SAICA launches the ISSB standards in South Africa
Johannesburg, 17 July, 2023 - While more and more industries are coalescing around the idea of sustainability, it is the alphabet soup of guidelines that has limited the effectiveness of sustainability reporting. The landscape is about to change for the better.
In the grand scheme of things, the International Sustainability Standards Board’s (ISSB) inaugural global standards, IFRS S1 and IFRS S2, are set to improve the effectiveness of sustainability reporting, among a raft of changes, authorities say.
Almost two years in the making, the standards represent the high point of disclosures on climate and other sustainability issues, effectively removing the alphabet soup of guidelines and organisations.
The so-called alphabet soup – which has been a great handicap to the efficacy of sustainability reporting – incorporates all the voluntary standards and frameworks that exist, including the Carbon Disclosure Project (CDP), the Climate Disclosure Standards Board (CDSB), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD), among others.
By the ISSB’s account, the new standards are designed to ensure that companies provide sustainability-related information alongside financial statements.
In what is one for the books, the ISSB notes that the standards also create a common lexicon for disclosing the effect of climate-related risks and opportunities on a company’s prospects. What is more, they are suitable for application around the world, creating a truly global baseline.
On June 26, 2023, ISSB Chair Emmanuel Faber officially launched the standards at the IFRS Foundation’s annual conference in London. Pursuant to the launch in London the ISSB had a week of launch events hosted by stock exchanges around the world, including those in New York, Frankfurt, Lagos, London, and Johannesburg.
SAICA ISSB STANDARDS LAUNCH
In Johannesburg, at the Johannesburg Stock Exchange, the proceedings were directed by Khanya Okumu, who is a SAICA Top-35-Under-35 alumnus. “The discourse on sustainability is more than just about compliance. It is, and should be, a precondition for doing business in a world with complex social and governance structures and limited natural resources,” Khanya said, kicking off the event.
It bears mentioning that SAICA, working in concert with the JSE, was the host of the South African leg of the global launch of the ISSB’s inaugural standards, the significance of which is not lost on Milton Segal, SAICA’s Executive Director for Standards.
Milton, who has spoken extensively on the subject, honoured ISSB board member Dr Ndidi Nnoli Edozien for “empowering SAICA as the leading professional accountancy body to lead and promote the launch into South Africa”.
He picked up the gauntlet in his pithy keynote address: “This event is not the culmination of this work, it is the very start of it. We have a role to play in educating society within this field of sustainability and its implementation. SAICA undertakes to be a key role player for the country, society, and to support our members herewith.”
The proceedings at the JSE were chock-full of presentations by financial hyphenates and industry leaders, including representatives from the ISSB, SAICA, the IFRS Foundation, and the Good Governance Academy, among others.
The programme had two rounds of panel discussions. The first panel, led by Yvette Lange (Chair: SAICA Sustainability Technical Committee), looked at the role of auditors in sustainability reporting, and regulatory oversight, among other issues.
The high point of the morning was the IFRS Foundation’s Dr Suresh Kana whose keynote address considered the global relevance of the standards, among other things.
“Better information leads to better decision-making,” he said. “Our role as the ISSB is to develop standards for the provision of a global baseline for sustainability-related disclosures to meet information needs of investors… We have focused on climate change as a theme as it is perhaps the most important issue of our time.”
Speaking in turn was Dr Ndidi Nnoli Edozien, who was followed by veteran hyphenate Prof Mervyn King. Senior Counsel and Patron: Good Governance Academy.
In a fireside chat, the pair looked into the work of the ISSB with Prof Mervyn calling the new standards a steppingstone to a global comprehensive corporate reporting system.
WHY IT ALL MATTERS
In an interview with ASA magazine, Dr Suresh Kana notes the global importance of sustainability disclosures and why the world should take note of the new standards.
“Every individual in the world has some form of connectivity – whether it’s through a supply chain, through them being investors in an organisation, or part of a pension fund. All of that counts because your assets are at stake and you need transparent reporting regarding your assets or contributions.
“So whether you’re in labour or in manufacturing, it’s important that people understand your impact that you are having on a sustainability basis. So that’s why I think it gets down to not just about business – it’s about every individual being interested in this.”
Jonathan Labrey, Connectivity and Integrated Reporting Officer: ISSB, agrees: “The world needs the capital markets to understand the value of the information that is found in sustainability information.
“And using the S1 and S2 standards it enables investors to fully value companies and allocate capital more efficiently, more effectively, and in a more sustainable way. And that will help secure and lock in the public policy commitments that governments have made to secure net zero and meet our sustainable development commitments.”
THE BENEFITS FOR THE GENERAL PUBLIC
IFRS S1 has been described as the “core baseline” of sustainability reporting, attempting to better unify disclosures on factors such as waste and emissions. IFRS S2 however is more detailed in respect of specific topics – particularly climate mitigation and climate adaptation.
Dr Ndidi says the world should take note of the new standards “because it’s absolutely critical to unlocking capital flows. Investors are using these standards to determine what decision-useful information coming through the standards will help them make investment decisions. And so to unlock capital flows it’s very important that we are appropriately disclosing, transparently, comparably across companies, industries, countries, and jurisdictions.”
When asked how the new standards are likely to benefit the general public, Dr Suresh says he’s confident that standards will allow for a comparable way to report on risks and opportunities as it relates to sustainability.
“The idea is that we can operate all our businesses, municipalities, and society in a much more efficient way and mindful of sustainability,” he says. “If we all used 10 percent less electricity, wouldn’t it go further for everybody? So that’s the kind of benefit of thinking to sort of say ‘how can I stretch my resources?’ Because that’s what the opportunity is here.”
Dr Ndidi agrees: “In the world we live in today if you think about a farmer, they are impacted by either drought or too much rain, which leads to flooding. All of these are linked to climate-related risks. Climate-related risks are part of sustainability-related risks.
“But there are also opportunities: for example, we don’t have constant electricity. However, the sun is a source of power so using renewable energy allows for a) potentially a more cost-effective way of receiving power, say to drive your irrigation systems, and b) to address the issue of not having enough water.
“So, sustainability-related disclosures are really about understanding what the climate or sustainability-related risks are depending on your industry.”
About SAICA
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.
Chartered Accountants are highly valued for their versatile skill set and creative lateral thinking, that's why all of the top 100 Global Brands employ Chartered Accountants.
SAICA is a member of Chartered Accountants Worldwide (CAW), a global family that connects over 1,8 million fellow Chartered Accountants and students in more than 190 countries. Together, we support, develop, and promote the role of Chartered Accountants as trusted business leaders, difference-makers, and advisers.
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