How Australian Companies Can Prepare for the ISSB Standards
Download a PDF of this articleOn 26 June 2023, the International Sustainability Standards Board (‘ISSB’) released its inaugural global sustainability reporting standards, IFRS S1 and IFRS S21 (‘Standards’). Australian companies must proactively prepare for these forthcoming changes, with mandatory climate-related financial disclosure anticipated to impact our shores as early as Q2 2024 as the Standards are adapted for the Australian context. The ISSB Standards release represents one of the most significant shifts in financial reporting in recent years, marking the next step towards equal prominence for sustainability and financial reporting.
The ISSB Standards are vital to investors by providing reliable sustainability information to support investment decisions. Over the next six months, Boards, CEOs, CFOs and sustainability executives should start planning and allocating sufficient funds and resources in preparation for the Australian implementation of the Standards and the mandatory requirements which in Australia will extend to
climate-related financial disclosures. To ensure companies are prepared well before the requirements come into effect, our Australian ESG specialists outline the steps companies should consider implementing during the second half of 2023.
FTI Consulting’s Key Takeaways
The perception held by some of ESG as a mere appeasement for socially conscious investors is about to shift with the upcoming introduction of the ISSB Standards, specifically IFRS S1 (covering general sustainability-related financial disclosures) and IFRS S2 (focused on climate-related financial disclosures), starting in January 2024 when the Standards will take effect globally. They will not be immediately mandatory across markets, with each jurisdiction needing to define the extent to which they will be implemented, however, with the global community seeking a consistent sustainability disclosure baseline, the ISSB Standards are likely to be widely adopted across the globe.
Covering governance, strategy, risk management, metrics and targets, the Standards establish a consistent global framework, requiring companies to report on all relevant sustainability topics, not just climate-related ones.
Be aware, this is more than just a reporting requirement; it is also a rewiring of how company value is determined, articulated and how performance is measured.
Companies will need to assess information to disclose that can reasonably influence decisions by key stakeholders such as investors, lenders and creditors. Once adopted internationally and in Australia as a consistent set of standards, businesses will need to align financial reporting with sustainability reporting. As a result, there may be a requirement for additional disclosures in an entity’s financial statements. This means companies must be ready to share a much more comprehensive range of information than before with investors, lenders and other financial stakeholders.
| The views expressed in this article are those of the author(s) and not necessarily the views of FTI Consulting, its management, its subsidiaries, its affiliates, or its other professionals.
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