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Prepare for the accounting revolution

While the alphabet soup around accounting standards for environmental, social and governance issues is as rich as ever, joint efforts are steering it in the right direction.
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Prepare for the accounting revolution

Here at Sustainable Views, we think that accountants (or accounting) will save the environmental, social and governance (ESG) world. To bring you the latest developments in this space, we have caught up with Janine Guillot, chief executive of the Sustainability Accounting Standard Board (SASB), and discussed the merger with the International Integrated Reporting Council (IIRC), working with the International Financial Reporting Standards (IFRS) Foundation on sustainability, and the challenges of mandating disclosures.

How is the merger with IIRC progressing?

We hope to close that merger on June 1. We think that’s a major step towards simplifying the field because it brings under one roof two major organisations that are focused on what we call enterprise value reporting: reporting on how companies deliver value over the long term.

Will others follow?

The focus has really shifted away from talking about further mergers among organisations — which are a big effort, I can tell you.

There’s an increasing appetite for mandatory disclosure of some type in many markets around the world

Janine Guillot, SASB

We’ve shifted our focus now to support the IFRS Foundation's efforts in this space. They have announced the formation of a technical working group at the end of March, which includes SASB, IIRC, the Climate Disclosure Standards Board, the World Economic Forum and the Task Force on Climate-related Financial Disclosures. The best thing to do now is to support the IFRS [which are global standards already required or permitted in around 120 countries] and help figure out what the end model should be.

What is the aim of the IFRS work?

The IFRS Foundation is talking about creating a parallel board, a sustainability standards board under the IFRS Foundation umbrella focussed on sustainability disclosure by companies to providers of financial capital; that would be a very significant development.

Would that become the world’s ultimate ESG reporting framework?

It’s too early to know. The IFRS Foundation decided to focus on climate initially, while SASB and IIRC cover topics much broader than climate. But they did say that over time they’d want to expand to broader ESG factors. 

Will disclosures become mandatory for all?

The first question is: mandating disclosure for whom [investors or multiple stakeholders]? Once you answer that question, there’s a question about the nature of that mandatory disclosure: is it qualitative disclosure, governance strategy or risk management’s approach to climate? It could be metric-based, for instance six metrics on a specific topic, like human capital.

There’s an increasing appetite for mandatory disclosure of some type in many markets around the world, but there’s definitely no consensus on what that mandatory disclosure should look like. People are all over the map on that.

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Read more about:  ESG & sustainability
Silvia Pavoni is editor in chief of The Banker. Silvia also serves as an advisory board member for the Women of the Future Programme and for the European Risk Management Council, and is part of the London council of non-profit WILL, Women in Leadership in Latin America. In 2019, she was awarded an honorary fellowship by City University of London.
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