In recent years, corporate reporting has evolved to meet the changing information needs of an ever-widening range of stakeholders and users, with an increased focus on non-financial reporting information. 

With social and environmental issues high on the agenda, this has led to different jurisdictions developing their own sustainability reporting requirements, leading to diversity in approach. 

The creation of the International Sustainability Standards Board in 2021 to develop a global baseline of sustainability disclosure requirements focused on the needs of investors and the financial markets marked a seminal moment in sustainability reporting.

In Europe, meanwhile, the Corporate Sustainability Reporting Directive, adopted by the European Commission in 2023, requires compliance with European Sustainability Reporting Standards.

With so much change happening at pace, ICAEW agreed with many stakeholders that it is important to reflect on what has been achieved and how future sustainability standard setting might be done better. 

Following extensive outreach, ICAEW has published a report analysing key features of effective accounting standard setting and considering the challenges faced by sustainability standard-setters.

Shaping sustainability standard setting is directed at organisations or individuals involved in the work of global standard-setting bodies, as well as others with an interest in the future success of sustainability reporting. It has been informed by a range of views garnered through a round-table event and one-on-one interviews with standard-setters, policymakers, academics and other stakeholders between September and November 2023. The report also provides an international perspective on the experiences to date.

As a result of that process, ICAEW has identified 10 core standard-setting areas of focus, and set out a series of recommendations. 

What emerges is that a lack of consensus regarding the purpose, scope and audience for sustainability reporting has made it difficult to achieve a widely applied global baseline. The report encourages sustainability standard-setters to collaborate and clearly articulate the role of their standards relative to others.

Another key feature of effective standard setting is rigorous due process. Transparency, consultation and accountability are key to the development of quality accounting standards. The report explores the challenges that sustainability standard-setters face in this context, given the fast-paced environment, and examines the balance that needs to be struck. 

Meanwhile, interoperability of sustainability standards is another core area of focus within the report. Different sustainability reporting solutions developed in individual jurisdictions are problematic for businesses, not least due to the potential need to report under several regimes. The report recommends that sustainability standard-setters work together to minimise differences, learn from each other and facilitate creation of a global baseline of sustainability disclosures.

The challenges that sustainability standard-setters face in balancing resources for implementation activities with the pressure to develop new standards is another issue reflected on in the report. It recommends that priority be given to education and implementation at this stage, to provide the standards with credibility and a secure foundation for growth and expansion.

Other core areas of focus in the report include clear strategic planning, wider stakeholder engagement, ensuring independence and expertise of those involved in standard setting and providing the clarity necessary to enable effective assurance and enforcement.

“We hope our members and beyond enjoy reading this contribution to the future development and success of sustainability standard setting,” says Laura Woods, ICAEW’s Technical Manager, Corporate Reporting. “We are looking forward to discussing this report and its findings widely with key stakeholders and to further exploring the core areas of focus highlighted.”

Dr Nigel Sleigh-Johnson, ICAEW’s Director of Audit and Corporate Reporting, adds: “We are keen to influence the sustainability standard-setting agenda in the public interest and are committed to contributing to the success of global sustainability reporting and assurance. This report is a considered contribution to the much wider debate about the challenges we all face around sustainability. We welcome comments on its findings from members and others.”