On 27 July 2023, the International Sustainability Standards Board (the “ISSB”) published the Proposed IFRS Sustainability Disclosure Taxonomy for public consultation. The IFRS Sustainability Disclosure Taxonomy, which follows the ISSB’s issuance of the IFRS sustainability disclosure standards (the “Standards”) (which we reported here), is a digital taxonomy designed to facilitate digital reporting of sustainability-related financial information and to improve accessibility and comparability of such information by investors and regulators globally. Notably, the IFRS Sustainability Disclosure Taxonomy is not a taxonomy for categorising sustainability ratings or attributes of specific activities such as the EU taxonomy for sustainable activities.
A key feature of the IFRS Sustainability Disclosure Taxonomy is the tagging of sustainability-related narrative information in financial reports that is prepared in line with the Standards and other compatible standards (for example, SASB standards). This is important as narrative information is expected to play a more crucial role in sustainability-related financial disclosures than it does in traditional financial statements. The IFRS Sustainability Disclosure Taxonomy seeks to simplify and reduce the costs of tagging narrative information in financial reports that will be helpful to report preparers.
The IFRS Sustainability Disclosure Taxonomy is designed using ‘eXtensible business reporting language (XBRL)’ i.e., the open international standard for digital business reporting, which was also used for the IFRS Accounting Taxonomy, a digital taxonomy which was designed to tag financial statements prepared using the IFRS Accounting Standard. The IFRS Sustainability Disclosure Taxonomy is therefore able to work well with the IFRS Accounting Taxonomy. However, the two digital taxonomies are distinct and separate. The IFRS Sustainability Disclosure Taxonomy can be applied to financial statements prepared in accordance with the IFRS Accounting Standard and other generally accepted accounting principles.
The consultation on the IFRS Sustainability Disclosure Taxonomy will close on 26 September 2023. Subject to the consultation responses received, the ISSB aims to issue the final IFRS Sustainability Disclosure Taxonomy in early 2024.