Since the IFRS S1 and S2 standards were finalized last summer, we’ve seen a lot of predictions that the standards will become the global norm. Many see this as a global baseline that would improve standardization and ease global reporting burdens. However, proponents of double materiality argue that the IFRS standards do not go far enough. Despite this debate, the IFRS appears to be gaining widespread global adoption. A recent press release from the IFRS reports that over half of the global economy by GDP is now taking steps towards IFRS implementation, stating:
“A growing number of jurisdictions are moving ahead with or considering measures to ensure global comparability in companies’ climate and other sustainability-related disclosures by relying on the global baseline established by the ISSB Standards. More than 20 jurisdictions have already decided to use or are taking steps to introduce ISSB Standards in their legal or regulatory frameworks. Together, these jurisdictions account for:
- nearly 55% of global GDP;
- more than 40% of global market capitalisation; and
- more than half of global greenhouse gas emissions.”
This widespread adoption of IFRS standards makes the long-sought-after standardization of sustainability disclosure feel within reach. Even so, two major jurisdictions remain standouts – the US and the EU. In the US, the SEC’s Climate-related Disclosure Rules were built independent of the IFRS standards, though both use the same financial materiality approach (although California’s state-specific disclosure laws require companies to use IFRS-aligned frameworks). In the EU the Corporate Sustainability Reporting Directive (CSRD) goes above and beyond what is required under the IFRS standards. However, since the CSRD overlaps with the IFRS standards, the IFRS considers the jurisdiction IFRS aligned. Outside of the US and Europe, the IFRS is becoming the leading disclosure framework this means that most jurisdictions requiring sustainability disclosures will have some level of standardization. In fact, other voluntary disclosure regimes are aligning with IFRS including the recent CDP announcement that their new disclosure platform will be based in the IFRS S2 standard. It appears that both governments and private industry are coalescing around the IFRS.
Our members can learn more about the IFRS here.
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