Corporate reporting takes a huge step forward this week

At Saïd Business School we are very proud to have been a leading voice in the work that led to this moment. Our faculty have long recognised the importance of corporate accountability arguing that financial disclosures were not enough by themselves but needed to be seen alongside sustainability-related disclosures. Five years ago Richard Barker, Professor of Accounting, and Robert Eccles, Visiting Professor of Management Practice wrote a Green Paper exploring the case for the existing standard-setting regimes for financial reporting - the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) - to be extended to include setting standards for sustainability-related information. 

In true Oxford University style their Green Paper set the stage for an Oxford Union Debate in December 2018 –The Motion: This House believes that corporate sustainability reporting should be mandated, and standardised by FASB and IASB, for it to be most useful for investors – which in turn further informed their thinking and led to a White Paper setting out a path for the creation of globally recognised standards. 

It was great to see the IFRS (the parent organisation of the IASB) step into this space and start a consultation in 2020 on the need for sustainability standards and what if any role the IFRS should play in this space. And appropriately this culminated in the formation of the ISSB at the COP26 Climate Conference in Glasgow in November 2021.

Proposing change is one thing but getting global agreement is the next and challenging step. Building on the positive reaction earlier this year from the G20, and other jurisdictions such as Hong Kong, the ISSB now needs to persuade more countries and jurisdictions to adopt these standards or we must ensure that where other standards are being used (for example in the EU) they are interoperable.  

And beyond agreement there is implementation which is particularly challenging with increasing political divides and geopolitical uncertainty. Based in the USA where ESG is increasingly becoming a political football Robert knows this well:

'Large US multinational companies recognise that investors want information about sustainability performance according to a set of standards. They are all familiar with the Sustainability Accounting Standards Board (SASB), now part of the ISSB, and its industry-specific standards. Ignoring the political theatre in the “ESG Culture Wars” in the US, both sides of the aisle understand that managing material ESG issues contributes to value creation. This is exactly what the ISSB is all about.' While the US isn’t going to mandate the ISSB’s standards any time soon, if ever, Robert does note that ‘somewhat ironically, large US companies can help lead the global adoption of the ISSB’s standards by doing so on a voluntary basis. This is consistent with a less pro-regulatory environment than is the case in Europe and other countries.’

Given the momentum, interest in these standards is very evident in the professional financial reporting community and it is a testament to our expertise in this space that we are working with the most influential body of accountants and finance experts – AICPA & CIMA (which together form the Association of International Certified Professional Accountants) – to develop and deliver an online executive education programme on sustainable finance and ESG strategy. As Academic Director of this new programme Amir is excited that it will 'equip financial managers with the requisite skills and knowledge to develop their organisations’ sustainability strategy, understand the various stakeholder demands, including those of financial market participants, to enable them to effectively report on and manage their sustainability risks and opportunities.'

As a business school embedded in a world-leading university this programme, and our related programme, Oxford Leading Sustainable Corporations Programme, are uniquely placed to draw on a range of expert faculty from throughout the university, as well as invite speakers from practice and policy to share their insights, so our participants can apply the learnings to their real-world context.

Mary Johnstone-Louis, Senior Fellow in Management Practice and Co-Director of the Leading Sustainable Corporations Programme is very clear about the real risk corporations face today on their ongoing ability to deliver value in the face of extreme weather events, significant volatility in agriculture and other crucial inputs, and the urgency of the energy transition. ‘Delivering value for society and the environment at scale is the true challenge of this generation of leaders.’ she says. 'This is why' she adds 'progress will be required in the areas of corporate governance, reporting, innovation, and finance because standards are a fundamental aspect of making markets work for the future.’   

It's safe to say that five years ago at that Oxford Union Debate no one would have anticipated the formation of the ISSB three years later and having two solid sets of standards 18 months later. These provide the foundation for integrating sustainability into financial performance. The full value of this can only be obtained through the support of investors, companies, and government policy makers. We at Oxford stand ready to support them.