Keynote address by IAASB Chair Tom Seidenstein
IAASB Chair Tom Seidenstein delivered the following keynote address during the ICAEW event New International Sustainability Assurance Standards, held at Chartered Accountants' Hall in London.
Good morning. I am honored to return to the Institute of Chartered of Accountants of England and Wales (ICAEW). I wanted to thank Malcolm Bacchus for the kind introduction and the entire ICAEW team for hosting this timely event and their continued support of global standards.
The ICAEW building has a special place in my heart. It was in this building, more than two decades ago, that I leapt deep into the world of standard setting. In my role with what would ultimately become the IFRS Foundation, we interviewed many of the candidates that became the original members of the International Accounting Standards Board (IASB).
It must have been something in the water that day. Maybe you in the audience and others impacted by the work of the International Auditing and Assurance Standards Board (IAASB) regret the choice of water then. However, at that moment of time in the autumn of 2000, I got the “bug” for standard setting. Twenty-four years later, I stand before you, nearly six years in my tenure as IAASB chair. In all seriousness, I can tell you that we at the IAASB are truly appreciative of the mandate that we have and the support that the ICAEW and accountants throughout the world have given us. We will continue to do our best to drive confidence in the work of accountants throughout the world.
Events such as the one being held today are essential to build knowledge, to exchange ideas and experience, and to guide standard setters, regulators, and practitioners as we embark on the sustainability journey together.
Journeys are never simple. On a journey, you often meet the unexpected. You meet delays from time-to-time. You often must make compromises along the way. The most important thing ultimately is keep advancing towards the destination.
For the last several years, we have witnessed an accelerating, almost inevitable momentum on our journey—towards a new era of external reporting that would mandate both financial and non-financial information to describe corporate performance. Not surprisingly, policymakers, regulators, standard setters, and a broad range of market participants called for a range of sustainability requirements that would form the basis of a new reporting ecosystem.
Let’s take two of the world’s largest capital markets. The European Union approved the Corporate Sustainability Reporting Directive, or CSRD, and with it came European Sustainability Reporting Standards. The US Securities and Exchange Commission approved a Climate Disclosure Rule.
Indeed, much like the world of financial reporting and audit, we also saw a trend towards adopting global baselines. The IFRS Foundation established the International Sustainability Standards Board with significant support from securities regulators globally. And jurisdictions throughout the world, including here in the UK and others such as Australia, Brazil, Japan, Nigeria, Singapore, and Turkey, initiated processes for considering or mandating reporting and sustainability assurance regimes.
In recent weeks, several jurisdictions have announced a reconsideration or recalibration of their sustainability requirements and commitments. My message today is that we must pay attention to this shifting landscape and understand the underlying rationale for changes. As an independent standard-setter, we cannot operate in a vacuum and must be responsive to shifting public interest demands.
However, I remain convinced that the longer-term trend is likely to remain directionally the same. Investors globally, those who provide capital, will continue to seek broader measures of corporate performance. Even before mandatory requirements more than 95 percent of the world’s largest companies were providing some form of sustainability reporting. And despite the shifts in some jurisdictions, many companies are continuing to adopt sustainability reporting requirements to meet investor demands.
It is therefore my first point and maybe most important point today—we need to keep our eye on the long-term destination for reporting sustainability-related information. We need to remain ambitious but also accept that the journey will vary by jurisdiction and will need to adapt to learnings. In doing so, we should commit to creating a system for sustainability and other material non-financial measures that focuses on building trust and confidence in the information companies provide, much as we have in the world of financial reporting.
We can take a few lessons from the world of financial reporting in terms of constructing a trusted sustainability reporting ecosystem. The most important is that trusted reporting should be built on a foundation of:
- High-quality reporting standards
- Complemented by robust assurance standards
- Supported by ethical and independent requirements
- Overseen by empowered regulatory authorities
In my mind, the public interest requires those components to:
- Enable global comparability
- Encourage the development of a cadre of professionals capable of producing and assuring high quality reporting
- Be unapologetic in its commitment to quality, rigor, and ethics
Indeed, that long-term vision was our motivation at the IAASB when we completed International Standard on Sustainability Assurance (ISSA) 5000. ISSA 5000 a global baseline that can work in every jurisdiction—whether you are in Europe, Asia, the Americas, Africa or Australia. In doing so, we moved quickly, because the International Organization of Securities Commissions (IOSCO) urged us, along with our colleagues at the International Ethics Standards Board for Accountants (IESBA), to meet the deadline of December 2024 to complement the ISSB’s work. We were also conscious of European and other national timelines and requirements.
