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Governance 6 min read Published Updated Credibility 92/100

Governance Briefing — November 3, 2021

The IFRS Foundation’s launch of the International Sustainability Standards Board (ISSB) at COP26 consolidates CDSB and the Value Reporting Foundation into a single global standard-setter, signalling imminent investor-focused disclosure requirements that mirror TCFD architecture and demand enterprise-wide data, control, and assurance upgrades.

Zeph Tech Research Lead

Research lead, Zeph Tech

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Executive summary. The IFRS Foundation formally launched the International Sustainability Standards Board (ISSB) at COP26 on 3 November 2021, folding the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) into a single global standard-setting platform charged with delivering investor-focused sustainability disclosure requirements that can serve as a baseline for jurisdictions worldwide.[1] Trustees simultaneously published prototype climate and general sustainability disclosure requirements based on the Task Force on Climate-related Financial Disclosures (TCFD) architecture, signalling rapid movement toward consistent reporting on governance, strategy, risk management, and metrics.[2] Global financial regulators, including IOSCO, endorsed the launch and committed to assessing the ISSB standards for potential adoption, creating clear expectations for multi-national groups to align their sustainability reporting systems, data governance models, and assurance programmes with the forthcoming IFRS Sustainability Disclosure Standards.[3]

Strategic context. The ISSB complements the International Accounting Standards Board (IASB) under a shared governance model, ensuring that sustainability disclosures can be connected to financial statements and enabling the IFRS Foundation to offer integrated reporting guidance once the VRF (which houses the Integrated Reporting Framework and SASB Standards) is consolidated in 2022.[4] Frankfurt and Montreal were selected as strategic hubs, with a multi-location model that includes offices in San Francisco, London, and Tokyo via the VRF and CDSB legacy footprints, ensuring geographic balance and the ability to convene industry panels rapidly. Organisations that already map to SASB Standards, CDP questionnaires, or TCFD recommendations should view this transition as an opportunity to rationalise overlapping metrics, align definitions, and build canonical data dictionaries that can be re-used for the future IFRS S1 (general requirements) and IFRS S2 (climate-specific) standards.

Mandatory requirements emerging from the prototypes. The prototypes published alongside the launch reveal the expected architecture of future standards and give compliance teams concrete requirements to prepare for:

  • Governance disclosures: Entities will need to disclose board and management oversight of sustainability-related risks and opportunities, including committee mandates, frequency of updates, delegated authorities, and how performance incentives are linked to sustainability objectives.[2]
  • Strategy and resilience: Preparers must explain material sustainability risks, opportunities, and their impacts on business models, strategy, and financial planning, supplemented by scenario analysis that assesses resilience under different climate pathways.[5]
  • Risk management: Processes for identifying, assessing, prioritising, and monitoring sustainability risks must be documented, including integration with enterprise risk management (ERM) and how thresholds for materiality are determined.
  • Metrics and targets: Entities are expected to provide quantitative and qualitative metrics that are decision-useful for investors, including Scope 1, Scope 2, and relevant Scope 3 greenhouse gas emissions, financed emissions for financial institutions, and industry-specific key performance indicators borrowed from SASB standards.[1]

The prototypes also emphasise connectivity with financial statements, requiring preparers to explain how sustainability impacts intersect with financial statement line items, assumptions, and long-term cash-flow projections. That imperative will push controllers, investor-relations teams, and sustainability leaders to develop shared materiality assessments and consistent data lineage.

Implementation roadmap. Organisations should pursue a staged readiness programme covering governance, process design, systems integration, and external engagement:

