ISSB’s much-awaited inaugural standards bring more clarity and consolidation to the sustainability disclosure field

In the dynamic global landscape of sustainability reporting, corporate reporters’ focus is shifting to mandatory disclosure. Companies have spent much of 2023 ‘biting their nails’ in anticipation of mandatory reporting standards. A pivotal moment arrived in June 2023 when the International Sustainability Standards Board (ISSB) issued its inaugural standards: International Financial Reporting Standards (IFRS) S1 and IFRS S2.

Backed by support from the International Organization of Securities Commissions (IOSCO) and bolstered by rapid adoption signals by several national governments, the ISSB’s IFRS S1 and S2 (IFRS S1/S2) standards are swiftly gaining ground and are poised to become mandatory in multiple jurisdictions. The ISSB’s burgeoning influence worldwide indicates a significant shift in the disclosure landscape.

The standards represent a long-awaited convergence of reporting climate- and sustainability-related disclosures in tandem with financial disclosures in annual business reports. IFRS S1 and S2 have consolidated and incorporated several frameworks (TCFD, SASB, CDSB, and others). Corporates feeling the pressure of reporting to multiple frameworks can look to this alignment with some degree of relief. However, once IFRS S1 and S2 become mandatory, depending on the jurisdiction, companies may find preparation requires significant resources both to extract the full value from alignment (beyond compliance) and to avoid fines and legal trouble.  

Companies should be mindful that in 2024, CDP will integrate the ISSB S2 standard into its global disclosure platform meaning the 23,000 companies who disclosed this year plus those that begin disclosing next year will all be preparing and disclosing an ISSB S2-aligned data set. This move will catalyze more rapid company adoption and ultimately advance mandatory requirements.

Companies navigating these uncharted waters must not delay their preparations. ERM’s experts anticipate the ISSB's influence will ripple through both corporate strategies and market dynamics, even beyond jurisdictions that follow IFRS.

Overview of ISSB’s IFRS S1/S2

The IFRS Sustainability Disclosure Standards set out requirements for a company to disclose information about its sustainability‑related risks and opportunities in its general-purpose financial reports. These Standards respond to persistent demand from companies and investors to have a common language to report and value climate and social sustainability strategies. The Standards are underpinned by a set of conceptual foundations in IFRS S1.

  • IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
    • This standard sets out how an entity reports its sustainability-related financial disclosures, by introducing requirements on governance, strategy, risk management, and metrics and targets.
    • IFRS S1 requires a company to disclose material information about the sustainability-related risks and opportunities that could affect its cash flows, access to finance, or cost of capital over the short-, medium-, and long-term.
  • IFRS S2: Climate-related Disclosures
    • Used in accordance with S1, this standard sets out how an entity reports its climate-related risks and opportunities. It requires material disclosures of information regarding physical risks (e.g., flood risk), transition risks (e.g., regulatory change), and climate-related opportunities (e.g., new technology).
    • IFRS S2 expands on CDP, CDSB, and the TCFD’s recommendations around climate-related financial disclosures to better meet the needs of investors and capital markets.

Timing and Transition Reliefs

All companies can apply IFRS S1/S2, but the ISSB does not have the authority to mandate their application. Timeliness will be important as IFRS S1/S2 are effective for annual reporting periods beginning on or after January 1, 2024. IFRS S1/S2 will be mandatory when and if jurisdictions’ respective financial reporting frameworks and regulatory requirements incorporate them. Reporters can and will follow IFRS S1/S2 voluntarily, like the Global Reporting Initiative Standards, if they become recognized as “best practice”.  

According to ISSB, sustainability disclosures should be included in general financial reports such as annual or quarterly reports. Importantly, companies must report their sustainability-related financial disclosures at the same time as their related financial statements. This element should not be underestimated, as once mandated, companies must establish processes and controls to ensure they can furnish sustainability-related information of equivalent quality and timeliness to their financial information.

IFRS S1 and S2 both include transition reliefs to allow companies time to comply. Notably, in the first year of adoption, companies can report to the requirements in IFRS S1 only to the extent that they relate to the disclosure of climate-related information (IFRS S2). In the second year that a company applies the IFRS Sustainability Disclosure standards, information about other sustainability-related risks and opportunities would need to be disclosed (the rest of IFRS S1). These reliefs should allow time for businesses to build the capacity necessary to report consistent, complete, comparable, and verifiable sustainability-related financial disclosures.

