More than 1,000 companies worldwide have reported on their sustainability impact using the International Sustainability Standards Board’s (ISSB) norms, the board’s parent body has revealed in a progress report presented to the Financial Stability Board (FSB).

Additionally, some 30 jurisdictions have taken steps to incorporate ISSB standards into their legal frameworks.

This marks a significant shift towards greater transparency and accountability in ESG accountability, the International Financial Reporting Standards Board Foundation said.

ISSB chair Emmanuel Faber said: “This progress report underscores the significant and encouraging progress in disclosure of climate-related information.”

He added, however, that there remains much work to be done.

“But further action is needed to address the fact investors are still not receiving the information they need to assess and price appropriately climate and other sustainability-related risks and opportunities,” he noted.

ISSB’s focus, mission

Since its launch in 2021, the ISSB has set about developing a comprehensive global baseline in sustainability disclosure.

This baseline aims to provide investors and other capital market participants with high-quality, transparent, and reliable information about companies’ sustainability-related risks and opportunities.

The board’s focus is, however, on a single, financial materiality model and it is not directly concerned with so-called double materiality or reporting on societal impact.

A key aspect of the board’s mission is to reduce the ‘alphabet soup’ or diversity in sustainability reporting.

It has set out to do this by consolidating the Sustainability Accounting Standards Board (SASB), the International Integrated Reporting Council (IIRC), and the Task Force on Climate-related Financial Disclosures (TCFD) under the banner of the IFRS Foundation.

TCFD alignment and disclosure gaps

But despite the progress in setting up the ISSB and establishing a fledgling global baseline, the update also painted a mixed picture in relation to TCFD alignment.

According to the report, while some 82% of companies disclosed information aligned with at least one TCFD recommendation, less than 3% of companies fully report in line with all 11 TCFD recommendations.

As a result, the Foundation said these shortcomings mean “investors are not currently receiving the information needed to assess and price climate-related risks and opportunities”.

Meanwhile, in a separate analysis released alongside the update, the Foundation reported strong global support for comprehensive sustainability reporting.

Progress on Scope 3 reporting

According to the report, nearly all of the jurisdictions it reviewed are mandating Scope 3 greenhouse gas emissions disclosures, requiring companies to report on emissions across their value chain.

Furthermore, most jurisdictions are incorporating industry-specific disclosures and broadening reporting requirements to encompass the full range of sustainability-related risks and opportunities, beyond just climate.

However, the Foundation warns against jurisdictions drifting from the new global baseline, arguing that global stakeholders are demanding alignment with ISSB standards to avoid regulatory fragmentation in sustainability reporting.

Both multinational companies and investors, the analysis noted, need a unified, comparable system for disclosing sustainability-related risks and opportunities, especially those operating across borders.

Additionally, the increasing adoption of industry-specific disclosures highlights the growing need for detailed sustainability data and the value of the SASB standards, which now serve as sector-specific guidance, in supporting this effort, the Foundation warned.

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