IFC and its Partners Host Event on Bridging Sustainability Disclosure Standards in EMDEs

The International Finance Corporation (IFC), through its Beyond the Balance Sheet sustainability reporting program, hosted the event “Enhancing ESG Reporting: Bridging Sustainability Disclosure Standards in Emerging Markets.”

In collaboration with IFC's Integrated ESG Advisory Program, and in partnership with the Swiss State Secretariat for Economic Affairs (SECO), the IFRS Foundation’s International Sustainability Standards Board (ISSB), EFRAG, the Global Reporting Initiative (GRI), and the UN Sustainable Stock Exchanges Initiative (UN SSE), this event gathered around 700 representatives from standard-setters, regulators, industry leaders and practitioners to discuss the implementation, latest developments, and interoperability of key sustainability disclosure standards.

The webinar also showcased the results of a benchmarking assessment “Elevating the Environmental, Social and Governance Reporting in Emerging Markets” conducted by Mott MacDonald, comparing the IFC’s Disclosure and Transparency Framework with the ISSB, ESRS, and GRI reporting standards.

The event featured insights from notable speakers, including Mardi McBrien, Chief of Strategic Affairs & Capacity Building, IFRS Foundation, Saskia Slomp, CEO of EFRAG, Bastian Buck, Chief Standards Officer, Global Reporting Initiative, Anthony Miller, Chief Coordinator, UN Sustainable Stock Exchanges Initiative, Karen Dinucci, Technical Director, Environment and Sustainability, Mott MacDonald and Katrin Ochsenbein, Deputy Head of Cooperation, Embassy of Switzerland in Serbia.

The recording of the discussion is available HERE.

The presentation can be downloaded HERE.

Download the IFC research “Elevating the Environmental, Social and Governance Reporting in Emerging Markets”

The key themes discussed in the session include the rapid pace of adoption of the new standards, the focus on interoperability and alignment between the standard setters, and the emphasis on implementation support and capacity building for companies, especially SMEs and those in emerging markets.

Recent Developments in ISSB Standards

• 35 jurisdictions have decided to use or are taking steps to introduce ISSB standards, covering about 60% of GDP and 40% of global market cap. 
• The ISSB does not prescribe how regulators should implement the IFRS Sustainability Disclosure Standards. This is up to the individual jurisdictions. The ISSB sets the global standards, but the enforcement mechanisms are determined by the individual regulators adopting the standards.
• However, the ISSB has published a Regulatory Implementation Guide that outlines potential transition relief options, such as phasing in requirements or allowing a scope-limited approach in the initial years. The goal is to support regulators in bringing the standards into their markets in a way that works for their context.
• The ISSB jurisdictional adoption program supports regulatory bodies around the world, with ongoing training sessions and workshops.
• The IFRS Sustainability Disclosure Standards are primarily designed for large, listed companies as the initial focus.
• The ISSB is focused on updating sector standards, research on biodiversity and human capital, and creating a global norm for transition plan disclosure.
• The ISSB has launched a capacity building program with over 50 partners to support the adoption of the IFRS Sustainability Disclosure Standards globally.
• This includes the IFRS Knowledge Hub, which provides webinars, guidance and other educational resources to help preparers and regulators implement the standards.

Access the ISSB Knowledge Hub HERE

Recent Developments in ESRS Standards

• The EU CSRD mandates the use of ESRS, covering environmental, social, and governance topics. 
• EFRAG has published the first set of sector-agnostic standards and a draft digital taxonomy. 
• EFRAG is also working on implementation guidance and sector-specific standards like for oil & gas and mining. 
• EFRAG has published a voluntary SME standard, which provides a basic model with 11 disclosures and a more comprehensive model with 20 disclosures. The goal is to replace the numerous questionnaires that SMEs often have to respond to from larger companies and banks. The SME standard will be translated into multiple languages and EFRAG is working on an SME ecosystem to provide support for its implementation. 
• Implementation support on the ESRSs is provided through Q&A platform and guidance on topics like value chain, data points, materiality assessment and transition plans. EFRAG is working on providing more educational materials and workshops. 
• EFRAG has an exposure draft ready for a non-EU standard, which focuses on impact materiality and double materiality. This standard is intended for companies outside the EU that need to report under the CSRD requirements. 
• ESRS standards published in the EU's Official Journal are available for translation into any language, without copyright restrictions. Companies or jurisdictions are free to translate and potentially amend the ESRs, but EFRAG recommends indicating any changes made for transparency. 
• EFRAG noted that the timing of future developments, like the omnibus directive, is uncertain and depends on the priorities set by the new European Commission.

