B Lab’s response to the International Sustainability Standards Board (ISSB) Consultation
What is the International Sustainability Standards Board (ISSB)?
ISSB is part of the broader body of International Financial Reporting Standards (IFRS) and the Trustees of the IFRS Foundation announced the formation of the ISSB on 3 November 2021 at COP26 in Glasgow, following strong market demand for its establishment.
The ISSB is developing—in the public interest—standards that will result in a high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets and has set out four key objectives:
- to develop standards for a global baseline of sustainability disclosures;
- to meet the information needs of investors;
- to enable companies to provide comprehensive sustainability information to global capital markets and
- to facilitate interoperability with disclosures that are jurisdiction-specific and/or aimed at broader stakeholder groups.
While B Lab’s standards for B Corp certification are centered around performance and focus on a company’s impact on the people and the planet, we seek interoperability between IFRS S2 and our evolution of standards on climate-specific topics.
B Lab’s response to the ISSB Consultation
The ISSB published the Request for Information Consultation on Agenda Priorities on 4 May 2023 to seek stakeholders’ feedback on its priorities for its next two-year work plan on four potential projects:
- three research projects on sustainability-related risks and opportunities associated with:
- biodiversity, ecosystems, and ecosystem services;
- human capital; and
- human rights; and
- one research project on integration in reporting to explore how to integrate information in financial reporting beyond the requirements related to connected information in IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.
B Lab has responded to the International Sustainability Standards Board (ISSB)’s public Consultation on Agenda Priorities. We highly favor beginning new research and standard-setting projects, notably on nature and social matters, and we suggest the ISSB prioritizes the development of standards covering nature and social topics and expands its materiality approach to include information on environmental and social impacts.
Creating and releasing standards that encompass environmental, social, and governance aspects beyond just climate is crucial for driving a transition toward sustainability. B Corps are proof that a holistic approach to sustainability successfully guides companies in the right direction. And social aspects like human capital and rights are vital in this transition. Investors increasingly target positive social impact, considering justice, equity, diversity, and inclusion (JEDI) and avoiding harm to rights and social issues (1).
We urge ISSB to create joint standards for human rights and human capital, covering JEDI beyond gender. These topics are closely linked and should be addressed together.
There’s a strong relationship between sustainability-related impacts and financial performance, as consistently demonstrated by B Corps (2). All economic activity is permanently embedded within and dependent on environmental and social systems. Investors and financial institutions depend on the viability and stability of these systems for their sustained financial performance. This approach supports the paradigm shift from mitigating negative to generating positive impact.
We, therefore, recommend the ISSB to adjust its definition of materiality, expanding the scope of the criterion ‘the importance of the matter to investors’ to include impacts. Investors are increasingly aware (3) of the interdependence between sustainability risks and impacts, which is material for investment purposes beyond sustainability-related risks.
Furthermore, reducing negative and generating positive impacts can also give rise to opportunities. For example, an enterprise could gain a competitive edge and strengthen its future position relative to peers by managing its environmental impacts – for example, by being an early adopter of green production technology – or by inducing productivity and innovation in the workforce as a result of greater employee well-being (4).
Footnotes
