Chair of the IASB Hans Hoogervorst said how reporting that helps investors understand how companies are affected by sustainability issues offers a promising step forward.
Mr Hoogervorst highlighted:
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the importance of sustainability reporting,
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how it relates to financial reporting,
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the role of the IASB in the field of sustainability reporting, and
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sustainability reporting thoughts.
The first strand of sustainability reporting is embedded in CSR reporting. It seeks to promote behavioural change by requiring companies to demonstrate how they contribute to a better world by engaging in environmentally sustainable activities. This strand of sustainability reporting is oriented towards the public good and views society at large as the audience of reporting.
Although this strand in sustainability reporting is perfectly legitimate, its scope is different from the scope of IFRS Standards. IFRS Standards do not seek to portray the contribution of a company to the public good, but to provide information that helps investors in their efforts to predict future cash flow of the company itself. So, CSR-like sustainability reporting does not meet the objectives of financial reporting, although there may be some overlap in practice.
However, there is another, increasingly influential, strand in sustainability reporting that is more focused on the impact of sustainability issues on the company itself, rather than on the public good. It seeks to provide investors with information on how sustainability issues might impact the company’s future financial performance. The work of bodies such as the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) is an example of such orientation towards investors and value creation. The scope of this disclosure framework comes very close to that of the IASB.
Mr Hoogervorst does not think the IASB is equipped to enter the field of sustainability reporting directly. Setting sustainability reporting standards requires expertise. Moreover, there are already more than enough standard-setters active in this field.
Mr Hoogervorst concluded: “Climate change has moved to the forefront of people’s concerns and this will hopefully create more room for adequate public policies in the future. The more these policies start to bite, the more relevant sustainability reporting will become.”
Full speech
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