If one went in sequence through the almost 700-post history of this blog, it might seem to speak to the fading prominence of IFRS relative to other forms of financial reporting; at present, the IASB just doesn’t generate as much of immediate interest as does the ISSB. Of course, that’s somewhat by design: many of IFRS’s larger battles (like, getting to exist as more than an academic exercise!) are behind it, much of its efforts now devoted more to maintenance and fine-tuning than to further revolutions; in contrast the ISSB’s work to this stage might mainly constitute a prologue to the major narrative to come. This may of course swing the other way in the future, for any number of reasons. But for now, the big questions regarding general acceptance, regulation, enforcement and so on mainly belong to what a recent paper defines as “non-financial reporting” (corporate disclosures of “the social, environmental, and relevant economic impacts of their operations, as well as their strategies and policies in relation to these impacts.)”

The paper, titled The multiverse of non-financial reporting regulation, was written by Diogenis Baboukardos, Silvia Gaia, Philippe Lassou and Teerooven Soobaroyen. It notes that differences in reporting practices “have effectively led to a NFR ‘multiverse’ where organizations provide aggregated or disaggregated, incomparable, incommensurable and, often, incomplete information with questionable relevance, reliability and understandability for the various users of these reports.” But at present: “we are witnessing an unprecedented movement across the world towards regulating NFR which aims at specifying the information that companies are required to disclose and hence alleviating long-standing issues of relevance, reliability, comparability, and greenwashing stemming from voluntary NFR…. The overarching motivation behind the current regulatory initiatives’ is associated with the need for higher quality NFR which will (i) lead to better-informed capital markets; (ii) satisfy the various information needs of stakeholder groups and (iii) promote the adoption of socially and ecologically responsible activities…”

The paper sets out various areas for further research, including:

• how national (financial) audit regulators and other related agencies would establish professional expectations, certification, and registration when it comes to sustainability assurance.
• a strong emphasis on Western contexts, particularly from the US, the UK, and continental Europe. Issues for countries in the “global south” may include institutional mechanisms, reflected in the exercise of the rule of law, regulatory enforcement, good governance, and openness/transparency, which remain weak or are subverted to private interests, along with a frequent dearth of professionals and expertise, especially in enforcement and regulatory circles.
• the selection and use of metrics sometimes implicitly conceive of standards and benchmarks in certain narrow ways, possibly losing their neutrality characteristics because they would tend to favour certain companies and settings relative to others.
• the process and operationalisation of double-materiality principles  and  how  this  is  reflected  in  corporate  reporting.
• the “real effects “of NFR regulation, not just in terms of change and impact at the organization level, but whether this has translated into improved outcomes for society nationally and internationally (e.g. quality of livelihoods, biodiversity gain, enhanced human and employee rights, transition to net zero economies).

The paper notes that the impact of the forthcoming ISSB standards is, of course, yet to be determined, and will provide much scope for further research: “Issues such as the reliability, completeness  and comprehensiveness of NFR are expected to be determined by topics ..such as assurance, single/double materiality, and content of required disclosures) which, in turn, may lead to capital market effects. Whether these issues would indeed affect firms’ capital market valuation and investors’ perception of risk are open empirical topics. Further, and rather similarly to the IFRS literature, the same set of standards does not necessarily lead to convergence of reporting practices among countries. Cross-country differences stemming from the actual application of the new standards as well as from cultural, legal and economic development aspects of each country may lead to different capital market effects.”

As I write, the US contains some major strands of skepticism toward the virtue of such reporting (Elon Musk recently reiterated that ESG is “the devil“); a Republican Presidential victory in 2024 would likely turn this into outright hostility, with inevitable knock-on effects for other jurisdictions. I quoted the paper above as stating that one of the overarching motivations behind the current regulatory initiatives is to promote the adoption of socially and ecologically responsible activities, but this might as easily be cited as a reason for fervent opposition (one person’s social responsibility is another’s freedom-hating wokeness). Perhaps the safest approach, if only as a matter of political positioning, is to downplay the “virtuous” aspects of ESG, and to approach it simply as a matter of enterprise risk management, such that it would be negligent not to focus on the issue. But no doubt this positioning would be easier to implement for some aspects of the non-financial reporting spectrum than for others…

The opinions expressed are solely those of the author.