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accountants and bookkeepers

What is the International Sustainability Standards Board (ISSB)

As the world’s focus increasingly shifts to sustainability, organisations are paying more attention to reporting their environmental efforts to stakeholders and government agencies. 

With the rise in interest in sustainability reporting, the International Sustainability Standards Board (ISSB) was created in 2021 at the UN Climate Change Conference (COP26). Delivering global standards for sustainability disclosures, the ISSB hopes to standardise the way businesses report their efforts and commitment to green practices. 

In this explainer, we explore the ISSB, its objectives, significance, and why Australian accountants and bookkeepers should be interested. 

What is the ISSB?

The ISSB is a global organisation that was created at COP26 in Glasgow on November 3, 2021, in response to the demand for sustainability reporting globalised standards. Now, the ISSB helps governments and businesses develop high-quality sustainability reports that meet globally accepted standards.

The ISSB acknowledges the significance of using sustainability information to make financial decisions. By incorporating sustainability disclosures into financial reports, investors and stakeholders can better understand a company's performance and risks. 

Accounting professionals play a crucial role in guaranteeing the accuracy, dependability and adherence to the ISSB's sustainability standards for these disclosures. As an accountant in Australia, it is essential to understand global standards that are created by the ISSB (IFRS S1 and IFRS S2) to help your clients meet their sustainability requirements. 

Why does the ISSB exist?

As sustainability became a key factor in investment decision-making, the financial industry needed to adapt accordingly - and thus, the ISSB was born. Once the standards created by the ISSB are widely adapted, investors and governments will have globally comparable data on the risks associated with poor sustainability and opportunities for growth.

This demand isn't just a passing trend; it reflects market participants' strong call for consistency and reliability in sustainability reporting.

Before the ISSB, there were varying voluntary sustainability standards and guidelines from global initiatives used by businesses to report their environmental, social, and governance (ESG) performance. These include the Global Reporting Initiative (GRI), the Task Force on Climate-related Financial Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB), among others. 

The ISSB addresses this fragmentation by setting one global standard for businesses and organisations.

Global Support for ISSB

The ISSB has already seen global support, backed by the G7, G20, the International Organisation of Securities Commissions (IOSCO), and the Financial Stability Board. Central bank governors are also showing support for the organisation, including in the UK, Australia, Canada, China, Japan, New Zealand, and Singapore. 

Global support for the ISSB highlights the need for unified global standards when reporting on sustainability efforts and objectives.

ISSB's Objectives

The ISSB’s objectives go beyond setting globalised sustainability reporting standards. Let’s take a closer look at the organisation’s core objectives: 

  • The primary aim of the ISSB is to establish comprehensive global sustainability standards. These standards offer a consistent and standardised framework for organisations to report their environmental, social and governance (ESG) performance and impacts.

  • The ISSB also addresses the fragmentation in sustainability reporting. The existence of multiple reporting frameworks and standards has previously caused complexity and inconsistency for companies and investors. The ISSB streamlines these standards in order to reduce complexity, minimise costs and enhance the credibility of ESG reporting.

  • The ISSB also aims to enhance transparency and disclosure in sustainability reporting. It promotes greater consistency in the types of ESG information reported and ensures that disclosures are relevant, reliable and useful for stakeholders.

  • By recognising the significance of sustainability in making financial decisions, the ISSB integrates sustainability reporting with financial reporting. This alignment will give investors a comprehensive understanding of a company's overall performance and risks.

  • One of the key focuses of the ISSB is to support climate-related reporting due to the pressing issue of climate change. The organisation aligns its work with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

Efficiency and Value in Decision-Making

The ISSB is dedicated to developing cost-effective standards that provide useful information for decision-making in the market. These standards are designed to help companies report efficiently while offering information that supports investors in making informed decisions. 

Also, ISSB standards allow companies to avoid duplicative reporting when local requirements align with global benchmarks.

How Does ISSB Benefit Accountants?

Australian accountants are crucial in guiding businesses through complex financial reporting landscapes. The ISSB presents several ways in which it can empower these professionals:

Clarity and Consistency

ISSB standards offer a clear and consistent framework for sustainability reporting. This clarity simplifies the process of gathering and analysing sustainability data, making it easier for accountants to integrate this information into their client’s financial statements.

Improved Decision-Making

By following the guidelines set by ISSB, accountants can provide their clients with comprehensive sustainability information. This allows for more informed decision-making as companies can better assess risks and opportunities related to their sustainability efforts.

Global Recognition

The international recognition of ISSB standards help Australian businesses compete globally. Accountants who understand and implement these standards can assist their clients in attracting international investments from stakeholders. 

How QuickBooks Can Help

If you’re ready to offer ISSB guidance to your accounting clients, QuickBooks can help. By allowing you to collect financial data relevant to energy expenses, waste management, and investments in sustainable practices, QuickBooks can help keep that financial data in one place. 

Sign up for QuickBooks Online Accountant today and improve your accounting services for your business clients.

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