IFAC continues to speak out on behalf of the global accounting profession on the topic of non-financial reporting, most recently in response to the European Commission’s review of the Non-Financial Reporting Directive (NFRD). This review marks another valuable step in the dialogue and evolution toward relevant, reliable, and comparable reporting of non-financial information. A summary of IFAC’s response is available on its website.
IFAC urges the Commission to adopt a global mindset by engaging input from a broad range of international stakeholders in determining the best way forward. Steps taken must “fit within” a global system and avoid regional regulatory fragmentation.
Non-financial reporting answers the call from investors and other providers of capital for better, broader information about company performance and prospects for value creation, while also helping identify opportunities to support sustainable—and less carbon-reliant—business models. In the post-COVID world, corporate reporting that reflects the needs of a broad range of stakeholders will be particularly important to communicate on an organization’s performance and priorities.
As a Network Partner of the B20, IFAC calls on global bodies—including the G20—to encourage policy-makers, standard-setters, and regulators to facilitate harmonization towards a globally-acceptable approach to reporting ESG metrics and disclosures.
IFAC supports reporting requirements that address both societal and company performance impacts and that anticipate the needs of specific markets. Any jurisdiction-specific reporting requirements need to conform with metrics and disclosures that are part of a globally accepted system so that comparability is achieved.
The accountancy profession is critical to evidence-based decision making, reliable information gathering, and consistent, comparable corporate reporting. Active engagement by the profession on this topic will maximize the benefits of a global solution to non-financial reporting that best serves shareholders and the broader public interest.
As the global voice of the accounting profession, IFAC remains committed to advocating for a comprehensive approach to non-financial reporting through its contributions to global consultations and engagements.
The no tolerance stance (i.e., outright removal of the materiality threshold) proposed by IESBA for PIEs (and, for some services, also applies to the non-PIEs) is based on the argument that perception of independence in appearance is key, whereas the IESBA’s mechanism has been the application of the reasonable and informed third party test, which was designed for this purpose and is instead being overridden. A third-party test might not lead to the same outcome as a no stance approach in all cases as the former allows for flexibility.
IFAC has responded to the European Commission’s Review of the Non-Financial Reporting Directive (NFRD). The NFRD marks another valuable step in the dialogue and evolution toward relevant, reliable, and comparable reporting of non-financial information.
The IFAC Small and Medium Practices Committee has followed the development of this project and that of the Non-Assurance Services (NAS) since their inception and welcomes the close coordination of IESBA with the International Auditing and Assurance Standards Board. We also concur that the outcome from the work of the Task Force on the definition of Public Interest Entities and Listed Entities will be equally impactful on this ED. Hence, we support this project being accelerated.
Ms. van Onselen is an experienced, strategic executive with an extensive background across the financial services as a litigation lawyer and with various listed, government and not-for-profit organizations including membership bodies.
Prior to joining Chartered Accountants Australia and New Zealand, Ms. van Onselen held a number of senior roles over six years at Westpac Group, including Managing Director of RAMS, Chief of Staff to the CEO and General Manager of Deposits & Unsecured Lending. She was also the Global Director of Women’s Markets and Inclusion & Diversity.
Ms. van Onselen has more than 20 years’ experience as a non-executive director. She is currently a non-executive director at financial services company Automic and the commissioner of Legal Aid NSW.
Ms. van Onselen commenced her career practicing as a lawyer and ultimately became a partner in a specialist corporate and commercial practice in Western Australia. She holds a Bachelor of Laws and Master’s of Applied Finance, and completed the Company Directors Course at the Australian Institute of Company Directors.
It is well acknowledged by investors, business leaders, and other stakeholders that, in addition to financials, effective corporate reporting must also measure value creation, sustainability and environmental, social, and governance factors. Such enhanced corporate reporting is needed to maintain confidence in companies and financial markets, to better meet stakeholder needs, and to inform business planning for long-term success.
The WEF consultation makes a valuable contribution in the dialogue amongst all stakeholders who share a common interest in relevant, reliable, and comparable reporting of this information.
In its consultation response, IFAC focuses on six takeaways to keep the global conversation moving forward:
Rationalization efforts must work toward a global system. IFAC strongly supports a global approach to ESG metrics and disclosures.
Timeliness is key. Alignment, harmonization, and convergence must take place before regional or jurisdiction-specific initiatives become standard practice.
Take a modular approach. Build upon existing high-quality metrics and disclosures.
There is a role for both standards and frameworks. For example, the Integrated Reporting Framework.
Assurance is needed to deliver confidence in corporate reporting. Assurance is most effective when applied against metrics and disclosures that follow clear best practices or standards.
The accounting profession must remain engagedin the conversation. The profession is critical to evidence-based decision making, reliable information gathering, and consistent, comparable corporate reporting—be it ESG-focused or otherwise.
IFAC stands ready, as a global voice and convener of the accountancy profession, to facilitate coordination, assimilation, and convergence in sustainable reporting approaches. IFAC supports the WEF consultation as a catalyst to challenge policy makers, regulators, and ESG metric providers to get the job done, now.
Ongoing and active engagement by the profession—through this initiative and by assisting companies in the implementation of its metrics and disclosures—is an enormous opportunity for the profession to embrace.
