Against the backdrop of a global pandemic and climate change challenges, the Sustainability Accounting Standards Board (SASB) and International Integrated Reporting Council (IIRC) last Wednesday announced their plan to merge into one organisation — the Value Reporting Foundation — to work towards a comprehensive reporting framework long demanded by investors and corporates.
“Capital markets are hungry for information linked to enterprise value creation, but they cannot easily digest what comes from a fragmented reporting landscape,” Robert K. Steel, chair of the SASB Foundation Board of Directors, said in a news release. “This merger is an important step towards businesses and investors communicating with clarity and ease about the issues that matter most to financial performance.”
The Value Reporting Foundation will maintain the IIRC’s integrated reporting (IR) framework and set sustainability disclosure standards for corporate value creation. The current IR framework connects corporate value creation activities across six areas or “capitals”: financial, manufactured, intellectual, human, social and relationship, and natural; while SASB standards enable nonfinancial data of companies in the same industry to be compared, a crucial feature for investors.
“The IR Framework and the SASB standards are complementary”, said Barry Melancon, CPA, CGMA, FCMA, chair of the IIRC Board and CEO of the Association of International Certified Professional Accountants. “Organisations globally already use both to communicate effectively with investors about how sustainability issues are connected to long-term enterprise value…under the Value Reporting Foundation, we will link the concepts between the IR Framework and SASB standards even further”.
When formed by the middle of 2021, the new organisation will be led by current SASB CEO Janine Guillot.
The merger advances the vision to simplify the current corporate and sustainability landscape put forth by global standard setters and framework providers in September. Other organisations could potentially join hands under the Value Reporting Foundation. The Climate Disclosure Standards Board has indicated interest to enter into such discussions in the coming months, according to an IIRC news release.
A single and coherent system of corporate disclosure could help corporates and investors make business decisions that considers environmental, social, and governance (ESG) impacts, which are increasingly holding greater sway in investment decisions.
Management accountants will play a key role in helping anticipate, report on, and mitigate their organisations’ ESG risks. The Association’s road map published last week outlines a direction for 2021 and relevant resources for accounting and finance professionals who provide sustainability reporting and assurance services.
— Alexis See Tho (Alexis.SeeTho@aicpa-cima.com) is an FM magazine associate editor.