New guidance available for ISSB-ESRS sustainability standards interoperability

New sustainability standards interoperability guidance has been published by the IFRS Foundation and EFRAG to help Chief Sustainability Officers navigate the alignment between ISSB standards and the European Sustainability Reporting Standards (ESRS).

As the number and granularity of sustainability disclosure standards increase, Chief Sustainability Officers and their teams are finding the reporting exercise more complex. To reduce this complexity, regulators and standard-setters have been working to make their standards interoperable.

That’s the case of the European Financial Reporting Advisory Group (EFRAG) – which is behind the ESRS standards to be used under the Corporate Sustainability Reporting Directive (CSRD) – and the International Sustainability Standards Board (ISSB), which created the IFRS S1 and S2 climate disclosure standards.

ISSB-ESRS alignment on climate-related disclosures

The guidance now made available to companies provides CSOs and other sustainability professionals with details on how to apply both sets of standards together, and the specific aspects that are aligned – namely the definition of financial materiality, climate-related disclosures and presentation.

“The release of this guidance is a milestone for progressing interoperability and quality of sustainability-related data,” said EFRAG Sustainability Reporting Technical Expert Group Chair Chiara Del Prete. “ESRS preparers are able to report on climate, also in compliance with ISSB Standards, only with a very limited number of points to consider, clearly identified in Section 3 of this document. 

“This document also explains that ESRS preparers are able to utilise ESRS to comply with ISSB Standards to report on matters beyond climate. This guidance reflects our commitment to avoid duplicative reporting and support preparers and other stakeholders in their implementation challenges. Now, our next step is digital interoperability.”

Other standards seeking ESRS interoperability

In addition to the ISSB, other sustainability disclosure frameworks are also seeking alignment with the ESRS, since Europe’s CSRD is fast becoming the gold standard of sustainability reporting.

A high degree of interoperability had already been achieved last August with the standards of the Global Reporting Initiative (GRI), which helped EFRAG develop the ESRS: an interoperability index is available to help CSOs navigate this alignment. 

Carbon disclosure project CDP also announced in November that it would start working with EFRAG to align its disclosure system with the ESRS. 

Commenting on the ISSB-ESRS guidance, Mairead McGuinness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, said: “Climate change is a global challenge. I welcome today’s guidance that recognises the Commission’s sensible approach to sustainability reporting, and a commitment to ensuring a very high degree of alignment between EU and international sustainability reporting standards. It is important that reporting  frameworks in different jurisdictions are interoperable with each other to reduce the reporting burden for EU companies.”

Read also: How to navigate the changing world of sustainability standards