The current state of adoption

Regulatory Response

The IFRS S1/S2 standards have been well-received internationally and continue to garner the support of oversight and regulatory bodies. Within a week of the announcement, Singapore proposed its plan for mandatory climate-related reporting, recommending that company reporting mirrors the requirements of IFRS S1 and S2. In the months since, several countries have followed suit including Japan, Canada, Brazil, Egypt, Nigeria, Chile, the United Kingdom, and Australia, each announcing their intent to incorporate the standards into required reporting regimes. This is no big surprise, as the standards were designed for adoption by and harmonization with IFRS countries’ existing financial reporting regulations, yet the relatively quick, global uptake is significant. ERM expects that most IFRS-reporting nations will implement related requirements in the coming years.

The IFRS S2 standard has been particularly well-received. During COP28, ISSB announced that almost 400 organizations from 64 jurisdictions have committed to advancing the adoption or use of the ISSB’s climate-related reporting (IFRS S2) at a global level.

Non-IFRS jurisdictions (like the U.S.) will likely monitor the rollout and adoption of IFRS S1/S2 and consider using best practices for regulation in their own jurisdictions.

Relationship with other Frameworks/Raters

IFRS S1 and S2 were influenced by several pre-existing standards, frameworks, and disclosure platforms, some of which have been consolidated under the ISSB’s umbrella to create a single, standardized framework for disclosures. IFRS S1 and S2 incorporate the TCFD recommendations, SASB Standards, CDSB Framework, Integrated Reporting Framework, and other sources. Though some of these frameworks still function as standalone guidance (such as SASB), their consolidation under a single entity encourages consistent and comparable disclosures.

The ISSB has been working closely with other standard setters to maximize interoperability between its standards and relevant reporting frameworks including:

  • European Financial Reporting Advisory Group (EFRAG) in the EU
  • Securities and Exchange Commission (SEC) in the US
  • Memorandum of understanding (MOU) with GRI

We expect that it will take time for companies to notice a reduction in reporting burden, and that effort will be reallocated to preparing investor-grade data, but it does seem that we are finally headed toward meaningful consolidation and alignment.

How to prepare

As a first step, companies should review their geographic footprint and determine if they are or will be subject to any local requirements to disclose the S1 and S2 standards.

Upon determining applicability, companies should evaluate relevant timelines and local requirements to begin planning for disclosure. There may be varying timelines or requirements between jurisdictions.

We recommend the following actions to help prepare your company to report on the IFRS S1/S2 (and other sustainability, ESG, or) reporting standards:

  • Conduct a materiality assessment or review your assessment process: If you have already conducted a materiality assessment (double or single), review your materiality process to ensure it explicitly incorporates financial considerations and addresses value trade-offs and short-, medium-, and long-term impacts.
  • Complete a gap analysis and create a roadmap: Assess your current state of reporting and management to determine whether you are ready to comply with IFRS S1/S2. Prepare a plan to close the reporting gaps.
  • Education and upskilling: Prepare key internal leadership and internal stakeholders for disclosing to IFRS S1/S2.
  • Monitoring: Monitor your relevant jurisdictions regarding IFRS S1/S2 mandatory disclosure, when regulations become effective, and what transition reliefs are available. Also, be on the lookout for future additional ISSB standards.

Just ahead of the effective date, on Climate Action Day at COP28, the IFRS Foundation launched the IFRS Sustainability knowledge hub to support the use of the ISSB Standards. Resources include an introduction to the ISSB Standards, a transition guide from the TCFD recommendations to ISSB Standards, and a set of Frequently Asked Questions (FAQs).

As businessess look ahead to reporting on their 2023 progress and beyond, it will be important to plan for IFRS S1/S2 alignment. Fortunately, these actions are not aberrant - corporates that have been working towards mature sustainability programs have been moving in this direction for years. The actions outlined here will help reporters prepare for multiple voluntary and mandatory frameworks.


As the journey towards unified sustainability reporting standards reaches critical milestones, the ISSB emerged as a pivotal player. The world watches an important paradigm shift in corporate reporting—one that demands attention, foresight, and swift action from entities navigating these uncharted regulatory waters. There is no time to wait, companies must begin preparing now.

ERM’s Sustainability Institute will publish a briefing on ISSB, IFRS S1/S2 in early 2024. This briefing will be the next in our Navigating the New Disclosure Landscape series.