Question 1 Flashcards
What is the Multiple Streams Approach (MSA) and how is it relevant to the ISSB’s creation?
MSA explains policy changes by analyzing the coupling of three streams: the problem stream (issues requiring attention), the policy stream (viable solutions), and the political stream (institutional and external pressures). The IFRS Foundation’s creation of the ISSB involved coupling these streams during a policy window facilitated by policy entrepreneurs.
What was the “problem stream” that led to the IFRS Foundation’s entry into sustainability reporting?
The problem stream was the fragmented and inconsistent landscape of sustainability reporting, often referred to as the “alphabet soup.” Investors expressed dissatisfaction with the lack of comparable and coherent information for assessing long-term risks and opportunities.
How did the IFRS Foundation initially respond to the problem of fragmented sustainability reporting?
Initially, the IFRS Foundation updated the Management Commentary Practice Statement (MCPS) as a minor step to address concerns but refrained from broader action due to hesitancy about expanding its mandate.
What role did policy entrepreneurs play in the creation of the ISSB?
Policy entrepreneurs within the IFRS Foundation, particularly Trustees, identified the problem’s urgency, promoted investor-focused proposals, and strategically engaged stakeholders to build support. They coupled the problem, policy, and political streams during a policy window to drive the ISSB’s formation.
What external pressures contributed to the opening of a policy window for the IFRS Foundation?
External pressures included the EU’s development of the CSRD, which sidelined the IFRS Foundation, and public calls from EU Commissioner Valdis Dombrovskis for the IFRS Foundation to act quickly on sustainability reporting to maintain its relevance.
What role did Accountancy Europe and Eumedion play in the policy stream?
They contributed actionable policy proposals, such as Accountancy Europe’s Cogito Paper and Eumedion’s Green Paper, which provided detailed frameworks for creating a sustainability standards board aligned with financial and non-financial reporting.
Why was the GRI excluded from the Technical Readiness Working Group (TRWG)?
The GRI was excluded because the IFRS Foundation focused on investor-oriented frameworks emphasizing financial materiality, while the GRI prioritizes broader impact materiality.
What steps were taken to implement the ISSB, and why was COP26 significant?
COP26 provided a global platform to launch the ISSB. The TRWG developed prototype standards, and organizations like the SASB, IIRC, and CDSB were merged into the IFRS Foundation to consolidate expertise and reduce fragmentation.
How does the ISSB’s focus on “enterprise value” differ from the CSRD’s “double materiality” approach?
The ISSB focuses on financial materiality—information affecting enterprise value for investors—while the CSRD includes double materiality, addressing both financial impacts and a company’s effects on society and the environment.
What were the challenges faced by the IFRS Foundation due to its lack of regulatory authority?
The IFRS Foundation had to rely on legitimacy-building by engaging stakeholders, constructing demand, and securing endorsements to ensure voluntary adoption of its sustainability standards.
Should the IFRS Foundation be the global standard setter for sustainability reporting?
While the IFRS Foundation has expertise in investor-focused reporting, sustainability reporting requires a broader multi-stakeholder approach. The ISSB can provide a global baseline but should collaborate with frameworks like the GRI to address diverse stakeholder needs.
How did policy entrepreneurs construct demand for the ISSB?
They engaged stakeholders like the TCFD, IOSCO, and investors to frame the ISSB as a demand-driven response. Public consultations reinforced the urgency of consistent sustainability reporting, aligning the streams for the ISSB’s creation.
Why was legitimacy critical for the ISSB’s creation, and how was it maintained?
Legitimacy was crucial for gaining stakeholder trust and voluntary adoption of standards. The IFRS Foundation framed its initiative as demand-driven and built on existing frameworks to minimize resistance and reinforce neutrality.
What was the significance of merging the SASB, IIRC, and CDSB into the IFRS Foundation?
The mergers reduced fragmentation, pooled expertise, and positioned the ISSB as a consolidated leader in sustainability reporting, enhancing its credibility and efficiency.
How did the coupling of the streams lead to the ISSB’s establishment?
Policy entrepreneurs aligned investor dissatisfaction (problem stream), actionable proposals like the Cogito Paper (policy stream), and regulatory pressure from the EU (political stream) during a policy window, culminating in the ISSB’s launch.
