Integrated reporting and ESG disclosures

Since the rise of the Triple Bottom Line concept in the 19902, integrated reporting has evolved and been formalised by major global institutions and legislators. Corporate transparency and accountability is at the core, going beyond the traditional view that a company’s finances is all that matters. Indeed, reporting trends and requirements in ESG (Environmental, Social and Governance) is a signal that these issues often have a direct impact on the finances of a company and unintended consequences on society and the planet we depend on.

So. the idea of the Triple Bottom Line, evolved into The Integrated Reporting Framework, which has in turn become synonymous with international accounting standards.

There are two standard-setting boards, the International Accounting Standards Board (IASB) and International Sustainability Standards Board (ISSB).

In 2023, ISSB released these Standards: IFRS S1 (general disclosures) and IFRS S2 (climate-related financial disclosures).

Globally these come into effect in January 2024.

IFRS S1 requires companies to disclose material information on all sustainability-related risks and opportunities that could reasonably be expected to affect their prospects.

IFRS S2 sets out the requirements for climate-related disclosures. For risks and opportunities beyond climate, IFRS S1 directs companies to sources of guidance and requires companies to refer to and consider the industry-based SASB Standards.

standards1 and 2 compare

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How did we get here?

The formation of the ISSB was announced on 3 November 2021 at COP26 in Glasgow, following strong market demand for its establishment.

There was also a strong desire to address a fragmented landscape of voluntary, sustainability-related standards and requirements that add cost, complexity and risk to both companies and investors.

The ISSB has international support with its work to develop sustainability disclosure standards backed by the G7, the G20, the International Organization of Securities Commissions (IOSCO), the Financial Stability Board, African Finance Ministers and Finance Ministers and Central Bank Governors from more than 40 jurisdictions.

The Australian Government has released an exposure draft of legislation requiring large companies to comply with standards based on the IFRS standards. A phasing in approach is being taken to give smaller companies more time to adapt.

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