OFFICIAL

Emmanuel Faber
Chair
International Sustainability Standards BoardIFRS Foundation
Colombus Building
7 Westferry Circus
Canary Wharf, London E14 4HD
UNITED KINGDOM
4 August 2023
Dear Mr Faber,
Joint response to invitation to comment on Exposure Draft Methodology for Enhancing
the International Applicability of the SASB Standards and SASB Standards Taxonomy
Updates
The Australian Accounting Standards Board (AASB) and the Sustainability Standards Board ofJapan (SSBJ) are pleased to have the opportunity to provide comments on the Exposure
Draft Methodology for Enhancing the International Applicability of the SASB Standards andSASB Standards Taxonomy Updates (Exposure Draft) published on 11 May 2023.
The AASB and SSBJ have both publicly stated support for the ongoing work of theInternational Sustainability Standards Board (ISSB). Our respective Boards are committed todeveloping jurisdictional content that builds on the global baseline of sustainability-related
financial reporting requirements established by the ISSB. Consequently, we welcome any
opportunities to provide comments on projects of international significance, such as theExposure Draft.
The AASB and SSBJ have provided individual submissions to the ISSB in response to theExposure Draft, which detail issues that each Board considers important for theirjurisdiction.1
We provide this joint submission to highlight some of the common concerns that both theAASB and SSBJ have regarding the Exposure Draft. In particular, this joint response
highlights four key matters that we consider significant to enhancing the international
applicability of the SASB Standards.
Our joint submission aims to constructively contribute to the development of internationally
relevant and useful industry-specific disclosures and support the ISSB’s efforts towards
developing a global baseline for sustainability-related financial reporting requirements.

1

Australia: AASB submission to ISSB on Methodology for Enhancing International Applicability of SASB;
Japan: SSBJ submission to ISSB on Methodology for Enhancing International Applicability of SASB.

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International applicability of the SASB Sustainable Industry Classification System®
The SASB Sustainable Industry Classification System® (SICS®) is essential to reporting under
the SASB Framework. It facilitates the grouping of entities into common industries andsectors and, in turn, the identification of financially material sustainability topics on which
an entity should report. While the SASB SICS® may be suitable for companies operating in
the United States, they are not necessarily suited for international stakeholders.
There are significant differences and variations in the types of industries that exist globally.
These industries commonly have distinct characteristics and therefore face uniquesustainability-related financial risks and opportunities. The SASB SICS® are primarily
representative of United States-based industries and therefore do not necessarily align withthe types of industries that are present in different jurisdictions internationally. This
misalignment makes the SASB SICS® difficult to apply in an international setting andtherefore limits the relevance and utility of these materials to an international audience.
Both the AASB and SSBJ are of the view that there must be a greater global consensus on
the use of SASB SICS® as the industry classification system for sustainability-related financial
disclosures via the ISSB. The SASB SICS® may be a suitable starting point for thedevelopment of an industry classification system. However, without suitable customisation,
they are not suitable for international users in their present form. Consequently, werecommend that the ISSB consider a process and methodology for internationalising theSASB SICS® and expose this for public consultation, together with the revised content itself.
We recognise that this task would require the ISSB to commit significant time and resources.
However, we consider this to be a priority because it will significantly help to improve therelevance of any industry-specific requirements to international stakeholders. We are of theview that starting this task soon will provide the ISSB with the opportunity to incorporate
industry-specific disclosure requirements into the IFRS Sustainability Disclosure Standards ata later stage.
Non-disclosure of revised contentThe content provided in the Exposure Draft is limited to a description of the proposed
process and methodology that will be used to amend non-climate-related metrics. It does
not identify the specific non-climate-related metrics that were deemed to require
amendments to enhance their international application, nor does it provide the amended
content itself.2
This approach means that any analysis of the internationalisation process is limited to ahigh-level consideration of the methodology and process, rather than a detailed2

We acknowledge that the ISSB intends to publish a separate fatal flaw draft containing all of therevised non-climate-related SASB Standards metrics for further public consultation at a later date.

