Greenbiz’s interview with Jean Rogers, founder of SASB and new global head of ESG at Blackstone, and Bob Eccles, SASB founding chair, a founder of the IIRC, and professor of management practice at Oxford, on the ISSB and the future of ESG reporting, is eye-opening for their seasoned insights on the meaning and anticipated impacts of the new International Sustainability Standards Board (ISSB) (which we reported on here) globally, and within the US specifically.
Most notably, Dr. Rogers does not believe global sustainability standards are (or will ever be) realistic, in part based on significant regulatory, cultural, and political differences across jurisdictions; rather, she is focused on potential opportunities for a conceptual framework or approach that can inform jurisdiction-specific standards.
Harrison (Green Biz): The formation of the ISSB has been widely celebrated in the green finance community. As the dust settles since the announcement earlier this month, do you see any misunderstandings of what it’s capable of solving?
Rogers: Global standards, like global trade, are a myth. Celebrating the creation of ISSB as a victory for a single unified global sustainability standard misses the true advantage of ISSB. The IASB has created the perfect structure for supporting global jurisdictions while allowing adaptation to specific market use cases. It operates essentially as a clearinghouse, establishing a principles-based framework which is then tailored, translated and adopted to varying degrees in different jurisdictions based on local conditions.
Even at that, the interviewees perceive the “success” of the ISSB to be subject to various impediments and concerns, including the importance of adhering to due process protocols in any standard-setting to engender trust; the fact that the ISSB is voluntary and lacks enforcement authority; the lack of harmonization of the ISSB with the EU, GRI, and many other reporting frameworks, which poses a risk of yet another set of standards/standard-setter among many, notwithstanding some internal consolidation; the absence of private company reporting; and consolidation implementation challenges.
Harrison (Green Biz): Going back to 2012, the first year after SASB’s launch; imagine you were afforded a view into 2021 to see the ISSB launch as it is now. Is there anything that would make you scratch your head with what you see? Something you see stand out as seriously promising? Causes for concern?
Rogers: SASB was developed as a U.S. standard focused on an arcane and specific definition of materiality. The SASB standards are not fit for purpose for use in global markets and are a nightmare for a regulator that would have to develop the capacity to enforce across 80 or so industries. It’s not possible, even for the SEC.
The learnings from SASB are important. Adopting standards before following due process that their own constitution requires is concerning right out of the gate. A conceptual framework shows respect for the constituents and the process of standards setting, and creates trust with those who may adopt the standards.
The second area of concern is the lack of harmonization with GRI and the EU, as the EU is a major IFRS jurisdiction. It’s just setting up a needless power struggle, and nothing will have been accomplished — just a different flavor of soup.
According to Rogers, the US in particular is deemed an unlikely adopter of any global ISSB standards (although the EU is also perceived as problematic based on its existing sustainability regulatory scheme and associated reporting):
I don’t see any tie-in of ISSB’s work into the U.S. market. The SEC’s comment letter template is an excellent view into what they are looking for on climate disclosure. They operate under a heavily regulated environment with a very specific definition of materiality and they are sensitive to regulatory capture. I doubt they will adopt ISSB’s global sustainability standards. They might "accept" it if global companies that list on U.S. exchanges provide the information, but they won’t require it of U.S. companies.
The Global Reporting Initiative (GRI) reportedly (page 38) is the most commonly used framework to meet the EU’s sustainability reporting standards (and is the most widely used standard globally (page 25)), which were developed by the European Financial Reporting Advisory Group in cooperation with the GRI. To date, the GRI has not been substantively engaged with the ISSB.
See “The measure of success: Five key things the IFRS Foundation’s International Sustainability Standards Board needs to have real impact” and additional information & resources on our Sustainability and Climate Risk & Disclosure pages.
This post first appeared in the weekly Society Alert!