  1. Mobilise leadership. Assign board oversight—often to the audit, risk, or sustainability committee—and document revised charters that reflect ISSB-aligned responsibilities. Ensure the CFO, Chief Sustainability Officer, Chief Risk Officer, and Chief Audit Executive agree on ownership for disclosures, controls, and assurance.
  2. Map current reporting. Inventory existing disclosures made under TCFD, CDP, SASB, GRI, Integrated Reporting, or local mandates. Highlight duplicated data sources, inconsistent methodologies, and metrics that fail to capture enterprise-wide exposures. Establish a baseline maturity assessment that benchmarks each disclosure pillar (governance, strategy, risk management, metrics) against the prototypes.
  3. Design data architecture. Define canonical data elements for greenhouse gas emissions, climate scenario parameters, sustainability-linked compensation metrics, and industry-specific KPIs. Leverage the VRF’s SASB taxonomy as a reference to harmonise definitions across business units, then design application interfaces to capture activity data, emission factors, and control evidence.
  4. Integrate controls and assurance. Translate each disclosure requirement into control statements covering completeness, accuracy, timeliness, and governance. Embed automated validations (for example, checking emission factor units, scenario modelling assumptions, or board meeting attendance) and establish independent testing by internal audit to prepare for external assurance once standards are finalised.
  5. Engage stakeholders. Prepare investor communications explaining how ISSB adoption will alter disclosures, coordinate with jurisdictional regulators monitoring the global baseline (e.g., UK Financial Conduct Authority, Canadian Securities Administrators), and provide feedback to IFRS consultations during 2022 to influence final requirements.

Controls catalogue. Compliance and finance teams should implement a control environment that aligns with the IFRS Foundation’s focus on high-quality, decision-useful information:

  • Data acquisition controls: Automated extraction of activity data (energy use, procurement volumes, asset lifetimes) from enterprise resource planning (ERP) and operational technology systems, combined with data-quality rules that validate units, dates, and organisational boundaries.
  • Methodology governance: Documented calculation methodologies for emissions, scenario analysis inputs, and sustainability-linked financial metrics, version-controlled and reviewed by cross-functional committees to prevent unilateral changes.
  • Materiality assessments: Structured workshops with finance, risk, sustainability, and investor-relations teams using defined scoring criteria to determine which sustainability matters are material. Archive rationale and supporting evidence for each inclusion or exclusion decision.
  • Disclosure controls and procedures: Pre-issuance checklists verifying alignment between sustainability disclosures and financial statement assumptions, ensuring no contradictory statements appear across filings, investor decks, or sustainability reports.
  • Assurance readiness: Preparation of evidence packages (data lineage diagrams, control test results, management representations) that can be shared with external auditors and regulators to demonstrate compliance with IFRS-quality standards.

Metrics and KPIs. Organisations should track leading and lagging indicators that demonstrate readiness:

  • Percentage of sustainability data points with automated lineage to source systems.
  • Number of board and executive briefings covering ISSB transition and associated action items completed.
  • Time taken to close sustainability reporting, measured from quarter-end to issuance of draft disclosures.
  • Assurance findings related to sustainability controls, including remediation cycle time.
  • Coverage of SASB industry metrics incorporated into pilot ISSB-aligned reporting packages.

Training and change management. Equip directors and management with briefing materials that translate ISSB prototypes into practical expectations, using case studies from early adopters (e.g., jurisdictions mandating TCFD) to illustrate investor reactions. Provide finance and sustainability analysts with scenario-planning workshops, data-governance bootcamps, and tool-specific training (e.g., emissions calculation engines, disclosure management platforms). Reinforce cultural alignment by integrating sustainability targets into performance reviews and incentive plans.

External engagement and policy monitoring. Track IFRS Foundation consultations, including the exposure drafts for IFRS S1 and S2 expected in Q1 2022, and coordinate comment letters reflecting sector-specific insights. Monitor jurisdictional adoption signals, such as the UK’s Sustainability Disclosure Requirements roadmap and Canada’s commitment to base standards on the ISSB, to anticipate dual-reporting obligations.[6] Maintain dialogue with industry groups (WFE, IIF, SASB Standards Advisory Group) to influence implementation guidance and secure early access to transition relief clarifications.

Forward-looking considerations. The ISSB will prioritise climate but plans to broaden into biodiversity, human capital, and value-chain resilience topics—areas where investors are seeking greater transparency. Organisations should therefore build modular data models capable of absorbing new metrics without major rework and adopt workflow tools that can handle evolving taxonomies. By investing early in governance, data, and controls, enterprises can reduce compliance costs, pre-empt fragmented national requirements, and demonstrate leadership in sustainable value creation.

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