Access the EFRAG Q&A Platform HERE

Recent Development in GRI Standards

• GRI has developed more than 30 topic standards, with updates in labor disclosures, climate change, and economic impact. 
• Sector standards are being developed for financial services, textiles, and apparel, with a focus on impact-focused standards. 
• GRI is working closely with regulators and other standard setters to support national and regional regulators in introducing impact reporting. 
• GRI emphasized the importance of sustainability reporting for SMEs and the role of GRI in providing guidance and training. GRI has successfully run programs in emerging markets to support SMEs in applying the GRI standards for sustainability reporting. GRI has developed guidance materials on how SMEs can approach sustainability reporting, recognizing that they may only apply portions of the standards based on requests from their value chain partners. 
• GRI is working on a project this year to provide specific guidance on the link between impacts, risks and opportunities, and how this relates to the materiality assessment. This is intended to strengthen the backbone of the global reporting system and the relationship between the different perspectives. 
• GRI works closely with other standard setters like IFRS and EFRAG to ensure alignment and interoperability, especially on topics like climate change and human capital disclosures. 
• GRI has two main facilities for professional certification and training - the GRI Academy and a network of over 100 certified training partners in 55 countries.

Access the GRI Resource Center HERE

UN Sustainable Stock Exchanges Initiative Capacity Building

• The UN SSE acknowledged the tremendous progress made in sustainability reporting and material climate disclosures over the last 10-15 years, moving from a plethora of frameworks to more codified standards. 
• The UN SSE's role is to leverage its global network to provide educational resources and support the adoption and active use of the evolving sustainability reporting standards by companies and markets. 
• The UN SSE works with various partners to provide training and education on sustainability standards. As a capacity building partner, the SSE has worked closely with IFRS, EFRAG, GRI, and others to provide training and education on sustainability reporting standards to its network of over 130 stock exchanges globally. 
• The SSE's focus is on helping the marketplace, including companies, understand and actively use the new disclosure standards, not just comply in a box-ticking manner. 
• There is a need for sustainability literacy among board members to understand and use sustainability reports effectively. The UN SSE is developing training materials for board members to enhance their understanding of sustainability standards.

Access the UN Sustainable Stock Exchanges Initiative Academy HERE

Interoperability and Challenges

The discussion highlighted the commitment of the standard setters to work together and provide support to improve the interoperability and implementation of sustainability reporting globally.

• Collaborative Approach: IFRS, EFRAG, and GRI - emphasized that they work closely together and have a collaborative approach. 
• Alignment Efforts: The standard setters are actively working to align their standards and promote interoperability to reduce reporting burden for companies. Examples include IFRS and GRI renewing their MOU to collaborate on areas like biodiversity, and EFRAG aligning definitions like financial materiality with IFRS. 
• Regulatory Integration: Regulators and stock exchanges are integrating the ISSB, ESRS and GRI standards into their reporting requirements, driving the need for interoperability. Companies are expected to report using a combination of these standards, so alignment is crucial. 
• Implementation Support: The standard setters are providing implementation guidance, training and resources to help companies, especially SMEs and those in emerging markets, navigate the different reporting requirements. Initiatives like the IFRS Knowledge Hub and EFRAG's SME standard are examples of this. 
• Remaining Challenges: While the standard setters are making efforts, some differences remain due to legislative contexts, scope, and focus areas of the individual standards. Coordinating these nuances and ensuring a streamlined reporting process for companies remains an ongoing challenge.

Presentation of IFC’s Benchmarking Research

Mott Macdonald introduced the benchmarking research conducted by IFC, comparing the IFC Disclosure and Transparency Framework with IFRS, ESRS, and GRI standards. 

1. Methodology: 

• The research involved a 3-stage process - strategic alignment review, high-level content review, and detailed content review.
• It compared the IFC Disclosure and Transparency framework against the IFRS, ESRS and GRI standards.
• The research team also conducted 16 interviews with standard setters, IFC framework users and stock exchanges. 

2. Benchmarking Results:

• The results were classified into strong, some, and weak levels of alignment between the IFC framework and the other standards. 
• Areas of strong alignment were found in certain aspects of governance, strategy, and risk/opportunity disclosures. 
• Some alignment was found in topics covered, but differences in prescriptiveness or scope. - Weak alignment was identified where the IFC framework only briefly mentioned a topic without providing detailed guidance. 

3. Key Findings: 

• The IFC framework showed strong strategic alignment with the purpose, scope and materiality approach of the IFRS, ESRS and GRI. 
• At the high-level, the IFC framework had varying degrees of alignment across the reporting pillars of governance, strategy, risks/opportunities and metrics/targets. 
• The detailed content review found further alignment between the IFC performance standards and the topic-specific disclosure requirements of the other frameworks. 
• It also highlighted opportunities to further enhance the alignment and interoperability of the IFC framework with IFRS, ESRs and GRI.

Download the IFC research “Elevating the Environmental, Social and Governance Reporting in Emerging Markets”

For more information, access the full video recording HERE