The recent announcement of the sustainability standards board poses several challenges for Australian entities and those that regulate them.

Let’s take one step back first because some folks reading this might not be fully up to speed with developments.

The recent COP26 climate conference – the one that was preceded by the great war of truth and lies of 2021 between Australian and France – saw the launch of the International Sustainability Standards Board by the IFRS Foundation.

The IFRS Foundation has added sustainability reporting standards to its list of things to oversee after having only the accounting standards board to look after for the past 20 years.

They have also announced that a climate reporting standard will be the first of the documents to drop off their assembly line when the engines get revved up.

The ISSB – you have another acronym to remember – already has some prototype guidance so you can expect climate reporting guidance to be out more quickly. This is the first thing people need to keep in mind.

These London-based sustainability reporting gurus will be moving quickly and they have pre-existing guidance to draw from, such as integrated reporting, global reporting initiative and the former Sustainability Accounting Standards Board.

This means that the exercise to get guidance together will not take as long as the stuff they have been doing over the years on accounting matters.

Guidance issued by this body will also be considered best practice and will become mandatory given the support from global regulators and key economic players.

That raises the thorny question of assurance of reports containing narrative disclosure. Demand for assurance will increase as will the scrutiny of stakeholders and regulators.

Boards of directors and senior management in companies will need to ensure that their teams are ready to engage with the new literature when it bounces out of the ISSB because the marketplace will be ready to mark them severely if they fail to meet expectations.