2 minute read 17 May 2023
ey-ccas-new-frontier-of-sustainability-standards

Navigating the new frontier of sustainability standards

Authors
Meg Fricke

EY Australia Climate Change and Sustainability Services Partner

Environmental scientist and economist passionate about transforming and integrating sustainability into business strategy, building robust and transparent disclosures and making the world work better.

Megan Wilson

EY Oceania Assurance Partner

Actively promotes diversity and inclusiveness. Collaborative. Communicator.

Contributors

Mathew Nelson,

 

Pip Best,

 

Nicky Landsbergen

2 minute read 17 May 2023
Related topics Climate change and sustainability Climate-related reporting Nonfinancial reporting Assurance Sustainability
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A new EY report looks at one of the most significant shifts in financial reporting that businesses in Oceania have ever seen.

In brief

  • The International Sustainability Standards Board (ISSB) disclosure requirements will require new collaboration between finance and sustainability teams.
  • Non-financial information will be elevated to an equal footing with financial information, revealing the effect of climate risk on enterprise value.
  • Sustainability reporting must mature at an unprecedented pace, supported by robust data, automated workflows and new controls and governance.

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The current fragmented ESG disclosure landscape has eroded investor confidence in the reliability, consistency and comparability of climate-related disclosures, despite significant investment by disclosing entities. The International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards will address this threat by creating a global common, consistent language for sustainability-related financial disclosures – a global baseline that can be included in national jurisdictional requirements.

According to the EY report, Navigating the new frontier of sustainability standards, getting ready for the proposed sustainability disclosure requirements will be a testing time for many organisations.

There’s no doubt that the change being wrought by the ISSB will be a net good. The robust data gathered for disclosure purposes will also support organisations to confidently make decisions and investments that mitigate climate risk and support decarbonisation. The strong connection with financials will make sustainability core to business in a way that we have yet to see in Oceania, even in the most committed, ”green” organisations.

However, the mandate to disclose the financial impact of climate change and decarbonisation risks and opportunities will necessitate sustainability data being sufficiently robust to withstand internal and external audit – and available within much more pressing timeframes.

For most organisations, this represents a big step up the sustainability reporting maturity curve. Credible disclosure will require massive investment in systems and capabilities. It will also call for new levels of cross-organisational cooperation, new thinking and new approaches.

For sustainability teams used to ad hoc reporting, the scrutiny on measurement, systems and processes will be a painful shock. For finance teams used to black and white numbers, the difficulty in calculating the quantum of climate impacts or determining their materiality will be exasperating. For both, the scale and pace of change will be hair raising.

The work will be challenging, but also enormously important. Deepening the connections between non-financial and financial information should lead to more nuanced and sophisticated financial reporting. In this sense, the historical changes about to be made to business and accounting may be the most important of our lifetimes.

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Summary

Getting ready for IFRS Sustainability Disclosure Standards requires hard work and immense collaboration across business functions. Download the report to find out what integration will look like and how to start preparing now.

About this article

Authors
Meg Fricke

EY Australia Climate Change and Sustainability Services Partner

Environmental scientist and economist passionate about transforming and integrating sustainability into business strategy, building robust and transparent disclosures and making the world work better.

Megan Wilson

EY Oceania Assurance Partner

Actively promotes diversity and inclusiveness. Collaborative. Communicator.

Contributors

Mathew Nelson,

 

Pip Best,

 

Nicky Landsbergen

Related topics Climate change and sustainability Climate-related reporting Nonfinancial reporting Assurance Sustainability
Upvote