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Posted by Charles Cho, Liz Demers, Begoña Giner and Riccardo Stacchezzini, on behalf of the EAA Stakeholder Reporting Committee (EAA SRC).
The IFRS Foundation issued a Consultation Paper on Sustainability Reporting, at the end of September. This document has attracted much attention not only in academia but from a wider range of stakeholders. In particular, we highlight the workshop organized by the EAA on November 27, 2020, where Trustee representatives of the Foundation and accounting academics had the opportunity to discuss and debate about the Consultation Paper. On December 24, 2020 the EAA Stakeholder Reporting Committee sent a response letter outlining its position in relation to the issues raised therein. The letter can be accessed here is also attached to this blog.
Our response makes clear that there is a strong and urgent need for a common and global language on sustainability, integrated and/or non-financial reporting (hereafter, “SR/NFR”): i) to facilitate and guide preparers’ provision of this now much requested information, while avoiding “cherry-picking” (i.e., presenting information related to only those activities on which the firm performs well) or “green-washing”; ii) to enable investors and other stakeholders to make informed decisions, where the latter implies, amongst other things, having access to reliable information that is comparable across entities; and iii) to make assurance practices more effective, as a single standard would facilitate them.
We understand that the IFRS Foundation is potentially well-positioned to facilitate the achievement of these objectives because it has a track record of developing financial reporting standards (i.e., IFRS) and in obtaining legitimacy by gaining the confidence of governments and regulators around the world to adopt and enforce these standards. In addition, it would be desirable to have a relatively high level of interconnectivity between corporate financial reporting and SR/NFR standards. The housing of both sets of standards under the Foundation’s umbrella would facilitate the collaboration that is necessary to achieve the desired level of standard interconnectivity.
Nevertheless, while acknowledging the IFRS Foundation’s potential to contribute to the establishment of a set of global SR/NFR standards, we also have significant concerns regarding the IFRS Foundation’s venturing into this already crowded sphere of activity. We also have significant concerns on some proposals of the CP. We elaborate on all these issues in our attached response letter in our detailed responses to the questions that are established in the Consultation Paper.