Speakers on a webcast hosted by the Global Reporting Initiative, a major corporate sustainability organization, said that financial reporting can and should take on more environmental, social and governance (ESG)-related topics and, indeed, should standard-setters such as the International Financial Reporting Standards (IFRS) Foundation do so, it will go a long way toward broadening the quality and use of such information. 

The webcast referred to the IFRS Foundation's recent call for comments on how it can contribute to the sustainability reporting space, possibly even to the point of forming a new standards board of its own. GRI Chief Standards Officer Bastian Buck said that the time has come for a global sustainability reporting mandate, and that the foundation is uniquely positioned to advance such a requirement.

"We believe the moment is right [for] the IFRS Foundation, with a mandate on financial reporting currently, expanding, hopefully in our view, in the right way to include financial considerations related to sustainability issues that can actually help elevate sustainability reporting ... to the level it deserves and needs to be at this point in time," he said.

This, he said, could be done if the foundation augments current corporate reporting standards with disclosure requirements for matters outside the financial statements that improve users' ability to make better economic decisions. For example, he noted that a carbon tax is only meaningful if there is a deep understanding of a company's emission's profile, noting that financial impacts due to sustainability-related issues could fall within the foundation's mandate. He said that already there are many companies drawing on sustainability information in their financial filings, given their risk impacts. He believes that there needs to be more of that, but that "this practice needs to be evolved and we hope the IFRS Foundation can play a key role in that."

"Within the current mandate of the IFRS Foundation, and within the focus on the impacts on the reporting entity, more work needs to be done to provide guidance and standards to enable organizations to consider sustainability-related financial implications, and we want the IFRS Foundation to focus, first and foremost, on this issue area and work together with the GRI and others to establish a true future corporate reporting regime where you have the two perspectives, reporting on impacts on the entity as well as impacts of the entity on others, as part of a holistic corporate reporting approach," he said.

Not that there won't still be a need specifically for sustainability reports. Eric Hespenheide, chairman of the GRI board, who also spoke on the webcast, noted that the framework that the International Integrated Reporting Council (IIRC) supports, which utilizes the concept of the Six Capitals, does much work in joining financial and sustainability information, but for now, he does not believe it can be a replacement.

"It represents a great tool for communicating the company's value proposition, a great deal for trying to interlace the inputs for the business model and the outcomes. ... Will this be a replacement for financial reporting or sustainability-related reporting? Our answer is probably not. It can be knit together, but the information needs of financial markets require more detail than might come through in an integrated annual report, though it could be a part of it," Hespenheide said, noting that he himself was a developer of the framework. "Stakeholders and civil society and policy makers probably need more detail than what is currently encapsulated in integrated annual reportings."

But he also noted that, given the fast-paced evolution of the sustainability space, these needs could change in the future. Buck also noted that, as time goes on, the line between financial and sustainability reporting could grow much more fine.

He illustrated that point by examining the investor-oriented versus stakeholder-oriented approaches to sustainability reporting and noting that the difference is not as large as one might think. Even if one takes a very narrow view of the investor as a pure value- maximizing agent, a firm's impact on broader society is surely something that also impacts the investor's decision making.

"There are all kinds of signals regarding financial risks and opportunities that arise from the impacts useful for economic decision making, even if you're not concerned with normative aspects of behavior for [corporations]," he said. " [We] believe that eventually the standard-setting will become more and more aligned across issues because the information the two perspectives rely on when it comes to sustainability will increasingly be the same over time."