How’s the cooperation between #EFRAG and #ISSB going?
I stumbled across this report by Accountancy Europe from 2021 again. Two and a half years later, it is more relevant than ever. (https://lnkd.in/d4uwg9tb)
The report states: "EFRAG and the IFRS Foundation should coordinate and collaborate as early as possible to develop consistent [#sustainabilityreporting] standards."
The graph below shows how the governance of this coordination could have looked like. But it never took place.
❗ This leaves EU firms with the unfavorable situation of having two, not one, sustainability reporting standards (and #materiality interpretations!) to comply with, the ESRS (#doublemateriality) and the IFRS S1 and S2 (single materiality).
Instead of common standard development, today there is only rather superficial talk about "interoperability". (see f.e.: https://lnkd.in/d_RsY6Bx)
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Some background:
In 2002, the European Commission adopted the IFRS standards for financial reporting/accounting for all EU companies. EFRAG is the central advisory body to the EU Commission on all aspects of financial reporting.
In 2021, EFRAG bodies started developing the ESRS. At about the same time as the IFRS Foundation founded the ISSB to develop the S1 and S2 sustainability disclosure standards.
As EFRAG and IFRS are in constant dialogue anyway, I wonder why their sustainability reporting standards were not developed in collaboration.
This could have prevented or at least mitigated some of the problems the EU faces today:
1️⃣ The unresolved fundamental debate about single and double materiality,
2️⃣ the lack of integration of financial and non-financial reporting, and, closely related to this
3️⃣ the non-existence of accounting (rather than just reporting) standards for sustainability information (what reduces the usefulness of sustainability information).
❗ This post only scratches the surface. And I am by no means an expert on the subject. I would therefore welcome more nuanced comments from people who have a deeper understanding of affairs.
Research and Insights | Circular Economy | Food Systems Transformation | Sustainability
4moThank you for sharing this important update, Dr. Fong. Curious to know how the concept of the circular economy will be integrated into the updated Scope 3 Standard. In the current Standard, we’ve noticed a lack of guidance on circular economy activities beyond recycling across the Protocol.