The Frankfurt-based International Sustainability Standards Board (ISSB), founded at the end of 2021, is developing a framework of internationally uniform requirements for sustainability (a "global baseline"). It also plans the disclosure of Scope 3 emissions. The Board was commissioned by the International Financial Reporting Standards Foundation, which publishes the IFRS guidelines for uniform global financial reporting. In our interview, Jenny Bofinger-Schuster, ISSB member and sustainability expert, provides insights into the goals of the ISSB, its impact on companies as well as into the challenges and recommendations for measures so that companies are well prepared for what’s coming.
Ms. Bofinger-Schuster, what are the biggest challenges in developing a globally applicable standard in the field of sustainability?
BOFINGER-SCHUSTER Adopting a truly global baseline of sustainability standards means learning a very new language for companies, investors, and regulators. In order to be truly inclusive, our responsibility starts with setting adequate and pragmatic proportionality and scalability mechanisms in our standards, and continues with proactively supporting education, training and capacity building related to the use of those standards. We can learn a lot from our colleagues at the IASB, who have been very successful in creating global accounting standards, and yet our work is different because our colleagues from accounting can rely much more on existing standards.
In your opinion, how will the new standard also affect companies’ internal decision-making processes?
BOFINGER-SCHUSTER In applying the ISSB standards, companies will need to use judgements to identify and prepare disclosure about possible and uncertain future events, and they will have to make estimates when they cannot measure metrics directly. Alongside our standards, we will also be developing guidance to help companies in preparing and presenting this information effectively so it’s useful to investors in making decisions. It may be that these disclosures will help companies make decisions on adjusting to future risk, although the IFRS standards are focused on providing investors with better information so they can make better decisions.
In addition, I am convinced that the new standard will also accelerate the interplay between finance and sustainability departments, which will not only improve the quality of information disclosed, but also lead to a better understanding of ESG risks and opportunities throughout the company. This might of course also affect companies’ internal decision-making processes – for the better.
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