Sue Lloyd, Sundip Jadela and Lois Guthrie answered questions on the challenges faced in implementing the sustainability standards.
Alignment with other standards and scalability of reporting requirements for smaller businesses and emerging economies are the two most important messages the ISSB had received from responses to its consultation, Sue Lloyd, vice-chair of the ISSB board, told the World Standard-Setters' Conference in London on Tuesday (27 September).
Lloyd, Sundip Jadeja, technical manager at the ISSB, and Lois Guthrie, senior technical advisor at the ISSB, delivered a presentation on the feedback they received on the exposure drafts for IFRS S1 and IFRS S2 before answering questions from the standard setters' representatives. Here are some highlights of the Q&A.
The ISSB is mostly focused on climate whereas Europe covers more areas in its [proposed] standards. Are there any plans to issue more specific standards and how will these be interoperable with [the European proposals]?
Lloyd: At the moment, we've mainly focusing on climate [in our conversations with] Europe [on alignment] because we've both got specific proposals so that's the place where we can look most closely.
Our intention going forward will be to try to reduce the misalignment on sector focused or industry-based requirements because that's going to be something that Europe is going to start looking at early next year.
As we develop additional standards, and we will develop additional specific standards beyond S2, we will be doing what we can again to try and find opportunities for interoperability.
Reporting boundaries and the value chain are still quite difficult to understand. Do you think you should offer more guidance on the value chain?
Jadeja: It's something I think we need to consider, and the board needs to consider further, in terms of trying to provide clearer guardrails, and the extent to which we can provide guardrails, in terms of where does value chain begin and end, to provide that clarity and ability for preparers to put it into practice.
Guthrie: There have been some suggestions that perhaps we could look at whether the boundary extends beyond tier one suppliers down to tier two suppliers.
I think the standard to me already suggests that the boundary is to be determined by the nature and extent and significance of the risk.
Lloyd: One of the things we might need to do is just provide more explanation about how understanding the effects of things in the value chain informs your thinking about the sustainability effect on the consolidated reporting entity.
Some parts of the standards will be difficult to implement. What is the ISSB's approach in addressing this?
Lloyd: What we publish needs to be complete enough that a company can legitimately go off and know what they need to do to start implementing [it]. So, what data do they need to be collected? What systems changes do they need to be putting in place? I think companies need that level of clarity.
One of the careful decisions we're going to have to make is going to be what is an appropriate effective date for these sets of requirements, given what we're asking of different entities around the world.
One of the important conversations I think we'll be having with regulators around the world when we get to potential jurisdictional adoption is whether there should be potentially different timelines for different industries or different sizes of companies, etc, that maybe jurisdictions should be thinking about as well.
