The International Sustainability Standards Board is considering a major change in how companies report nature-related risks and opportunities. Staff members recommend a non-mandatory “Practice Statement” instead of a new binding standard. This proposal, developed under the IFRS Foundation, aims to guide companies without adding pressure in the early stages of sustainability disclosure. This shift is already influencing discussions about ISSB nature reporting, IFRS sustainability standards, nature-related disclosures, climate reporting frameworks, and ESG reporting guidance, as stakeholders evaluate its impact on global reporting practices.

This recommendation comes at a time when businesses worldwide are still adjusting to new sustainability standards. By choosing a Practice Statement rather than a strict rule, the ISSB seeks to maintain flexibility while highlighting the importance of nature-related information in financial reporting. The discussion is gaining momentum across various areas, particularly as investors and regulators demand greater environmental transparency.

Background: ISSB and Existing Standards

The ISSB was established in November 2021 to create a global baseline for sustainability disclosures for both investors and companies. Its mission focuses on providing consistent, comparable, and helpful information about sustainability risks and opportunities. In June 2023, the board introduced its first two major frameworks: IFRS S1 and IFRS S2, which focus on general sustainability and climate-related disclosures.

These standards marked a significant milestone in aligning global reporting practices. They help companies disclose important sustainability information in a structured way. Since their release, organizations across different industries have worked to integrate these requirements into their financial reporting systems, making the timing of any new standards a vital consideration.

Exploring Approaches to Nature-Related Disclosures

In a recently published staff paper, the ISSB looked at four possible ways to include nature-related disclosures. These options included expanding existing standards like IFRS S1 or IFRS S2, introducing a new standalone standard, providing industry-specific guidance, or developing a non-mandatory Practice Statement.

The staff ultimately recommended the Practice Statement approach, arguing that it would complement existing frameworks without disrupting their use. According to the paper, including nature-related requirements directly in IFRS S1 or S2 could cause confusion and slow adoption. Also, a standalone standard might separate nature-related issues into a different category, possibly leading to fragmented reporting.

The proposed Practice Statement, while not mandatory, would still be part of the broader IFRS Sustainability literature. It would give companies structured guidance on identifying and disclosing nature-related risks and opportunities, helping them meet investor expectations while maintaining flexibility in how they apply it.

Role of TNFD and Industry Alignment

The ISSB’s move toward nature-related disclosures follows earlier efforts by the Taskforce on Nature-related Financial Disclosures, which developed frameworks to guide companies in reporting nature-related impacts. After the ISSB announced its intention to create its own approach, the TNFD opted to end its technical work program, signaling a consolidation of global efforts under the ISSB’s leadership.

This transition reflects a growing recognition of how climate and nature risks are connected. Many experts argue that biodiversity loss, ecosystem degradation, and resource depletion pose financial risks similar to climate change, making their inclusion in corporate reporting increasingly important.

Concerns from Environmental Organizations

Despite the ISSB’s reasoning, the recommendation has faced criticism from several environmental and sustainability organizations. Groups like WWF International, Conservation International, and Finance for Biodiversity Foundation worry that a non-mandatory approach may stall progress on nature-related disclosures.

In an open letter, these groups urged the ISSB to adopt a mandatory standard instead. They argue that the financial significance of nature-related risks is now well understood, and that delaying binding requirements could hinder global efforts to combat biodiversity loss and environmental damage. The letter stressed that aligning climate and nature reporting is crucial, and that voluntary guidance might not lead to meaningful change.

Balancing Flexibility and Urgency

This debate highlights a larger tension within sustainability reporting: the need to balance flexibility for companies with the urgency of environmental issues. While a Practice Statement may promote gradual adoption and lessen implementation burdens, critics fear it could result in inconsistent reporting and lower accountability.

At the same time, supporters of the approach argue that it helps companies develop their capacity and integrate nature-related concerns without overwhelming existing reporting systems. By framing the Practice Statement as a supportive tool rather than a strict requirement, the ISSB aims to encourage broader participation in nature-related disclosures.

Next Steps for ISSB

The ISSB plans to discuss the staff recommendation at an upcoming meeting on April 22. This meeting will determine the future direction of its nature-related reporting framework. The decision is expected to have significant implications for companies, investors, and policymakers, as it will shape how nature-related risks are included in global financial reporting systems.

As discussions continue, the outcome is likely to influence not just corporate disclosure practices, but also the overall alignment between sustainability, finance, and environmental responsibility.