PROMINENT organisations have expressed reservations about draft plans to internationalise sustainability metrics in the Sustainability Accounting Standards Board (SASB) Standards.

SASB is an American non-profit organisation created in 2011 to develop and disseminate SASB Standards. Primarily developed with American corporations in mind, SASB standards were grounded on underpinning those different industries that were exposed to different sustainability risks.

Formed in 2021 as an arm of accounting standards setter IFRS Foundation, the International Sustainability Standards Board (ISSB) develops a common global baseline of sustainability standards that would foster high-quality sustainability disclosures. To do so, ISSB plans to integrate previous frameworks by other sustainability disclosure organisations to become a uniform set of standards.

In 2022, it was announced that SASB will merge with ISSB. The merger delivers on the commitment by IFRS Foundation to be a unified voice in the sustainability disclosure landscape. In August 2023, ISSB completed a public consultation on an exposure draft that details a methodology to amend SASB Standards metrics. By doing so, ISSB hopes to promote international adoption of these metrics.

ISSB received more than 140 comment letters from six continents. Publicly available responses from major accounting bodies include those from the Accounting and Corporate Regulatory Authority (Acra), Australian Accounting Standards Board (AASB), Deloitte and PricewaterhouseCoopers (PwC). Entities such as the European Securities and Markets Authority (ESMA), Institute of Chartered Accountants of England and Wales (ICAEW) and UK’s Financial Reporting Council (FRC) also provided responses.

The respondents generally view the Exposure Draft as a positive first step. However, comments raised suggest that the Exposure Draft alone is not a panacea to harmonise varying sustainability metrics.

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Approach to revision

In brief, the ISSB adopts the “replace, remove and recreate” approach in the revision process – replace metrics that are inappropriate, remove metrics that serve little use, and create metrics that are needed.

According to the Exposure Draft, 20 per cent of the approximately one thousand metrics in the current SASB Standards were earmarked for amendment. According to AASB, no clear explanation was given for criteria used or the process undertaken to identify these metrics.

Echoing the need for greater transparency, FRC highlighted that the approach to revision is flawed. According to FRC, the rationale of each revised metric is needed to be fully understood.

Moreover, ICAEW suggested that ISSB should lay out a vision for architecture of its Sustainability Disclosure Standards. Consistent with this, ESMA called for principle-based disclosure.

Highlighting that SASB Standards are currently a patchwork of individual sector-specific standards, PwC pointed out that ISSB should instead identify broadly applicable disclosure topics and metrics in thematic standards.

Internationalisation approach

Respondents expressed reservations about the proposed approach to internationalisation. Developed for the US market, SASB Standards adopted American jurisdictional terms and industrial classifications that do not necessarily suit global markets.

Lending broad support to the revision process of SASB standards that aligns with international standards, many respondents such as FRC called for research across a wide selection of markets to understand jurisdiction-specificity of sustainability related matters. Deloitte further added that full consideration should be given to topics considered a priority in developing countries.

Respondents also called standard setters to balance costs and benefits of revision. Deloitte, for instance, drew attention to the additional cost of having to provide an internationalised metric stipulated by ISSB in addition to an existing metric mandated by the countries they operate in.

Due process

The ratification of the ISSB Sustainability Disclosure Standard needs to go through a proper due process. Starting with an exposure draft, the standard must be approved by the ISSB Board before taking effect.

Articulating the need to follow due process here, respondents generally felt that circumventing those steps would hamper internationalisation. Acra emphasised that preparers face the challenge of implementing new procedures or systems to collect data required for new metrics.

Sustainability Standards Board of Japan (SSBJ) highlighted unease over introducing new sustainability metrics at this stage. In SSBJ’s view, metrics should follow due process and be discussed in future projects within IFRS Sustainability Disclosure Standards.

ICAEW added that if SASB Standards were to be made mandatory in the future, the standards should be properly exposed for stakeholder comment at that stage.

Sustainability disclosure has come a long way globally since the formation of ISSB. However, more work is required to revise and internationalise SASB Standards.

On balance, the comments indicate receptiveness as well as concern regarding the Exposure Draft, suggesting that there will be challenging hurdles to clear before ratification and implementation.

Jian Ming is an associate professor and Rony Lim is a lecturer at Nanyang Technological University’s Nanyang Business School