The International Integrated Reporting Council and the Sustainability Accounting Standards Board said Wednesday they intend to merge into a single organization to be called the Value Reporting Foundation by the middle of 2021.
The unified group will give investors and corporations a comprehensive corporate reporting framework across the enterprise with standards aimed at improving global sustainability performance. The two groups have worked together since 2014 as part of a group known as the Corporate Reporting Dialogue that was established by the IIRC.
They and other sustainability standard-setters have come under increasing pressure from financial regulators around the world to harmonize their sometimes conflicting sets of standards and frameworks for environmental, social and governance, or ESG, reporting. Five of them agreed in September to work on better aligning their standards (
As investment in ESG funds has grown in popularity in recent years among institutional investors, they have increasingly come to rely on such standards, but the confusion among the different standards has led to calls for more unity from investors and regulators, who worry that companies may be claiming adherence to the loosest standards as a way of “greenwashing” their environmental performance.
"Information is the lifeblood of good decision-making,” said Robert Steel, chair of the SASB Foundation board of directors, in a statement Wednesday. “Capital markets are hungry for information linked to enterprise value creation, but they cannot easily digest what comes from a fragmented reporting landscape. This merger is an important step toward businesses and investors communicating with clarity and ease about the issues that matter most to financial performance."
The Value Reporting Foundation will merge the SASB and IIRC into an international organization that will maintain the IIRC’s Integrated Reporting Framework, advocate for integrated thinking, and set sustainability disclosure standards.
"The framework and the SASB standards are complementary. Integrated reporting describes all relevant value creation topics and the approach to integrating them in corporate thought and reporting,” said AICPA president and CEO Barry Melancon, who also chairs the IIRC board. “SASB provides the precise definitions of the data that should be reported for these topics in each industry. Organizations globally already use both to communicate effectively with investors about how sustainability issues are connected to long-term enterprise value, with these endeavors ultimately benefiting other key stakeholders. Under the Value Reporting Foundation, we will link the concepts between the framework and SASB standards even further."
Another ESG standard-setter, the Global Reporting Initiative, welcomed the merger between the IIRC and SASB. The GRI, which was among the co-founders of the IIRC, said that consolidating efforts around informing investors about the financial impacts of sustainability issues on value creation helps simplify disclosures.
“We congratulate IIRC and SASB on their decision to join forces and their support of companies in producing relevant disclosures about sustainability-related value creation,” said GRI chairman Eric Hespenheide in a statement. “For a sustainable future, companies need to take responsibility for their impacts on the world. Sustainability reporting is the practice by which they disclose their significant economic, social and environmental impacts. This information is critical to inform decisions for a wide range of stakeholders, ranging from employees to policy makers and from customers to investors.”
The IIRC and SASB said their merger will advance the work of their groups, along with GRI and the two other ESG standard-setters, the Carbon Disclosure Project and the Climate Disclosure Standards Board, in the statement they issued in September of their intention to work together toward comprehensive corporate reporting. They predicted that the Value Reporting Foundation could eventually integrate some of the other entities, and the CDSB has already signaled its interest in entering into exploratory discussions in the months ahead.
Both SASB and the IIRC point to “strong synergy” that already exists between the IIRC’s Integrated Reporting Framework, which builds connections across financial, manufactured, human, social/relationship, intellectual and natural capital thinking and reporting, and SASB standards, which add comparability to non-financial data across companies within the same industry. The IR Framework and SASB standards will remain complementary tools, and the Value Reporting Foundation will facilitate the use of both of them together.
The foundation will form around the middle of next year and will be led by SASB’s current CEO, Janine Guillot. "Sustainability disclosure is at the top of the agenda for many, creating incredible momentum towards simplifying the corporate reporting landscape,” she said in a statement. By merging two organizations focused on enterprise value creation, we hope to clarify the field. We stand ready to engage with the efforts of the IFRS Foundation, IOSCO [the International Organization of Securities Commissions], [the European Financial Reporting Advisory Group] and others working toward global alignment on a corporate reporting system.”
IIRC CEO Charles Tilley will serve as a senior advisor to the Value Reporting Foundation and will sit on the VRF board and chair its Framework Committee. "This merger is a significant advancement towards building a comprehensive system of corporate reporting, as we work to ensure integrated reporting and sustainability disclosure have the same level of rigor as financial accounting and disclosure,” he said in a statement. “But reporting should never be for reporting's sake. Our focus is on ensuring businesses have effective governance over enterprise value creation factors and that investors are able to fulfil their role as stewards. We will continue to advance integrated thinking to achieve this.”
Tilley, who was formerly CEO of the London-based Chartered Institute of Management Accountants, will remain senior advisor at the VRF through 2021, partnering with Guillot on integrating SASB with the IIRC. The foundation will be headquartered in London and San Francisco, with staff located around the world.
Richard Sexton of the IIRC and Robert Steel of SASB will co-chair the foundation's board . Mary Schapiro, a former chair of the Securities and Exchange Commission, who has been on the board of SASB, and Helen Brand, chief executive of the Association of Chartered Certified Accountants, will serve as vice chairs of the VRF.
