Much-anticipated global sustainability disclosure standards for companies to help investors understand the connection between value creation and sustainability will first focus on climate, the International Sustainability Standards Board said Tuesday in a news release.
A second standard, for general sustainability-related disclosures, will follow and both will be issued toward the end of the second quarter, the ISSB said.
The decision to lead with climate is part of what the standard-setting organization calls transitional relief to allow companies to phase in their approaches to the new disclosure demands aimed at establishing a global baseline.
Emmanuel Faber, ISSB chairman, said in the release that such a baseline "is being welcomed by companies urgently looking for tools to meet the information needs of their investors." Companies already disclosing information beyond climate are expected to continue doing so, Mr. Faber said in the release.
The new rules are based on a framework developed by the Task Force on Climate-related Financial Disclosures for assessing and reporting on the financial risks of climate change within portfolios. The general one, or S1, will describe sustainability as a company's ability to sustainably maintain resources and relationships, and manage its dependencies and impacts within its whole business ecosystem over the short, medium and long term.
Starting with the climate-related standard, or S2, the standards will help companies meet investor demands for decision-useful information on climate-related risks and opportunities in the first year of reporting under the ISSB standards, once finalized.
Full reporting under both standards will be expected in the second year.
Companies following the climate standards the first year will also not have to provide Scope 3 greenhouse gas emissions or use the Greenhouse Gas Protocol to measure emissions if they use a different approach. They will also not have to provide comparative information about general sustainability-related risks and opportunities beyond climate in their second year of reporting.
Both S1 and S2 will be issued toward the end of the second quarter, following extensive market feedback to inform their development, the release said. In May, the ISSB expects to consult on its future priorities for standard setting and seek feedback on four potential projects: biodiversity, human capital, human rights and integration in reporting.
Development of the ISSB standards is being overseen by the IFRS Foundation, whose accounting standards are required in 140 jurisdictions around the world.
