EU, ISSB collaborate to minimise disclosure burden on firms

The European Union (EU) and the International Sustainability Standards Board (ISSB) have agreed on joint guidance on Thursday to minimise the burden on international companies that need to comply with two sets of disclosures for reporting the impact of climate change on their business, according to Reuters.

The ISSB has finalised standards for climate-related corporate disclosures at the request of the G20, that will be adopted by countries like Britain and Canada, but not the United States, which has its own rules.

The EU’s European Sustainability Reporting Standards (ESRS), which are already in effect, cover a broader range of issues, including social and governance aspects, compared to the ISSB standards.

The goal is to make the two sets of standards “interoperable” on climate issues, meaning that compliance with one set would require minimal additional work to comply with the other.

At a public meeting on Thursday, the EU’s advisory group on financial reporting approved the joint guidance on climate-related disclosures developed with the ISSB. The guidance ensures that whether a company starts with ESRS or ISSB standards, it can comply with the climate requirements of both sets of standards.

Under both sets of standards, companies will need to report carbon emissions and other factors if they consider them “material” enough for disclosure. The definitions of what is considered material are aligned in both sets of standards, ensuring a high degree of alignment of the climate-related disclosures.