Emmanuel Faber was appointed as the inaugural Chair of the newly created International Sustainability Standards Board (ISSB) in December 2021. Here he discusses what attracted him to the role and his ambitions for the ISSB.
I have always been interested in sustainability. As a keen rock climber I have a strong affinity with nature and the great outdoors. And as a business leader, I placed sustainability at the core of business strategy. That’s not only good for society and the environment, but it is also good for the long-term success and resilience of the company. That is why, at Danone, we developed a sustainability strategy and reported on sustainability matters long before many other companies did so. Over the years, I’ve had lots of interesting discussions with investors and others about the importance of sustainability and on reporting to the market on sustainability matters.
I believe that global, efficient capital markets are a gift that serves society. Therefore, the IFRS Foundation’s public interest remit and its mission to provide the capital markets with information that enables investors to make informed investment decisions and capital allocations appeal to me.
Greenwashing has become a real risk in recent years but one thing it shows is that companies recognise that acting on issues like climate or social matters is important for their stakeholders and shareholders. The problem in today’s market is that companies can make claims that nobody can verify. That makes it extremely difficult for people making capital allocation decisions. High-quality global standards for disclosing sustainability information will significantly reduce greenwashing ‘noise’ and help companies and investors have meaningful conversations about what really matters to them and the concrete steps taken to implement sustainability commitments.
I have always looked at economy from the angle of the word’s Greek roots—oikonomia—and consider it our way of living in a common home. I am of the view that only human capital exists. Ideas for innovation, collective action to create business solutions to meet needs are a human factor, which then attracts financial capital for implementation. For me, such human capital is naturally embedded into the fabric of companies and the economy. I became aware of the climate component of this common home back in 2005: carbon is needed in the soil as a core nutrient—not in the air. As one of the leading food and agriculture companies in the world, at Danone we had an opportunity to decarbonise our processes while building the long-term resilience of our business by taking care of what nature provided for free.
I think we are at a turning point. We have built a global economic system which is now being challenged in many ways because the somewhat linear economic development that has taken place in many countries over the last several decades is coming to an end. The world has become volatile and climate is an increasingly critical factor of volatility and of increased inequalities across many dimensions. So we can’t think only with the mindset that emerged in the middle of the previous century. We have in many ways focused on short-term efficiency, and we are at a time when we absolutely need to add resilience into the mix. Already today, climate change is driving extreme weather events, water scarcity and social instability. The current decade is critical for managing and mitigating the effect of such events on our global prosperity.
I have significant experience in leadership and in working with people all over the planet. I have lived and worked in Africa, Asia, the Americas and Europe so I am used to talking with and listening to colleagues and other stakeholders around the world. As the CFO and CEO of a large, listed company I was also exposed to the information demands and expectations of global investors.
I have been involved with, founded and chaired several business coalitions—including the G7 Business for Inclusive Growth coalition, working with both the public and private sectors, and bring the skills and relations I have built through that work too.
I’m looking forward to many things: getting to know my new colleagues, both those at the IFRS Foundation and those working for the two organisations—the Climate Disclosure Standards Board and the Value Reporting Foundation—who are currently in the process of becoming part of the Foundation and the ISSB team; getting into the details of the prototypes developed by the Technical Readiness Working Group; and engaging with the many stakeholders that will become so incredibly important to the ISSB’s success.
The immediate challenges are to get the ISSB up and running. We are making good progress―Sue Lloyd has been appointed as Vice-Chair and Janine Guillot as my Special Advisor. I’m also working with the IFRS Trustees to appoint a diverse group of other ISSB members from around the world. Another key challenge for us is finding the right balance between working quickly to meet the demand for the standards while ensuring stakeholders have enough time to consider our proposals and share their views with us.
Our mandate and strategic direction set out by the IFRS Foundation Trustees are clear. Success is getting a diverse and inclusive ISSB up and running quickly so that we can meet the ambitious timeline of publishing proposals by the end of the first quarter this year, with the view of having the first final standards ready as soon as possible.
Another measure of success will be the level of engagement with and feedback from our consultations. Sustainability is by nature a multi-faceted topic and it is crucial that we get feedback from all those with an interest in companies’ reporting on sustainability matters to the financial markets to help us build consensus, create high-quality requirements and encourage adoption of the standards.
The ISSB can learn a lot from the IASB! The IASB has developed a comprehensive set of accounting standards that listed companies in much of the world are required to use when preparing their financial statements. It has done that by engaging successfully with a wide range of stakeholders and through high-quality technical discussions. The ISSB will follow the same inclusive and consultative process for developing standards and much of our other activities will also take inspiration from the IASB’s ways of working. While the ISSB will have to find its own ways, our ‘older sibling’ can teach us much.
Linking our work to that of the IASB is essential. We need to work together so we can provide investors with powerful decision-making tools―and to make sure we don’t create big overlaps or holes in the system.
I personally feel strongly about a range of topics and have always done, such as natural capital and biodiversity. However, the question about what we focus on next will of course be a decision based on stakeholders’ views and made by the ISSB. We plan to do a public consultation to help us create our future work plan and I would really encourage everybody to tell us what they believe we should do.
A fundamental difference! The Paris Agreement is one of the broadest ever: it encompasses nationally determined contributions and pathways for governments to reduce emissions of carbon, methane and other greenhouse gases within time boundaries. Governments need companies in the private sector to do the heavy lifting required. Investors and their regulators want to understand what companies are doing to reduce their greenhouse gas emissions and how climate matters affect their enterprise value. The ISSB’s remit is to provide investors with the information they need to understand and assess companies’ progress—helping build a globally accepted language about these emissions that will be a foundation for effective dialogue and decision making among all the stakeholder groups of the Paris Agreement.
As mentioned, I’m an avid rock climber. It brings me mindfulness. I also think the discipline it requires helps improve my decision making under pressure.
I could not choose between ski instructor, diplomat or astronomer.