Sustainability reporting for the future

29 August, 2021

Henry Daubeney Henry Daubeney
Global Head of IFRS & ESG Reporting, PwC United Kingdom

Demonstrating value beyond financial reporting

A company’s purpose in society is under scrutiny and the demands on its reporting are increasing. Investors and other stakeholders are demanding more holistic information about companies’ long-term value creation opportunities and their wider impact on society.

While we see plenty of companies publishing sustainability (or environmentmental, social and governance (ESG)) reporting, it is often fragmented and inconsistent. This makes decision making for stakeholders - whether investors, customers, employees and policy makers - challenging. To enable a better understanding of a company’s long-term performance and value creation prospects and sustainability, we need to transition to globally consistent, assured non-financial reporting that is as robust as financial reporting. Better reporting doesn’t just measure sustainable value creation, it incentivises it. Reporting does not just measure the system, it helps power it.

Increasing momentum

Momentum is building towards convergence. Governments, standard setters, regulators, investors and companies are increasingly focused on broadening corporate reporting. There is unprecedented attention on climate-related reporting, as well as its consistency with the financial statements.

Significant activity in just the last year is astonishing: five major framework and standard-setting institutions stated their intention to work together towards a comprehensive corporate reporting system; the International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) merged to form the Value Reporting Foundation; over 60 prominent business leaders publicly committed to the Measuring Stakeholder Capitalism WEF IBC Common Metrics; the European Commission published proposals (Corporate Sustainability Reporting Directive) to amend the EU non-financial reporting directive; the US SEC consulted on climate change disclosures; the New Zealand and UK governments became the first to mandate reporting of Task Force on Climate-Related Financial Disclosures (TCFD); and the IFRS Foundation Trustees’ progressed their sustainability reporting initiative. With the UN’s COP26 climate change conference coming up soon, momentum is only likely to build.

With so much going on, and different focuses and perspectives coming to light, it’s becoming clear that we need to enable the many different elements to come together - the question is how to do this.

Broad support for creating an independent international sustainability standards board (‘ISSB’) was evident from the IFRS Foundation Trustees’ consultation process. The ISSB would be well placed to drive convergence as a single global standard setter for comprehensive sustainability reporting. Starting with climate disclosures in the first instance, they will need to move quickly to cover other elements of the ‘E’, ‘S’ and ‘G’ information.

It makes sense to move forward using an existing established and respected organisational structure and processes. This should facilitate a coherent approach to standard setting, supporting the interconnectivity between financial and non-financial reporting, and enable the ISSB to move forward at pace.

Initial steps towards global alignment

A balance needs to be struck between the strategic goal of having a comprehensive set of sustainability standards and the need to respond quickly to stakeholder demands for information. The ISSB’s initial steps in moving towards achieving global alignment should run concurrently:

  • Leverage the best of existing standards, focusing, at least initially, on the topic of climate (in response to urgent demand). Wherever possible, start with the standards and recommendations issued by existing bodies (e.g. TCFD).
  • In parallel, consult widely to identify the sustainability areas to prioritise after climate and develop a detailed plan and timelines, focusing initially on enterprise value and leaving the company’s impact on society to a later stage. This will necessarily involve working with existing framework and standards setters (for example, SASB, GRI etc).
  • Address and prioritise where investor and other stakeholder reporting needs overlap and look to address their interoperability as new standards are developed. In this way the ISSB will be creating a ‘baseline for sustainability reporting’ with a useful multi-stakeholder approach.
  • Assess the impact on enterprise value of the sustainability areas to be reported on. By their nature, ESG reporting areas that are of fundamental importance to stakeholders are likely to have an impact on a company’s enterprise value, even if the effect will only become material in the future.
  • Work closely with the major existing sustainability standard setters focused on non-investor stakeholders and company impact, being ready to act at pace when stakeholder reporting areas become material to enterprise value.

In the near term, companies voluntarily reporting on ESG should identify existing metrics and disclosures material to their investors and other stakeholders, ideally following the TCFD or WEF/IBC minimum requirements on a comply or explain basis.

Governments and regulators may require ‘add ons’ to the ISSB’s baseline standards in pursuing political goals beyond enterprise value, such as demonstrating the societal impact of sustainability issues or moving forward with specific policy goals. Where possible these ‘add ons’ should use definitions and metrics in existing sustainability standards (rather than create more divergence with new standards). Where gaps are identified, the ISSB or ‘impact- focused’ standard setters should address them.

What’s next?

It seems a big ask: an aligned reporting ecosystem with globally adopted sustainability standards delivering comparable and reliable metrics and disclosures capable of being robustly assured. With the right strategic planning and focus, and the cooperation of key stakeholders, globally consistent standards are achievable.

We are at a pivotal moment to drive a coherent, comprehensive sustainability reporting system forward. Following consultation, the IFRS Foundation Trustees have support to drive forward. Most recently, the Trustees have issued a call for nominations for a chair and vice-chair for the proposed new International Sustainability Standards Board. We can expect further progress through 2021, including a definitive proposal and road map in September and perhaps the formal establishment of the ISSB at COP26 in November.

Everyone in the corporate reporting ecosystem – companies, investors, policy makers and other stakeholders – has a role to play in making this a success. Collaboration will be vital in making progress, focusing on the common areas rather than the differences. With this attitude, achieving harmonisation and delivering comprehensive sustainability reporting standards that address stakeholders’ information needs can – and will – happen.

Get in touch

Reach out to start a conversation

Nadja Picard

Global Reporting Leader, Partner, PwC Germany


Henry Daubeney

Global Chief Accountant and Head of Reporting, PwC United Kingdom


Follow us

Required fields are marked with an asterisk(*)

By submitting your email address, you acknowledge that you have read the Privacy Statement and that you consent to our processing data in accordance with the Privacy Statement (including international transfers). If you change your mind at any time about wishing to receive the information from us, you can send us an email message using the Contact Us page.

Contact us

Will  Jackson-Moore

Will Jackson-Moore

Partner, Global Sustainability Leader, PwC United Kingdom

Tel: +44 07710157908

Louise Scott

Louise Scott

Chief Operating Officer, Global Sustainability, PwC United Kingdom

Tel: +44 (0)7734 958 942