ISSB’s New Standards for ESG Reports: Adoption Progress in Southeast Asia

Environmental, social, and governance (ESG) disclosure is essential for a company or organization to report its business sustainability impacts. This document is becoming a mainstream part of investment decision-making. ESG reports require standards and frameworks to ensure credibility. In June 2023, the International Sustainability Standard Board (ISSB) issued new standards and invited Asian countries to get on board. How is the adoption progress of these standards in Southeast Asia?

Introduction to ISSB New Standards

The ISSB issued its first two standards to improve trust and confidence in company disclosures about sustainability alongside financial statements. These standards are developed with extensive market feedback, responding to the calls from the G20, the Financial Stability Board, the International Organization of Securities Commissions (IOSCO), and the investment community. 

The ISSB sets out IFRS S1 and IFRS S2, which have different talking points but are designed to be applied together. IFRS S1 provides disclosure requirements in discussing the effects of sustainability-related risks and opportunities. Meanwhile, IFRS S2 states specific climate-related disclosures. 

The Board has also created the Transition Implementation Group to assist companies in applying the standards. Although most large companies use the Global Reporting Initiative (GRI) standards, it is still possible to tandem both frameworks for more efficient sustainability disclosure.

Making Sense of ISSB in Southeast Asia

In 2022, 85% of the top 100 largest listed companies sampled in the Association of Southeast Asian Nations (ASEAN) adopted the GRI standards. While the GRI is more concerned on the ‘impact materials’, the ISSB is more focused on the ‘finance materials’. Therefore, ISSB offers a more practical financial report with sustainable impacts to complete the missing points in other standards.

As a prominent business center in the region, Singapore took the lead in introducing the ISSB Standards. Singapore hosted a capacity-building session during the ASEAN Capital Markets Forum (ACMF) gatherings organized by the Singapore Stock Exchange.

Similarly, Malaysia has also taken steps towards adopting the ISSB standards within its National Sustainability Reporting Framework (NSRF). The framework proposed by Malaysian committees offers organizations the flexibility to select standards that best align with the needs and interests of various stakeholders.

ESG Reports for All, by All

ESG reports can contribute to mainstreaming sustainable development in the business landscape. However, it is important to include all levels of business, leaving no one behind.

So far, sustainable business practices remain a challenge for most small and medium enterprises (SMEs) due to limited resources and expertise. Education and capacity development efforts are needed to support SMEs on their sustainability journey, such as making ESG reports that suit their needs. The ISSB standards and other reporting standards should make their frameworks accessible and adaptable and assist businesses in the implementation, bridging the gap in making ESG reporting a standard in sustainable business practice. 

Editor: Nazalea Kusuma