ICAS brings together global experts to discuss the future of sustainability reporting
ICAS’ recent sustainability reporting summit assembled panels of national and international experts to shine light on an issue of great complexity and mounting urgency. Director of Public Affairs, Sarah Chisnall, looks at the key lessons for business, CAs, standard setters and government – and outlines the ICAS position
How do we hold businesses to account for the impact they have on the environment and society more widely – and should we even try? And if we should, how can we make this meaningful and achievable? These were just two of the questions ICAS and guests put to a panel of experts and keynote speakers at our sustainability reporting summit on 26 April in Westminster.
We attracted a great line-up of speakers and panellists, including standard setters, regulators, government, corporates, NGOs and industry. The afternoon brought lively discussion, which left everyone with more questions than answers – but isn’t that always the case with complex issues? It was, however, good to hear the government outline its direction of travel and business discuss how it moved from seeing reporting as a burden to being a tool for value creation. Others challenged the capacity of the profession to effectively manage sustainability reporting and assurance.
The ICAS position
ICAS has been thinking about sustainability for a long time and has been a critical partner in the development of international standards. Myriad different organisations operate in this field, sometimes leading to confusion. There were several references during the afternoon to the need to simplify the “alphabet soup” of bodies, acronyms and standards if we are to make reporting second nature rather than another onerous job.
Bruce Cartwright CA, CEO of ICAS, and Indy Singh Hothi CA, President until two days after this event, set out the ICAS stall early on. We want aligned, mandatory sustainability reporting standards to cover a wide, holistic set of measures, including the impact of climate change and other sustainability issues on a business (otherwise known as “financial materiality”), but also the impact of the business on the environment and society (otherwise known as “impact materiality”) – and combined known as double materiality.
We believe sustainability in its widest sense is too important to hope that voluntary measures will do the job, or that simply reporting on the financial impact of climate change on companies is enough. We believe reporting on the impact companies have on the environment and society is the only way to fully understand and address the impact and cost of companies doing business.
To achieve this, there needs to be alignment between the International Sustainability Standards Board (ISSB) and Global Reporting Initiative (GRI) standards. This multi-stakeholder focus would deliver a set of international standards that will satisfy investor needs and growing public demand for action and more holistic reporting.
In recent months ICAS has been open about this position in our letters to the Prime Minister, secretaries of state and on public platforms. It was heartening for us to hear Ravi Abeywardana of the IFRS Foundation say in his keynote address that “ICAS has shown genuine leadership in calling for mandatory reporting of ISSB and GRI standards”.
Judy Kuszewski, Chair of the Global Sustainability Standards Board until recently, said in her speech that accountancy and its professional bodies have been strong allies, and one of the first sectors “to really get” the importance of sustainability.
The UK perspective
One of the many reasons for bringing such a diverse group of people into one room was to let the UK government and the audience hear the different views of speakers from key organisations. We also wanted to set out our position and hear the government’s thoughts.
The UK government recently announced its continued commitment to endorsing the ISSB standards – the first two of which are expected this month. In March, the newly created Department of Business and Trade (DBT) outlined a 12-month process to consider these standards once published, including a review to judge whether they are suitable for adoption within a UK framework.
Questioned as to how we can balance different stakeholder needs, panellist Andrew Death, Deputy Director at DBT, said: “Corporate reporting in and of itself won’t change anything. It’s how people use that information and what decisions they make as a result of that information.” On making standards mandatory, he said there will be a separate consultation (and decision). The government view is that the ISSB approach is the best fit for the UK just now. The 12-month period of assessment will give it flexibility on how they might be implemented and allow it to look at how businesses can implement them, before potentially moving to a mandated approach.
He feels that part of the difficulty is that there are so many “different sets of standards, and in some instances, people are reporting against no standards, making it extremely difficult to understand the information coming out”. More guidance is needed for both reporters and users.
The room welcomed his closing remarks that eventually we should reach a point where there shouldn’t be a need for separate reporting: “It shouldn’t be sustainability versus financial reporting, it should be integrated, and it should be reporting to help the company to tell its story.”
