US states discussing introduction of international sustainability reporting standards

Five US states, including California, have had discussions about using globally recognised sustainability reporting standards, according to Sue Lloyd, vice-chair of the International Sustainability Standards Board (ISSB).

Lloyd said at an online press briefing that while the US Securities and Exchange Commission (SEC) had “moved away” from its proposed climate reporting rule, the ISSB does “see action at the state level — including, for example, in California, where the California Air Resources Board (CARB) climate disclosures [offers] the potential to allow the use of the ISSB standards to meet those requirements”.

She was speaking ahead of the publication this morning of a series of profiles and snapshots updating the progress of individual countries in adopting ISSB standards.

There was also “momentum” behind US companies voluntarily adopting the standards, said Lloyd, adding that many already chose to use International Financial Reporting Standards (IFRS) accounting standards alongside the official Generally Accepted Accounting Principles (US GAAP).

The IFRS Foundation, which houses the ISSB, had not confirmed the names of the other states at the time of going to press.

California

California passed its corporate climate disclosure rules (Senate Bills 253 and 261) in October 2023. The CARB is working on implementing the standards.

Regardless of the SEC decision not to progress with federal climate disclosure rules, the California law is significant because it catches any company doing business in the state. According to data from the International Monetary Fund (IMF) and the US Bureau of Economic Analysis (BEA), if California were a country its economy would be ranked fourth largest in the world.

Profiles and snapshots

The ISSB has published 17 profiles and 16 snapshots to update on progress towards adopting its IFRS S1 (general) and S2 (climate) sustainability reporting standards. Countries in the profile category have finalised their adoption journey for the standards, while countries in the snapshot category have not yet completed it.

“A year ago, we committed to publishing detailed jurisdictional profiles describing adoption of our standards to complement our inaugural jurisdictional guide. The profiles provide a detailed current state-of-play to investors, banks and insurers who continue to struggle with the lack of appropriate, comparable and reliable information on these critical factors affecting business prospects,” ISSB chair Emmanuel Faber said in a statement on June 12.

At the press briefing, Lloyd said the profiles and snapshots would allow investors to understand any differences between the jurisdictions — including which entities/businesses were required to disclose.

The profile countries are: Australia, Bangladesh, Brazil, Chile, Ghana, Hong Kong SAR, Jordan, Kenya, Malaysia, Mexico, Nigeria, Pakistan, Sri Lanka, Taiwan, Tanzania, Türkiye and Zambia. And the snapshot countries are: Bolivia, Canada, Costa Rica, El Salvador, China, Indonesia, Japan, Philippines, Singapore, South Korea, Thailand, Rwanda, Switzerland, Uganda, the UK and Zimbabwe.

A lot of work has been done mapping European Sustainability Reporting Standards (ESRS) to the ISSB standards. The former are currently being revised as part of the EU ‘omnibusʼ package. Lloyd said that once the omnibus was completed, it would add the profiled jurisdictions.