For the Australian Accounting Standards Board (AASB) chair, Dr Keith Kendall, the topic of the moment is sustainability reporting.

The AASB has recently issued two exposure drafts on sustainability disclosures and climate reporting and Kendall says the AASB will apply the same due process it uses for financial reporting standards to the sustainability exposure drafts.

Stakeholders have until 15 July 2022 to comment on the draft standards, known as S1 and S2, so that the AASB can reflect Australian viewpoints to the London-based International Sustainability Standards Board.

“Our stakeholders have the option of providing their own comments to the ISSB, but we will put in a submission from the AASB that incorporates any stakeholder feedback that we have received up to that date,” says Kendall.

“As part of the due process and recognising this is an area of sufficient importance, we are conducting [more] extensive direct stakeholder engagement than we do on a lot of other topics. We’re having quite a number of round tables – both face-to-face and virtual.”

“As part of the due process and recognising this is an area of sufficient importance, we are conducting [more] extensive direct stakeholder engagement than we do on a lot of other topics.”

What’s in the exposure drafts

The first exposure draft deals with sustainability disclosures and proposes that entities disclose how sustainability risks and opportunities impact the value of an enterprise. Water is used as an example to illustrate the point. The first exposure draft says: When an entity’s business model depends, for example, on a natural resource – like water – it is likely to be affected by changes in the quality, availability and pricing of that resource.

Key areas covered in the exposure draft are requirements that would see companies describe their governance, strategy, risk management, and the metrics and targets in their reports to provide information to users on how they manage sustainability-related issues.

The second proposed standard deals with climate reporting. This includes – but is not limited to – disclosure requirements that would require entities to disclose identified climate-related issues, transition plans and carbon offsets to manage their impacts on the environment, current and anticipated effects, and the climate resilience of the entity.

Feedback is positive

AASB roundtables on sustainability have been held with industry groups including consumer goods and manufacturing entities, property, real estate and construction entities. Seven had been completed when Kendall, who commenced his role with the AASB in May 2020, spoke to Acuity.

The AASB has also sought feedback from professional practices and entities that will be responsible for applying the sustainability standards, as well as the academic community.

Kendall says the prospect of a single set of sustainability standards has been welcomed: there is a thirst for a rationalisation of frameworks and clarity on how a framework ought to be applied.

“Stakeholders are quite frustrated not knowing which framework they should adopt, and they are wanting some direction,” says Kendall, adding the word “relief” comes to mind. “The general feeling among stakeholders is, ‘We’re at least moving now, and we’ve got a little bit more certainty’.”

Any written comments must be lodged with the Australian Accounting Standards Board by 15 July 2022 for inclusion the board’s submission to the international body.