Judy told the audience there had been one million downloads of the GRI standards in 2022 – a huge 52% increase on 2021. She said both sides of the double materiality debate are equally important – the strengthening of sustainability-related financial disclosures reporting and wider impact reporting – and both should be considered necessary and material, but that we should be looking at the outward impact first. Philippe Diaz from WWF said we had waited far too long for a set of comprehensive and holistic standards and that we are already 10 years behind where we should be.
Interoperability is key in the creation of meaningful and usable standards. Saskia Slomp of EFRAG (formerly known as the European Financial Reporting Advisory Group) talked about the need for partnership, and of the shared research already going on between different standard-setting bodies. EFRAG works closely with the GRI and the ISSB on alignment, and seeks to develop standards in parallel, aiming over time for there to be no, or only limited, differences. For this, involving all the many stakeholders is critical. “We have to move together. We are not in competition,” she said.
Ravi Abeywardana from IFRS Foundation said the ISSB has tried to consolidate much of the alphabet soup of standards and highlighted the importance of connectivity and interoperability between them. He too stressed the importance of collaboration, acknowledging the reporting burden for businesses and that where there are similarities, they will try to find the most interoperable ways of working.
In one panel session, Mark Vaessen, of Accountancy Europe, called for a mapping exercise to compare the different standards in different countries, which would be important for accountants who want to be EU compliant but also need to comply with international regulation. He said the ISSB standards had laid the cornerstones for reporting in all jurisdictions for us to build upon.
The big questions
The two panel sessions threw up some challenging questions, not least from the Head of Sustainability at the Weir Group, who asked how anyone was supposed to make serious progress in reducing their impact while having to spend so long accounting for the harm they might be doing and reporting on so many data points. Panel responses varied from the need to take the concerns of interest groups seriously, to having to internally galvanise to put reporting measures in place.
Judy said: “Impacts are relevant and real and must be reported, regardless of the financial materiality.” Anthony Carey of Mazars asked the big question: “Are we missing the chance to be brave and bold and go for one set of performance standards which embrace double materiality?” The view from the panel seemed to be that while this might be desirable in the long term, we are still years from it being a practical possibility.
The business view
“What’s measured, gets managed,” said Matthew Forster from Britvic, a business on the front foot of sustainability. The adage resonated with many. Britvic has pivoted from seeing sustainability reporting as a burden to viewing it as an opportunity to set itself apart from other companies, and that knowing where your impact lies, wherever that is (carbon, crops, water stress etc), and reporting on it, can present opportunities. The company links senior managers’ bonuses (up to 20%) to performance against environmental, social and governance measures. It also believes success in attracting talent is linked to how well it performs in addressing climate change.
Bruce talked about the importance of assembling people “who really know what they’re talking about” to boost the likelihood of finding consensus. We had certainly seen a willingness to listen and learn from one another. In the final panel session, Mark Babington of the Financial Reporting Council (FRC) said that we are all trying to work out how to live with the consequences of climate change, and that although we are all currently focused on sustainability reporting, he suggested we “go back and think about what is most important for us to report”.
What they said...
“We’re producing information that has to be consumed, so it’s got to be fit for purpose. If the annual report needs to arrive on a low loader [van] then we’ve failed.”
Mark Babington, FRC
“You really need to boil down what sustainability reporting means for your business. Start putting things into place that are actually going to make a difference.”
Matthew Forster, Britvic
“In five years, at the very minimum, we do need to see a coordinated set of messages that can be practically understood in the marketplace about how the various sustainability standards fit together.”
Judy Kuszewski, former Chair, GSSB
“The ambition of the European Commission was to raise the level of sustainability reporting to the same or a similar level of financial reporting. Given the planetary emergency I think it is not justified to say, ‘We’re not ready, we’ll wait another few years’.”
Philippe Diaz, WWF Germany
Watch the ICAS sustainability summit now