Last week’s meeting of the International Sustainability Standards Board (ISSB) revealed what could amount to significant internal confusion regarding the fundamental goals and strategic direction of the plan to update the legacy Sustainability Accounting Standards Board rule book.
ISSB member Richard Barker said: “I’m still not clear from what’s been described in this call, whether we are in substance developing IFRS industry standards or whether we are simply maintaining SASB.
“I think the answer to that question then in turn affects the questions of timeline. I’ll just leave my comment there given time [constraints].”
Updating SASB standards
His comments came toward the end of the 20 March meeting, during which staff updated the board on their proposed approach for developing amendments to the standards. The project is supposedly focused on supporting the implementation of International Financial Reporting Standard S1 and S2.
Earlier during the meeting, Barker said the board must consider the three core issues of the purpose of the project.
On the first of the three issues, Barker said the project was “unusual” in that it was effectively “an interim project in substance because ultimately we’re going to create IFRS industry standards”.
Second, he argued, there is a conceptual difference between how IFRS S1 and S2 approach the value chain compared to the SASB standards, specifically in relation to Scope 3 emissions.
Third, he questioned whether certain issues should be addressed within industry standards or reserved for thematic standards to ensure consistency and avoid potential overlaps or inconsistencies.
For instance, he pointed to the discussion of water metrics, suggesting that while tidying up definitions within SASB is fine, the fundamental issues of definition and measurement might more appropriately belong in a thematic standard, similar to how greenhouse gas emissions are addressed in S2.
Disagreement on Scope 3, value chain
In response, ISSB vice chair Sue Lloyd said she disagreed with this assessment, noting that while a general Scope 3 requirement might be absent from the SASB standards, other value chain aspects are considered.
Regarding his broader concerns about the agenda, she stated that the board’s decision to enhance SASB standards alongside thematic research, as outlined in their work plan, already constituted their agenda planning.
The issue of Scope 3 emissions and the value chain is crucial in sustainability reporting because it captures an organization’s indirect environmental impact, both upstream (from inputs) and downstream (from outputs).
Improving implementation
The project to enhance the SASB Standards was initiated by the ISSB in July 2024 as part of its 2024-2026 work plan. Its primary goal is to update and improve the SASB Standards to better support the high-quality implementation of IFRS S1 and IFRS S2 by entities worldwide.
This includes ensuring the standards are internationally applicable, proportionate, and aligned with the ISSB’s broader sustainability disclosure framework.
ISSB has established a group of board advisors, made up of five ISSB members to develop drafts of the proposed amendments to the SASB Standards. These drafts will then be presented to the full ISSB for ratification.
Meanwhile, staff also revealed that the ISSB has rowed back from its initial plan to publish the proposed updates for public comment in the second quarter of this year. Instead the board will issue exposure drafts in two stages during 2025.
The ISSB anticipates ratifying exposure drafts for nine priority SASB standards, primarily in the extractives sector and processed foods, by the end of Q2 2025.
The remaining three priority standards, covering electric utilities, agricultural products, and meat, poultry and dairy, are expected to have their exposure drafts ratified by the end of Q4 2025.
Name change for SASB standards?
The staff paper reveals a proposal to consult on renaming the SASB Standards to “ISSB industry-based guidance” to signal their due process under the IFRS Foundation. Their status as guidance would remain unchanged in the near term.
The SASB standards have already undergone two earlier waves of amendment.
The first focused on aligning the climate-related content with IFRS S2 and incorporating finance emissions requirements, while the second addressed the international applicability of the non-climate-related content.
Learnings during the project could potentially affect any decision by the board to develop thematic standards covering human capital and biodiversity.
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