The European omnibus regulation aims to ease certain non-financial reporting requirements. The result: the CSRD will be eliminated for nearly 80% of the affected companies, postponed for others, the duty of care will be deferred, the carbon border adjustment tax will be modified, and so on. Stéphane Séjourné, Executive Vice President of the European Commission, had mentioned its possible elimination. This is a boon for the ISSB, a major competitor to the CSRD. This private-law organization, legally domiciled in the United Kingdom, aims to set new non-financial accounting standards.

For the ISSB, finance is the primary driver of transformation. By providing investors with reliable non-financial data, these standards would allow capital to flow naturally toward the companies with the best sustainability performance. This vision contrasts with that of the Corporate Sustainability Reporting Directive (CSRD) established by the European Union. This directive seeks to impose a more ambitious regulatory framework, on the grounds that the market alone is not sufficient to fully integrate non-financial considerations.

“We measure many things that matter, but we don’t measure everything that matters,” noted Emmanuel Faber, former CEO of Danone and current chair ofthe International Sustainability Standards Board (ISSB). So who will measure what really matters?

The ISSB Serving the Financial Markets

Established in 2021 under the auspices of the IFRS Foundation—the guardian of international accounting standards—the ISSB aims to harmonize non-financial reporting. The IFRS Foundation’s mandate is to “ensure transparency, accountability, and the efficiency of financial markets at the international level.”

“What makes me fundamentally optimistic is the role that financial markets can play in the transition we must successfully achieve,” says Emmanuel Faber, chair of the International Sustainability Standards Board (ISSB).

In line with this approach, the ISSB views accounting as a tool to serve investors. It refers to these new non-financial standards as IFRS S—S, for Sustainability. According to the London-based private-law organization,“it is reasonable to expect that these standards will have a short-, medium-, or long-term impact on a company’s cash flows, its access to financing, or its cost of capital.”

Three key principles underpin this vision:

• Facilitate the financing of the green transition through comparable and standardized data;

• To enable a better assessment of non-financial risks by incorporating these criteria into financial decisions;

• Harmonize regulatory frameworks on a global scale to ensure market stability and prevent market fragmentation.

It is not always easy to assess the pace at which IFRS S standards are being implemented, as the ISSB skillfully blends, in its communications, countries conducting consultations toward future adoption with those that have already definitively adopted its standards. According to the latest report published by the ISSB at the end of 2024: “Thirty countries outside the EU have chosen to begin the process of adopting ISSB standards; more than half have already completed it in recent months, with the first implementations scheduled for early 2025.”

These 30 countries account for 57% of global GDP and 50% of global GHG emissions.

CSRD: Holding Companies Accountable

Unlike the ISSB, which emphasizes its “apolitical nature,” the European Union has chosen a more ambitious path. Effective in January 2024, the CSRD establishes a binding framework to hold companies accountable beyond their financial interests alone. Specifically, large companies must include sustainability information in a separate section of their management report or publish a standalone sustainability report. It is based on the principle of double materiality, which incorporates two complementary dimensions:

• Financial materiality assesses how environmental, social, and governance issues influence a company’s financial performance, risks, and opportunities;

• Impact materiality analyzes how a company affects society and the environment, regardless of its direct financial impact.

By 2026, the CSRD was expected to apply to 50,000 companies in the European Union. But this goal is now being called into question by the European Omnibus Directive. The European Commission intends to narrow the scope of the requirement, limiting it to very large companies with more than 1,000 employees. The requirement would no longer apply to 50,000 but to 10,000 European companies.

Nothing is apolitical

Accounting standard-setting is , in practice, always influenced by political and economic choices, as the positive theory of accounting developed by Watts and Zimmerman teaches us. It emphasizes that companies are subject to political costs arising from regulations that favor certain stakeholders at the expense of others.

These costs are all the more likely to arise when companies report high profits or operate in sectors that are highly exposed to regulations and societal expectations. In this context, the ISSB and CSRD standards offer two distinct strategies. The ISSB, by relying on market forces, allows companies to limit their exposure to restrictive regulations while gradually integrating non-financial criteria. The CSRD, by imposing a more ambitious regulatory framework, increases transparency but also creates additional obligations and costs for companies.

A Frenzy of Interests

Different perspectives influence the standard-setting process. The positions taken by the International Organization of Securities Commissions (IOSCO), the French Financial Markets Authority (AMF), and auditors are particularly noteworthy in this regard.

IOSCO, which brings together the world’s leading financial regulators, supports the ISSB. It favors an approach based on financial materiality and transparency for investors, while calling for the avoidance of constraints that could hinder capital flows.The AMF, for its part, takes a middle ground . It encourages a framework inspired by the ISSB to preserve the competitiveness of companies and financial markets, while urging “the ISSB to incorporate dual materiality into its standard-setting process.”

Furthermore, sustainability reports required under the CSRD must be certified by auditors. However, these auditors—particularly the “Big Four”—are deeply involved in the organizations drafting the CSRD texts. These players appear to have identified this European directive as a market opportunity. This raises yet another question regarding the issues of concentration and influence in the development of the non-financial audit market.

What do the companies themselves have to say?

Companies in the sectors most exposed to non-financial regulations would prefer less stringent standards… such as those of the ISSB. As a result, 25 European lobbying groups representing business interests, including Business Europe (the European equivalent of Medef), have publicly called for the CSRD to be simplified and its implementation delayed.

“We strongly support the European Green Deal and its continued implementation, [and] we know that European standards on nature, biodiversity, and climate are not a problem, but an essential part of the solution.”

Conversely, in another open letter, more than 180 civil society organizations and about 60 major companies—including Decathlon, IKEA, Patagonia, Accor, and Nestlé—have publicly reaffirmed their support for European regulations.