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IESBA floats stricter ESG reporting standards for review

January 30, 2024

The creation of an effective sustainability standards infrastructure requires not only high-quality sustainability reporting and assurance standards, but also a global baseline of ethics (including independence) standards to ensure the integrity and objectivity of sustainability information.

The International Ethics Standards Board for Accountants (IESBA) has today (January 29) announced the launch of a public consultation on new ethical standards for sustainability reporting.

These proposed standards aim to address the growing concern of greenwashing and enhance the quality of reported sustainability information.

With the increasing importance of sustainability information to multiple stakeholders, including investors, consumers, companies, and governments, there is a pressing need for a global baseline of ethics standards. Such standards ensure the integrity and objectivity of sustainability reporting, fostering trust and transparency among users of sustainability disclosures.

“Ethics is about acceptable behaviours and right decisions to avoid bias in sustainability information and foster trust,” says Gabriela Figueiredo Dias, Chair of the IESBA.

“From investors looking for transparent and credible information, to consumers wanting to ensure the reliability of companies’ narratives about the sustainable credentials of their products and practices, and companies wanting to be trusted, all users of sustainability disclosures have a vested interest in ensuring ethical choices by the preparers and assurers of such information. These proposed standards will serve as a cornerstone of ethical behaviour with far-reaching benefits.”

The proposed
The IESBA has released two exposure drafts as part of its proposed ethical standards for sustainability reporting and assurance.

1. International Ethics Standards for Sustainability Assurance (IESSA)
The exposure draft for IESSA outlines a framework of expected behaviours and ethics provisions for sustainability assurance practitioners and professional accountants involved in sustainability reporting. This framework sets the stage for practitioners to uphold high ethical standards while conducting sustainability assurance engagements.

2. Using the Work of an External Expert
The second exposure draft focuses on the framework to be applied by professional accountants or sustainability assurance practitioners when evaluating the competence, capabilities, and objectivity of external experts. This evaluation is crucial when utilizing the work of external experts in sustainability reporting processes.

In line with the release of the exposure drafts, the IESBA has initiated a public consultation process to gather feedback and insights from various stakeholders. This consultation period provides an opportunity for interested parties to contribute their perspectives and shape the final version of the ethical standards.

The consultation period for the “Using the Work of an External Expert” proposal is open until April 30, while the sustainability standard proposal welcomes feedback until May 10. Interested individuals and organisations can access the exposure drafts and participate in the consultation process through the IESBA’s official website.

To coincide with the launch of the public consultation, the International Accreditation Forum (IAF) has announced its intention to stipulate to national accreditation bodies around the world that the IESBA’s proposed IESSA are to be used when accrediting and authorizing conformity assessment bodies to carry out assurance work on corporate sustainability disclosures1.

The release of these proposed ethical standards by the IESBA aligns with the global shift towards sustainability reporting and the emergence of various regulatory requirements and sustainability disclosure standards. Some notable developments include:

EU’s CSRD Rules: The European Union’s Corporate Sustainability Reporting Directive (CSRD) rules aim to enhance and standardize sustainability reporting for companies operating within the EU.

U.S. SEC’s Climate Disclosure Rules: The U.S. Securities and Exchange Commission (SEC) is developing climate disclosure rules to address the need for more comprehensive reporting of climate-related risks and opportunities.

IFRS Climate and Sustainability Reporting Standards: The International Sustainability Standards Board (ISSB) recently launched the International Financial Reporting Standards (IFRS) for climate and sustainability reporting, further emphasizing the importance of high-quality reporting in these areas.

The IESBA’s proposed standards complement these regulatory developments, ensuring that ethical considerations are an integral part of sustainability reporting and assurance processes.

Coordinated efforts
To strengthen the global sustainability standards infrastructure, the IESBA worked in coordination with the International Auditing and Assurance Standards Board (IAASB) during the development of these proposed ethical standards.

“IESBA’s Exposure Draft reflects the increasing demand for greater ethics and independence in corporate sustainability reporting. As the inaugural Chair of the Stakeholder Advisory Council, I view the proposed standards as critical to enhancing the integrity and credibility of sustainability information,” says Alan Johnson, Chair of the IESBA and IAASB Stakeholder Advisory Council (SAC).

“These standards are a significant step towards ensuring that sustainability disclosures are ethically grounded and universally trusted while also enabling businesses around the world to provide full transparency of progress towards achieving sustainability goals and objectives.”

This collaboration highlights the recognition of the interdependence between high-quality sustainability reporting and assurance standards and a robust foundation of ethics, including independence standards.

[Accounting Age]

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