How Standards Emerge

This issue of Innovations journal from MIT is dedicated to impact investing and features substantive conversations from industry leaders. The GIIN contributed this discussion about IRIS and the stakeholder involvement necessary to establish standards for a new industry.

From original article:

"Standardized accounting practices and financial reporting have evolved in tandem with the investment industry, and are now universally accepted and used. Today, the International Financial Reporting Standards (IFRS) guide reporting and aid interpretation of a business's financial position, and it is both de facto and, in much of the world, de jure that a business will regularly report standardized financial statements in order to function in a market.

"How do such standards emerge? Can a common reporting framework be credibly developed and accepted over a few decades, rather than over millennia? After all, the IFRS have yet to be adopted in the United States, which instead uses the generally accepted accounting principles (US GAAP), a reporting standard that fulfills the same purpose. These are key questions for the impact investing industry, as efforts to develop and adopt a standardized set of social and environmental performance indicators begin to gain traction. For impact investing, uptake and widespread adoption of a credible, independent, common set of standards is critical for social and environmental impact to be realized and far-reaching, and thus for the industry to flourish."