The International Sustainability Standards Board (ISSB) formally confirmed the concept of value chain in the IFRS S1 standard but unanimously voted for the IFRS staff to draft guidance to provide greater clarity on what needs to be reported, at its meeting in Montreal on Wednesday (19 October)
The IFRS technical staff proposed that the board provide better clarity on the breadth of the value chain reporting required in IFRS S1, particularly on the issues of control and value chain employment practices which were highlighted by feedback in the consultation as being unclear.
Chair Emmanuel Faber described value chain as a "fundamental aspect" of the standards and as crucial for interoperability with other standards as he said many jurisdictions across the world use the concept of value chain in their reporting requirements.
Vice-chair, Sue Lloyd, agreed on the importance of the concept to facilitate interoperability but said that there was a "communication issue" as the use of the term 'control' implies that a company needs to have a controlling investment in another entity for it to be included in its value chain.
She supported the recommendation to confirm explicitly that the reporting entity should be the consolidated group, but that it needs to look at all of its investments, even if they are not controlling investments, to understand the climate risk and opportunities of its entire value chain.
Conglomerates were highlighted by Jeffrey Hales as entities where it can be difficult to require value chain reporting if their activities are disparate and he supported providing more guidance to help them report on their value chains.
