The International Sustainability Standards Board (ISSB) has issued its first two IFRS® Sustainability Disclosure Standards – IFRS S1 (general sustainability‑related disclosures) and IFRS S2 (climate‑related disclosures). Together they create a global baseline for investor‑grade sustainability information, effective for annual reporting periods beginning on or after 1 January 2024. This guide distils what matters most for companies planning to adopt the Standards and offers a step‑by‑step readiness roadmap.
1. Understanding the ISSB Standards
1.1 IFRS S1 – General Requirements
- Applies to all sustainability‑related risks and opportunities that could reasonably be expected to affect enterprise value.
- Requires disclosure connected to four TCFD‑aligned pillars: Governance, Strategy, Risk Management, Metrics & Targets.
- Mandates linkage (“connected information”) between sustainability disclosures and the financial statements.
- Effective 1 January 2024 with optional early adoption alongside IFRS S2.
1.2 IFRS S2 – Climate‑related Disclosures
- Topic‑specific standard focusing on climate risks and opportunities.
- Requires disclosure of Scope 1 & 2 GHG emissions and (after the transitional period) Scope 3; industry‑based metrics drawn from SASB standards; and the use of scenario analysis to assess resilience.
- Aligns fully with the TCFD recommendations, embedding transition‑plan disclosures and financed emissions where relevant.
1.3 Interoperability with Other Regimes
The ISSB worked with global regulators to maximize interoperability with the EU’s ESRS, the SEC’s proposed climate rule, and GRI standards. Most overlapping information can be “double‑tagged”, reducing duplication if mapped carefully.
2. Why These Standards Matter
- Capital‑market relevance – 80% of global investors surveyed expect ISSB adoption to improve decision making.
- Regulatory pull – Over 20 jurisdictions representing more than half of global GDP have announced plans to adopt or reference the ISSB baseline.
- Operational efficiency – One global baseline avoids today’s patchwork of national ESG requirements.
3. Key Aspects to Consider
Aspect | What to watch | Practical tip |
Materiality lens | Investor‑centred, enterprise‑value focus | Anchor assessments in how sustainability factors impact future cash‑flows. |
Connected information | Consistency with financial statements | Align control environment and audit trail. |
Industry metrics | SASB‑derived metrics & narrative | Start with the SASB Industry‑Based Guidance annexes. |
Transitional reliefs | One‑year relief on non‑climate topics, Scope 3, comparatives³ | Use the relief year for systems build‑out and data quality work. |
Assurance trajectory | IOSCO (International Organization of Securities Commissions) & regulators signalling reasonable assurance within 3‑5 years | Engage audit and internal control teams early. |
Digital tagging (XBRL) | IFRS Digital Taxonomy to follow | Bake in structured‑data thinking now. |
4. Roadmap to Readiness - Ten Practical Steps
- Secure tone at the top – Board endorsement, designate C‑suite sponsor and cross‑functional steering group.
- Perform a gap analysis against ISSB disclosure requirements and existing reporting.
- Prioritize data architecture & ownership – map sources, define boundaries, assure data lineage.
- Embed climate scenario analysis consistent with NGFS (Network for Greening the Financial System) or IEA (International Energy Agency) pathways; quantify financial impacts.
- Upgrade risk management processes to integrate sustainability risks into ERM and capital allocation.
- Integrate sustainability & finance close processes to meet simultaneous filing expectation.
- Pilot disclosures in an internal “dry‑run” cycle; use feedback to refine controls.
- Plan for assurance – align with ISAE 3000/ISSAE 5000, strengthen internal controls.
- Develop transition‑plan narrative & targets (net‑zero, adaptation, capex) aligned with IFRS S2.
- Upskill and communicate – train staff, engage investors, and monitor evolving guidance.
5. Common Pitfalls and How to Avoid Them
- Treating ISSB as a reporting exercise only – integrate into strategy and risk processes.
- Under‑estimating data complexity – start Scope 3 mapping early and leverage industry collaborations.
- Siloed ownership – establish joint finance‑sustainability accountability.
- Late engagement with auditors – involve them during process design, not post‑facto.
- Ignoring jurisdictional tweaks – track local implementation rules and carve‑outs.
6. Looking Ahead
The ISSB has already launched projects on biodiversity, human capital and connectivity. Early movers will shape best practice and gain investor confidence.
Start now, iterate, and view the first reporting cycle as a learning opportunity.
Need support to start your reporting journey? Contact us today!
