A commentary on the “new” institutional actors in sustainability reporting standard-setting: a European perspective

Abstract

Purpose The purpose of this paper is to discuss the progress and future prospects of two relatively “new” institutions in this field: the European Commission (EC), together with the European Financial Reporting Advisory Group (EFRAG), and the International Financial Reporting Standards (IFRS) Foundation. Design/methodology/approach This paper reflexively analyses the recent events that characterise the European Union (EU) regulatory standard-setting landscape in the sustainability field. It is mainly based on publicly available documents. Findings After analysing the different routes followed to enter the field, this paper shows how the EC/EFRAG takes a wider view than the IFRS Foundation on certain key reporting aspects, that is, target audience, materiality and reporting boundary. As for the reporting scope, although it seems that the IFRS Foundation has a more restrictive vision, it is working to broaden it. Practical implications This paper provides some ideas about the potential cooperation between the two institutions. This paper also highlights some potential problems stemming not only from their intrinsic characteristics but also from the routes they have taken to enter the field. Social implications By envisioning how the EU sustainability reporting standard-setting landscape might evolve, this paper sheds light on how companies might need to approach sustainability reporting to adapt to the new institutional demands. Suggestions for collaboration between the two institutions could help them reach common ground and, thus, prevent misunderstandings for companies and stakeholders. Originality/value The reflections and takeaways benefit from the authors’ first-hand information, as both are involved in the EU process. The authors could, therefore, feed into further discussions on the developments and challenges facing the EU in this domain.

Swimming against the tide: back to single materiality for sustainability reporting

“…Researchers have examined the: evolution and current developments of the concept of materiality in sustainability reporting (Abela, 2022; Baumüller and Sopp, 2022); differences in the definitions of materiality adopted in different sustainability reporting regulations and by standards setters (Baumüller and Sopp, 2022; Chiu, 2022; Cooper and Michelon, 2022; De Villiers et al , 2022; Giner and Luque-Vílchez, 2022); limitations of various interpretations of materiality (Adams and Mueller, 2022; Adams and Abhayawansa, 2021; Cooper and Michelon, 2022); consequences of different interpretations of the materiality principle (Clark, 2021; Jørgensen et al , 2022); and the practice of materiality determination by companies adopting various sustainability reporting standards or frameworks (Beske et al , 2020; Gerwanski et al , 2019; Jones et al , 2016; Puroila and Mäkelä, 2019; Steenkamp, 2018). …”

When a sector-specific standard for non-financial reporting is not enough: evidence from microfinance institutions in Italy

“…In addition, some relevant challenges should be investigated to understand how to reconcile the ISSB with the GRI standards (IFRS Foundation, 2021b; Peirce, 2021; Adams and Abhayawansa, 2022; Michelon et al , 2020; Giner and Luque-Vílchez, 2022; Adams and Mueller, 2022). On 24 March 2022, the ISSB and the GRI announced their agreement to coordinate their work programmes and standard-setting activities to align, where possible, their respective work programmes, terminology and guidance to further harmonise the sustainability reporting landscape at an international level (IFRS Foundation, 2022).…”

“…The increasing relevance of this topic is further underscored by the recent ambitious initiatives launched by the International Financial Reporting Standard (IFRS) Foundation, one of the most prominent accounting standard-setters worldwide, and by the European Commission (EC) in collaboration with the European Financial Reporting Advisory Group (EFRAG) (Giner and Luque-Vílchez, 2022). In September 2020, the IFRS Foundation explored the creation of a globally accepted NFR standard through the International Sustainability Standards Board (ISSB) (IFRS Foundation, 2020).…”

“…The need for NFR standardisation has become evident after observing the growing number of frameworks and guidelines that national and international bodies have developed for disclosing the social and environmental impacts of company activities (Adams and Abhayawansa, 2022; Tschopp and Huefner, 2015; Eccles et al , 2012; Gray, 2002; Rasche, 2010; Etzion and Ferraro, 2010; Giner and Luque-Vílchez, 2022).…”

“…The harmonisation process in the realm of NFR standards mimics the process that started more than 40 years ago in the financial reporting field (Giner and Luque-Vílchez, 2022). Thus, harmonisation in NFR is an important goal that needs to be achieved at a global level.…”