The bumpy road to non-financial information standards

Climate change, resource depletion and social issues require global solutions. And today's issues increasingly demand robust, comparable and reliable non-financial information. The Covid-19 crisis has also shown that in uncertain circumstances, qualitative and non-financial information has become more important.

Different perspective or focus area

However, the fact that global standards are useful or important does not mean that they will come about quickly. The current landscape is one with a large number of standard setters, each with a different angle or focus - each working on standards for non-financial information. This situation creates a lot of ambiguousness for companies and their stakeholders.

It is not easy to move from this current situation to one global standard for all. In the field of financial reporting, it took several decades for a large number of national standards to arrive at one internationally accepted standard for listed companies, the International Financial Reporting Standards (IFRS). And even now this has not been fully achieved, as the United States still uses its own standards.

Steps towards better non-financial reporting

In the past year, several steps have been taken towards better non-financial reporting. In December 2019, Accountancy Europe called for concrete steps towards an international standard, assigning an important role to the IFRS Foundation. The latter launched a consultation last year to examine its role with respect to sustainability standards. 

Various standard setters have explored further cooperation and alignment, and the International Integrated Reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) have announced a merger to create the Value Reporting Foundation. These are hopeful steps towards slow convergence of all existing initiatives.

Ambitious sustainability agenda

At the same time, it will not be easy to get to high quality standards that are accepted worldwide quickly. In the short term, this may lead to new initiatives by parties who are in a greater hurry. 

The European Union (EU), for example, has a more ambitious sustainability agenda than many other regions globally. In line with this, the EU also wants to speed up standards for sustainability reporting. The EU Taxonomy will initially create yet another standard to work with.

Keeping an eye on one another

Is this a bad thing? Not necessarily. Even if one international standard will set a basic minimum level that companies worldwide must comply with, it is quite conceivable that additional requirements will apply in certain regions or sectors. Which elements will be part of the basic level, will become clear in the coming years. 

It would be good if Europe or other parties keep making  progress in the meantime. As long as the various parties keep an eye out for one another and work with the intention of eventually connecting their work wherever possible. Because alone you may go faster, but together you will get further.