IFRS Foundation
January 19, 2023

Future of the SASB Standards: What you need to know for 2023 disclosure

Neil Stewart

The ISSB set a clear path for the SASB Standards when it launched draft IFRS Sustainability Disclosure Standards, explaining how initially the industry-based SASB Standards can help companies identify their sustainability risks and opportunities along with metrics to use in their disclosures. The SASB Standards provide disclosures across a range of sustainability matters and, over time, will inform the industry-based requirements in the IFRS Sustainability Disclosure Standards. As such, report preparers will benefit from starting now, using the SASB Standards to meet the immediate needs of investors while laying the groundwork for adoption of IFRS Sustainability Disclosure Standards in the coming years.

Here are a variety of recent ISSB decisions to be aware of as you plan for 2023, followed by some tips for how best to prepare for the future application of IFRS Sustainability Disclosure Standards.

Recent ISSB decisions

The ISSB recently made several decisions that further clarify the role and evolution of the SASB Standards in response to extensive market feedback received on the draft IFRS Sustainability Disclosure Standards, General Sustainability-related Disclosures (IFRS S1) and Climate-related Disclosures (IFRS S2):

– The ISSB confirmed that industry-specific disclosures are required and, in the absence of specific IFRS Sustainability Disclosure Standards, companies must consider the SASB Standards to identify sustainability-related risks, opportunities and appropriate metrics.

– The ISSB will enhance the international applicability of the SASB Standards and continue SASB Standards projects handed over by the VRF as foundational work in 2023. In other words, the ISSB is not just preserving the SASB Standards, it is updating and improving them to provide a solid footing when companies use them when applying the new IFRS Sustainability Disclosure Standards. As part of that process, a group of ISSB members—chaired by Jeff Hales, former Chair of the SASB Standards Board—has been established and tasked with developing recommendations for the ISSB related to the maintenance, evolution and enhancement of the SASB Standards. The group will develop drafts of the required exposure drafts of amendments to the SASB Standards and, after considering the stakeholder feedback, drafts of the final amendments. The ISSB as a full board will consider the recommendations of this group in ISSB meetings (which are public) and ratify the exposure drafts and, subsequently the final amendments prepared by the group. The comment period for the exposure drafts will be the same as for those related to IFRS Sustainability Disclosure Standards.

– Some commenters said the industry-based climate-related topics and metrics that the ISSB had adopted from the SASB Standards in the appendix to its exposure draft need further market exposure and improvements to be applied globally. There were also concerns that smaller companies and markets newer to climate reporting need time to get ready for those industry-specific disclosures. In a strong response to this feedback, the ISSB, while confirming the requirement for industry-specific climate information to be disclosed, decided to classify this appendix as examples of disclosures that could be provided, with the intention to make these disclosures mandatory in the future, subject to further consultation. This will give the ISSB more time to consider the need to improve these industry-based climate-related metrics and companies more time to prepare.

– The ISSB decided to clarify and improve the Illustrative Guidance on S1. This important though sometimes overlooked guidance explains how preparers can identify sustainability-related risks and opportunities and the metrics to disclose material information about them – a two-step process. S1’s Illustrative Guidance will also be expanded to show how a company spanning multiple industries can use the SASB Standards in that two-step process.

Use 2023 to prepare

The ISSB will issue IFRS S1 and IFRS S2 in 2023 and is committed to supporting their implementation for businesses of all sizes and stages of development across different markets, although the effective date of the Standards is still to be decided.

In 2023, companies that already use the SASB Standards should continue to do so and those that are not using them yet should consider adoption. Report preparers that are new to sustainability disclosure should use 2023 to prepare for the future application of the IFRS Sustainability Disclosure Standards.  Here are three ways that leading companies are laying the groundwork even before these standards are finalized:

1. Evaluate internal systems and processes for collecting, aggregating and validating sustainability-related information across the organization and its value chain.

2. Consider the sustainability-related risks and opportunities that affect the business.

3. Review the ISSB’s proposed standards and supporting materials, including the SASB Standards, CDSB Framework, TCFD Recommendations and the Integrated Reporting Framework.

A streamlined and cost-effective process for preparers; targeted, decision-useful information for investors: These are the guiding objectives of the ISSB as it builds on the extensive work done by companies and investors using existing voluntary frameworks. Companies that apply the SASB Standards now will find they are an efficient solution for disclosing sustainability information and a solid foundation for adopting IFRS Sustainability Disclosure Standards in the coming years.

To learn more, check out the 3-part ISSB Corporate Reporting Webinar Series. Recordings and slides will be available on-demand following the completion of each live event.