The Sustainability Accounting Standards Board and the International Integrated Reporting Council finalized their merger Wednesday to form the Value Reporting Foundation and unite their environmental, social and governance reporting frameworks.
They plan to continue to develop tools to help organizations with ESG reporting and bring together staff across four continents. They also intend to work with the International Financial Reporting Standards Foundation as it prepares to launch an International Sustainability Standards Board as part of a technical working group.
SASB and the IIRC announced their merger last November after committing in September to working with other ESG standard-setters like the Global Reporting Initiative, the Climate Disclosure Standards Board and the Carbon Disclosure Project to harmonize their different standards and frameworks (
“It’s important to note that SASB standards and the integrated reporting framework are already complementary tools,” said Value Reporting Foundation CEO Janine Guillot, who was formerly CEO of SASB, during a press conference Wednesday. “Many companies already use them together. And the reason they’re complementary is because the integrated reporting framework provides principles-based guidance for how a report should be structured and what kind of content it should include, and then the SASB standards provide more detail. They provide the industry-specific topics and metrics for use in an integrated report. So there’s already very close alignment between the IR framework and the SASB standards. The IR framework uses a concept called ‘six capitals.’ The SASB standards use a concept called ‘five sustainability dimensions.’ Those things are very similar, but what we want to do is fully harmonize those over time to make it very easy for companies and businesses to use both the SASB standards and the IR framework together.”
SASB and the IIRC have worked together in the past with other standard-setters as part of a group called the Corporate Reporting Dialogue, but now they will operate in a unified way. “This is an idea that instantly made good logic and good sense to both of the organizations, and we joined this, recognizing that together we could accomplish more of our shared ambitions together than we might have if we continued to operate independently,” said Value Reporting Foundation co-chair Bob Steel. “People put their egos in their back pockets, and we really focused on coming together in order to accomplish a mission that we believe is much bigger and better than either of us could have achieved on our own, and we’ve done that with a really wonderful spirit.”
As ESG investment funds grow in popularity and climate change risks become more apparent across the globe, the various sustainability groups have come under pressure from international financial regulators to align their standards more closely. The Securities and Exchange Commission has expressed interest under the Biden administration in requiring companies to do more disclosure of climate risks using common reporting standards. But the competing standards can be confusing to investors and enable companies to pick and choose which ones to abide by to promote themselves as responsible stewards of the environment. The IFRS Foundation’s proposal to create an International Sustainability Standards Board, which it would oversee alongside the International Accounting Standards Board, is an attempt to address this problem. The G-7 finance ministers endorsed the creation of the ISSB in a statement last Friday, saying, “We encourage further consultation on a final proposal leading to the establishment of an International Sustainability Standards Board ahead of COP26,” referring to an upcoming United Nations climate conference. The new Value Reporting Foundation plans to play a role in the future ISSB.
“For far too long, stakeholders have been saying that traditional financial reporting, while it’s important, is just not meeting their needs on its own,” said Value Reporting Foundation co-chair Richard Sexton. “There have been many organizations and initiatives. It does sometimes feel like alphabet spaghetti, but they are very important. And three in particular that Janine touched on: the creation of the ISSB, the International Sustainability Standards Board, under the auspices of the IFRS Foundation, is absolutely critical, as is the issuance of directives by the EU driving implementation within the EU and acting as a beacon more broadly, but equally important is that the SEC is now thoroughly engaged in consultations. All of these are very positive indeed, but now we need to move to focus on implementation. The integrated reporting framework, integrated thinking and the SASB standards are all very well established and widely implemented and, importantly, complementary ways of addressing some of the challenges. We are very confident that by bringing them together into a single global organization, we contribute to clarity and simplicity as well as that continuing momentum that’s needed to transform the entire system.”
The new group received a number of statements of support. “Both the IIRC and SASB are celebrating their 10-year anniversaries,” said Charles Tilley, CEO of the IIRC until the completion of the merger, and who is now board director and senior advisor to the Value Reporting Foundation. “Over those 10 years we both built solid support, changing the way countless businesses and investors think about how value is created, preserved or eroded over time. Together, as the Value Reporting Foundation we can go further and faster, working with our partners toward a globally agreed system that supports much-needed sustainable development around the world.”
Former New York City mayor Michael Bloomberg, founder of Bloomberg LP, is a prominent backer of SASB and now chair emeritus of the Value Reporting Foundation. “We’re seeing a lot of great progress on sustainability disclosure and integrated reporting, especially when it comes to the risks and opportunities around climate change,” Bloomberg said in a statement. “This merger is another important step forward toward a stronger, more resilient economy — and a brighter, safer future.”
"We are virtually at the door of having a globally accepted comprehensive corporate reporting system,” said Mervyn King, chair emeritus of the Value Reporting Foundation and a former chair of the IIRC, in a statement. “I am excited and confident that the endeavors of the Value Reporting Foundation will take us closer to the opening of that door to what I call the end game.”
