IFAC was proud to be a part of the formation of the IIRC in 2009, and we look forward to supporting its next chapter as the Value Reporting Foundation together with SASB.
Since the IIRC’s formation, the interest in and evolution of sustainable finance and environmental, social and governance (ESG) and sustainability reporting has moved up several gears. This period of innovation and development has led to more diverse reporting on a wider range of issues which has gone some way to provide more transparency to stakeholders.
But we now need to respond to demand from investors, policymakers, and other stakeholders for a global reporting system that delivers consistent, comparable, reliable, and assurable information related to enterprise value creation and sustainable development. Without common global standards, it is difficult for companies and investors to integrate sustainability issues in their resource allocation decisions. The price of continuing with a fragmented approach is inefficiency, increased cost to investors and companies, and a lack of trust.
In our view, the International Financial Reporting Standards Foundation, with its independence, good governance, track record of due process, and the widespread adoption of international accounting standards around the world, is the ideal home for a new Sustainability Standards Board alongside the International Accounting Standards Board (IASB).
Under the IFRS umbrella, this new board can garner support from public authorities and international organisations, which will be essential to gain legitimacy and the ultimate adoption of standards.
However, the IFRS Foundation will need the expertise and continued cooperation of the Value Reporting Foundation, GRI, CDSB and CDP and the IMP to develop relevant standards.
Integrated thinking and reporting will continue to be fundamental components of creating a more sustainable and inclusive global economy and achieving the United Nations’ Sustainable Development Goals.
Integrated reporting provides the crucial link between financial reporting with sustainability and ESG reporting. It also extends to other capitals, including intellectual capital, which together comprise the value missing from traditional financial reporting. Above all, it provides the basis for boards to discharge a duty of accountability for long-term value creation and the long-term success of the company for the good of society.
Importantly, we must not forget that integrated reporting has three key features. First, it incorporates the same level of quality expected from financial reporting, and subject to assurance, provides a strong picture of the resilience of business and how it impacts its key stakeholders. Second, it is a predictive as well as a historical analysis of performance and resilience. Third, and of critical and unique value, it can enable integrated management thinking, which is what is ultimately needed to improve decision making and capital allocation.
The accountancy profession continues to be an integral part of a multi-stakeholder corporate reporting system to help companies, economies, and societies achieve a more sustainable future. Our strategic partnership with the IIRC, and in the future, the Value Reporting Foundation will continue so we can support the advocacy and engagement of integrated thinking and value reporting among the over 3 million professional accountants worldwide.