ISSB and IFRS S1

On 26 June 2023 the International Sustainability Standards Board issued its inaugural standards—IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. These standards set up a global baseline for sustainability reporting that jurisdictions can adopt or build upon, addressing investor demands for comparable, decision-useful sustainability information.

IFRS S1 General Requirements Overview

IFRS S1 establishes the overarching framework for sustainability-related financial disclosures, setting out core concepts, general requirements, and presentation principles that apply across all sustainability topics. The standard requires companies to disclose information about sustainability-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance, or cost of capital over the short, medium, and long term.

• Materiality concept. Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions of primary users of general purpose financial reports. This investor-focused materiality definition aligns with financial reporting frameworks.
• Governance disclosures. Companies must describe governance processes, controls, and procedures used to monitor, manage, and oversee sustainability-related risks and opportunities, including board oversight and management roles.
• Strategy disclosures. Reports must explain how sustainability-related risks and opportunities affect business model, strategy, decision-making, and financial position, including scenario analysis where climate risks are material.
• Risk management disclosures. Organizations must describe processes for identifying, assessing, prioritizing, and monitoring sustainability-related risks and opportunities, and how these integrate with overall risk management.
• Metrics and targets. Companies must disclose metrics used to measure and manage sustainability-related risks and opportunities, including industry-specific metrics derived from SASB Standards and targets set by the entity.

IFRS S2 Climate-related Disclosures

IFRS S2 builds on the TCFD framework to establish specific requirements for climate-related financial disclosures. The standard requires disclosure of Scope 1, Scope 2, and Scope 3 greenhouse gas emissions, with Scope 3 requirements phased in over time for smaller entities and emerging economies.

• Transition plans. Companies with climate-related transition plans must disclose key assumptions, dependencies, and metrics used to track progress. This includes carbon reduction targets and the strategies and actions planned to achieve them.
• Climate resilience. Organizations must use climate-related scenario analysis to assess resilience to climate-related changes, uncertainties, and potential disruptions. Both physical risks and transition risks must be considered.
• Industry-based disclosure topics. IFRS S2 incorporates industry-specific guidance from SASB Standards, ensuring companies in different sectors disclose the climate-related information most relevant to their industries.

Implementation Timeline and Jurisdictional Adoption

The ISSB standards are effective for annual reporting periods beginning on or after 1 January 2024, with jurisdictions determining their own adoption timelines. Several major economies have announced plans to require or permit ISSB-aligned disclosures, including the United Kingdom, Australia, Singapore, and Japan.

Transitional relief provisions allow companies to focus on climate-related disclosures in the first year of adoption before expanding to other sustainability topics. Scope 3 emissions reporting is also subject to transitional provisions recognizing the data collection challenges involved.

Relationship to Other Reporting Frameworks

The ISSB standards build upon and consolidate existing frameworks including TCFD recommendations, SASB Standards, and elements of the CDSB Framework. Organizations already reporting under these frameworks will find significant overlap, though additional disclosures may be required to achieve full ISSB compliance.

For companies operating in the EU, the ISSB standards create interoperability considerations with the European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive. While both sets of standards share common foundations, differences exist in scope, materiality definitions, and specific disclosure requirements that companies must handle.

Preparation Steps for Reporting Organizations

• Gap assessment. Compare current sustainability disclosures against ISSB requirements to identify gaps in governance, strategy, risk management, and metrics disclosures. Prioritize areas requiring the most significant improvement.
• Data systems improvement. Evaluate data collection capabilities, particularly for Scope 3 emissions and industry-specific metrics. Implement systems and processes to gather required information on a reportable timeline.
• Assurance readiness. Although assurance is not required in all jurisdictions initially, prepare for eventual external assurance by establishing controls over sustainability data comparable to financial reporting controls.

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Coverage intelligence

Published

June 26, 2023

Coverage pillar

Compliance

Source credibility

90/100 — high confidence

Topics

ISSB · IFRS S1 · IFRS S2 · Sustainability reporting

Sources cited

3 sources (ifrs.org)

Reading time

5 min

Cited sources

1. ISSB issues inaugural global sustainability disclosure standards — ifrs.org
2. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information — ifrs.org
3. IFRS S2 Climate-related Disclosures — ifrs.org