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examination of the revised content. We are of the view that international stakeholders are
more interested in the precise wording of the revised content that results from theapplication of the proposed methodology, rather than a general description of the overallprocess.
Accordingly, we strongly encourage the ISSB to expose the amended SASB Standards in their
entirety and allow stakeholders sufficient time to analyse and comment on them before
they are finalised. Such an approach would help to provide stakeholders with greater levelsof confidence regarding the internationalisation process and facilitate a more complete
examination as to whether the revised content may be suitable for individual jurisdictions
into the future.
Proposed methodology
We note that the proposed approach to internationalisation outlined in the Exposure Draft
is broadly equivalent to that which was applied to revise the climate-based metrics thatwere exposed as part of Appendix B to [Draft] IFRS S2 Climate-related Disclosure. We also
note that the AASB and SSBJ both independently concluded that the content incorporated
into Appendix B of [Draft] IFRS S2—even in its revised form—had not been sufficiently
internationalised and therefore remained unsuitable for international stakeholders. Thisissue formed part of our individual submissions to the ISSB on [Draft] IFRS S1 General
Requirements for Disclosure of Sustainability-related Financial Information and [Draft] IFRS
S2.3
We are of the view that application of a substantially similar methodology to non-climaterelated content will mean that the resultant materials will remain insufficiently
internationalised. We therefore encourage the ISSB to consider an alternative and morecomprehensive methodology to internationalisation. Such an approach should recognise thediversity that exists in the needs and expectations of stakeholders around the globe.
Consequently, we recommend that the ISSB first seek to establish whether the SASB
Standards are a suitable starting point for the development of industry-specific disclosure
requirements for international stakeholders. This evidence could partly be obtained bysubjecting the SASB Standards to the same, or equivalent, due process requirements as IFRS
Accounting and Sustainability Disclosure Standards. We strongly encourage the ISSB topursue this evidence-informed approach to the development of industry-specific disclosure
requirements.

3Australia: AASB and Auditing and Assurance Standards Board (AUASB) joint submission on [Draft] IFRS
S1 and [Draft] IFRS S2; Japan: SSBJ submission to ISSB on Draft S1 and S2.

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Bringing industry-specific disclosure requirements within IFRS Sustainability DisclosureStandards
We note that upon consolidation of the Value Reporting Foundation and the IFRSFoundation in January 2022, the IFRS Foundation took over responsibility for developing,issuing and maintaining the SASB Standards. We further note that the SASB Standards are
currently developed, issued and maintained independently of the IFRS Sustainability
Disclosure Standards and industry-based guidance published by the ISSB. Our understandingis that this arrangement means the SASB Standards are not subjected to the same due
process as IFRS Accounting and Sustainability Disclosure Standards.
While we recognise that it may be necessary to continue the independent maintenance ofthe SASB Standards in the short term, we strongly recommend that the ISSB consider how itmay phase out this approach over time. We hold the view that integrating industry-specificdisclosure requirements into the IFRS Sustainability Disclosure Standards would significantly
enhance the quality of these materials by offering a more streamlined and integrated
approach to sustainability-related financial reporting.
We are of the view that the IFRS Foundation’s full due process requirements provide atransparent, consultative and evidence-informed approach to the development ofinternational reporting standards. Accordingly, by consolidating industry-specific disclosure
requirements into the IFRS Sustainability Disclosure Standards and subjecting them to theIFRS Foundation's full due process, we maintain that international stakeholders would have
improved confidence regarding the suitability and relevance of these materials.
Considering the above, we strongly encourage the ISSB to explore ways to integrateindustry-based disclosure requirements into the IFRS Sustainability Disclosure Standards andsubject them to the same, or equivalent, due process requirements as IFRS Accounting andSustainability Disclosure Standards. We consider this to be an essential step to advancing
the sustainability-related financial reporting agenda globally and therefore encourage theISSB to commence work on this task as soon as practical.
If you have any questions regarding this letter, please contact Waka Kirihara, Director, SSBJ
(w.kirihara@ssb-j.jp) or Siobhan Hammond, Director, AASB (shammond@aasb.gov.au).
Yours sincerely,

Dr Keith Kendall

Yasunobu Kawanishi

Chair AASB
Australian Accounting Standards Board

Chair SSBJ
Sustainability Standards Board of Japan

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