ISSA 5000 did not sacrifice quality for speed. We followed a rigorous due process and conducted unprecedented outreach before finalizing the standard. We involved thousands of stakeholders on six continents, including our eight roundtables spread throughout six continents, bilateral meetings, and our exposure draft and comment process.
In developing ISSA 5000, the IAASB was conscious that sustainability assurance was already taking place around the world. For this reason, we adopted a no “greenfielding” strategy—we built off existing practices already embedded in our well-established and widely used assurance standards, ISAE 3000 and 3410. We needed to provide more specificity to reflect convergence around new sustainability reporting requirements and ensure greater consistency in practice. We also were able to draw upon recent modernization of audit standards, where appropriate. Finally, we benefitted from the advice of the thousands who participated in our consultations. With the benefit of their advice, we reflected themes we heard throughout the comment process. My colleague, Josephine Jackson, will shortly describe specific elements of the standard in more detail.
We believed it was important to develop the standard so that a diversity of practitioners could use ISSA 5000 for a wide range of sustainability assurance engagements. We committed to ensuring that the standard is useable and does not create any unnecessary burdens. We therefore paid particular attention to scalability and proportionality throughout.
My second major message is that for the IAASB, the journey on sustainability doesn’t end with the approval of the standard. We stand ready to help support the consistent application of standard in several ways.
First, we will support the adoption and implementation with significant energy and resources. We will continue to publish a wide range of implementation support. On January 27, jointly with IESBA, we released a first package of guidance and support videos—with more to follow. We have also committed to a wide range of outreach activities, which have already begun. Our focus is on issuing guidance that is concise, focused and pragmatic.
Second, we will give the market time to absorb ISSA 5000. We need a period of stability. Therefore, the emphasis will not be on the setting of new standards in the 5000-space. Do not expect a new 5000 series standard soon.
Third, we will set up a wide range of monitoring activities to determine whether there are practical implementation issues. We will work closely with our advisory council, national standard-setters, and regulators to get this feedback. We are in the process establishing a technical implementation contact group as well. Even though we will not write a new 5000 series standard in the next few years, we as a Board, stand ready to respond to market feedback if adjustments or guidance to ISSA 5000 are necessary.
My third major message is that if we are to reach our ambitious destination, we will require support and collaboration from a wide range of parties. We are calling upon policymakers and practitioners to adopt ISSA 5000 when adopting sustainability requirements. The UK Financial Reporting Council’s study will hopefully pave the way for broad use of ISSA 5000 among UK practitioners. The IAASB will not attempt to dictate the timing and phasing of requirements throughout the world, but a commitment to assurance requirements that complement reporting requirements is critical if reported sustainability information is to engender the same confidential as financial reporting.
We also call on the accountancy profession to prepare for broader scale demand for sustainability assurance engagements. This means organizations, like the ICAEW, play a critical role in developing curriculum and training programs. Accountancy and other assurance firms will need to develop expertise and capacity with the emerging requirements. And a new generation of talent in accountancy profession will have to expand skillset in the audit and assurance toolkit. Clearly, this will be a challenge, but we must see this as an opportunity for the profession to demonstrate their continued relevance and remain attractive to future generations of professionals.
Let me close by returning to a theme that I highlighted earlier. Our sustainability journey will not always be smooth or go as anticipated. We need to work together with a sense of ambition and patience.
We must always remember our ambitious goal—to create a system of sustainability reporting that engenders the same level of trust as financial reporting. That will not be easy or immediately achievable—but that should not deter us. Companies will need to develop systems of internal controls, governance, and data gathering to improve reporting. We will need to train assurance specialists and reporting teams. Investors and other users will need to learn how to best analyze the new information, if unfamiliar with sustainability reporting. And regulators and standard setters must be ready to react as challenges arise.
We also need patience because the initial waves of reporting will not be perfect. But imperfection should not deter us from the journey ahead. As we move forward, the IAASB will continue to engage with stakeholders across sectors, listen to market feedback, and provide the support needed for successful implementation.
Thank you once again for your trust, your collaboration, and your commitment to a future where transparency and integrity in reporting serve the public interest. We look forward to continuing this journey together, building a robust foundation for sustainable economies.