype Framework

The Technical Readiness Working Group (TRWG), formed by IFRS Foundation Trustees, developed prototype climate and general disclosure frameworks. These frameworks are built on the components created by long-standing international sustainability initiatives and integrated reporting bodies. Organizations can start looking into these prototype frameworks to prepare for future requirements on ESG disclosure.  

Identify Where Data Lives in Your Organization

To meet potential new disclosure requirements & integrate ESG metrics into an organization’s core strategy, organizations should first identify their data sources. Once you check out the prototype frameworks, identify both qualitative and quantitative sources across all operations and locations. The data can live internally or externally depending on various factors, but it’s crucial to be aware of the sources, whether it’s in systems or your people. Breaking down the ESG data barrier is a critical step in adapting to new ESG reporting requirements. 

Find the Right Technology Partner

The biggest ESG reporting roadblocks are manual processes and cumbersome, decentralized data management systems. Organizations need to find the right technology partner to help them make sense of their data and reporting standards.

That’s where FigBytes comes in. We help our clients automate reporting to frameworks and prepare for any new, upcoming disclosure requirements. We can find the data in your organization and help you capture, control, calculate, and streamline your reporting. Together we can move forward with confidence and embrace this new addition to the ESG landscape. 

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