If there is one area of agreement amongst all stakeholders who responded to the ISSB and EFRAG consultations is that they do not want to see emerge a fragmented sustainability reporting landscape, the feeling is potentially shared at both standard setters, yet their respective solutions do not gather unanimous support.
From its inception, the ISSB has argued in favour of a building blocks approach to ensure global alignment of sustainability reporting standards. The approach is for the ISSB standards to cover the most essential areas of sustainability reporting which will serve as a global baseline from which other standards and regulations can build on for their jurisdictions.
This strategic choice by the ISSB is endorsed by most of the investment community but criticised by the proponent of double materiality, who believe ISSB standards to be so fundamentally different in their philosophy to double materiality standards, such as the EU's proposed ones, that the two can't coexist.
But beyond the double vs single materiality debate, some have highlighted limitation in the ISSB's building blocks approach which could undermine its ability to serve as a global baseline.
This issue arose in the responses received by the ISSB on its exposure drafts IFRS S1 (728 responses).
Corporate Disclosures has analysed a sample of comment letters from accounting bodies, standard setters and NGOs and found that, overall, the IFRS sustainability standards are well placed to serve as a global baseline for sustainability reporting.
For example, investment manager Vanguard said they "support that this approach preserves different jurisdictional contexts in implementation, such as Corporate Sustainability Reporting Directive (CSRD), in Europe which requires a multi-stakeholder focus on materiality".
The Accounting Standards Committee of Germany was also positive about the strategy: "We strongly support ISSB's mission to create a global baseline and are committed to ISSB's building blocks approach".
A response which confirms previous reports by Corporate Disclosures that some Europeans would have preferred to see the EU adopt ISSB's standards.
Professional accounting bodies from Rwanda, South Africa, Uganda and The Cayman Islands also said that they welcomed the building-blocks approach and that the ISSB was the most suitable organisation for achieving a global baseline of standards.
This endorsement of the building blocks approach was shared by a wide range of organisations, including the Chartered Institute of Public Finance & Accountancy, Canadian Public Accountability Board, Pan-African Federation of Accountants and Brazilian Institute of Corporate Governance.
However, some respondents said they would like to see improvements in definitions, scope, cooperation with other initiatives and of course, inclusion of double materiality, in the building block approach, to ensure the ISSB's standards serve as a global baseline.
For some the building block approach may result in a reporting burden for companies, for example, the Institute of Chartered Accountants of Pakistan (ICAP) said: "We have concerns that the extent of detailed information required under the IFRS Sustainability Disclosure Standards would be a challenge for many entities. This could adversely affect in making the standards as global baseline."
The volume and detail of the standards being too high to act as a global baseline was a concern shared by other respondents such as the UK Financial Reporting Council, Accounting Standards Board Canada, Institute of Charted Accountants Ghana and the Institute of Singapore Chartered Accountants which said that ISSB should give "due consideration" to the current state of sustainability reporting.
Australian Institute of Company Directors (AICD) said: "It would be counter-productive for individual jurisdictions to adopt their own bespoke regulatory approaches." It warned that different regulatory regimes would reduce the consistency and comparability of sustainability reporting.
The Association of International Certified Professional Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA) shared this concern warning that "it may promote siloed sustainability thinking".
Similarly, the Malaysian Accounting Standards Board said: "Although we support the global baseline and building blocks approach which facilitates the addition of jurisdiction-specific requirements or requirements aimed to meet broader stakeholder information needs, we are unsure of the extent of the latitude provided."
A necessity for the ISSB to define baseline and to clarify key terms so that it can serve as an effective foundational layer was also expressed in comment letters, including those from the Japanese Institute of Certified Public Accountants and Accounting for Sustainability and the French standards setter (Autorité des Normes Comptables). The latter commented: "A clear definition of what a baseline can be is of paramount importance."
A number of respondents, while supportive of the ISSB, urged it to consider the inclusion of double materiality in its standards setting process going forward. The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) said it agreed "on the need for a global baseline for sustainability reporting, to which jurisdictions can add additional requirements to satisfy their policy objectives".
But added: "Going forward it will be important for the global baseline focused on value to business to be extended to cover the impact of business on the economy, society, and the environment. Further extensions to account for the needs of SMEs will also be necessary. Interoperability with other major reporting standards is fundamental."
A call echoed by Finance Watch, who said: "We urge the ISSB to embed the double materiality principle in the global baseline standards acknowledging the importance of disclosures on impacts that businesses have on people and the environment. They are of particular relevance for the growing number of investors. They are also needed to properly evaluate and design climate targets and transition plans."
Unsurprisingly, the vast majority of respondents called for greater collaboration between the ISSB and other sustainability standard setting initiatives and praised the establishment the ISSB's jurisdictional working group to oversee the compatibility of jurisdictional reporting standards with the global baseline.
The so-called big four accountancy firms – Deloitte, EY, KPMG, PwC - noted the need for a minimal overall and inconsistencies between the global baseline of standards and additional jurisdictional requirements.