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The ISSB sustainability reporting revolution: How to get your business ready

Introduction to ISSB 


The International Sustainability Standards Board (ISSB) was announced at the United Nations Climate Change Conference (COP26) in Glasgow in November 2021 to develop a comprehensive global baseline of sustainability-related disclosure standards that provide investors and other stakeholders with information about companies’ sustainability-related risks and opportunities. 


The ISSB was formed by the International Financial Reporting Standards Foundation (IFRS Foundation) to sit alongside the International Accounting Standards Board (IASB). The goal is to provide a globally consistent set of baseline standards for sustainability-related financial disclosures that can be adopted worldwide. 


In March 2022, the ISSB released drafts of its first two proposed Standards: 


In June 2023, the ISSB announced the final versions of IFRS S1 and IFRS S2. These initial standards focus on climate-related risks and opportunities, with the intention to broaden the standards to cover other sustainability topics in the future.  


The Standards are intended to provide baseline requirements for companies to disclose sustainability-related information alongside financial statements for annual reporting periods beginning on or after January 1st , 2024.  


Decisions on scope and implementation of any mandatory reporting requirements against the UK-endorsed standards will be taken following further consultation. Decisions mandating disclosure will be taken independently by the UK government - for UK registered companies and limited liability partnerships - and the Financial Conduct Authority (FCA) for UK listed companies. The effective date of 1 January 2024 stated in the ISSB Standards therefore is not relevant in the context of UK reporting. 


How does ISSB link to other standards and regulations? 


The ISSB Standards are expected to influence voluntary sustainability reporting and to be incorporated into regulatory regimes in jurisdictions around the globe. For example, the UK, Canada, Australia, New Zealand, China, Hong Kong, Singapore, Malaysia, Nigeria and Japan have all signalled their intent to adopt the Standards. 


IFRS S1 and IFRS S2 attempt to unite multiple overlapping sustainability reporting frameworks. In particular, the Standards lean heavily on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the industry-specific disclosure topics issued by the Sustainability Accounting Standards Board (SASB). ISSB has adopted TCFD’s four pillars focused on climate disclosure and will gradually apply them to other areas of sustainability like water, waste, and biodiversity, whilst also asking for additional data and analysis on climate items. Mandatory programmes that currently require an annual TCFD report will gradually switch to asking for ISSB reports instead. 


Other global standards will also collaborate with ISSB to align climate-related disclosures. For example, in March 2022, GRI and ISSB committed to ensuring that the two organisations’ standards will be complementary and interoperable. 


In January 2024, the Corporate Sustainability Reporting Directive (CSRD) entered into force. This new directive updates the rules concerning the social and environmental information that companies have to report. Companies subject to the CSRD will have to report according to European Sustainability Reporting Standards (ESRS). These standards were developed by the EFRAG, previously known as the European Financial Reporting Advisory Group, an independent body bringing together various different stakeholders. 


It's estimated that over 50,000 companies who do business in Europe will need to report and comply with ESRS, which goes further than the ISSB Standards. ISSB focuses on the climate’s impact on the filing organisation, not their impact on the climate. This is known as the single-materiality approach. ESRS requires disclosure based on the “double materiality” principle, which means that information that is not financially material may still be required to be disclosed if it has a material impact on people or the environment.  


The ESRS refers to standards published by the ISSB, including by requiring companies to “carefully consider” when developing disclosures under the ESRS, whether disclosures aligned with those ISSB standards may support comparability between companies. In addition, the ESRS provide that companies including "additional disclosures" stemming from standards published by other standards should clearly identify those disclosures and ensure that they meet the qualitative characteristics set out by the ESRS. 


A breakdown of IFRS S1 


IFRS S1 requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance or cost of capital over the short, medium or long term. 


IFRS S1 sets out the requirements for disclosing information about an entity’s sustainability-related risks and opportunities. Key principles of IFRS S1 include: 

  • The governance processes, controls and procedures the entity uses to monitor, manage and oversee sustainability-related risks and opportunities. 

  • The entity’s strategy for managing sustainability-related risks and opportunities. 

  • The processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities. 

  • The entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation. 


A breakdown of IFRS S2 


The objective of IFRS S2 is to require an entity to disclose information about its climate-related risks and opportunities.  

IFRS S2 requires an entity to disclose information that enables users of general purpose financial reports to understand: 

  • The governance processes, controls and procedures the entity uses to monitor, manage and oversee climate-related risks and opportunities. 

  • The entity’s strategy for managing climate-related risks and opportunities. 

  • The processes the entity uses to identify, assess, prioritise and monitor climate-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process. 

  • The entity’s performance in relation to its climate-related risks and opportunities, including progress towards any climate-related targets it has set, and any targets it is required to meet by law or regulation. 


What carbon accounting is needed for ISSB reporting? 

supply chain scope 3 emissions

IFRS 2 requires companies to disclose absolute gross greenhouse gas emissions generated during the reporting period, measured in accordance with the Greenhouse Gas Protocol, across Scope 1, Scope 2 and Scope 3 emissions


Pankaj Bhatia, Director of Greenhouse Gas Protocol and member of the IFRS/ISSB International Reporting & Connectivity Council (IRCC), said:  


“The ISSB’s requirement to disclose Scope 3 emissions is a major step forward in measuring and managing emissions from companies’ value chain. This is the first time a major global standard-setting institution required reporting of Scope 3 emissions, setting a precedent for other institutions and regulatory programs to follow.” 


For those not yet familiar with Scope 3, these are emissions that originate from activities both upstream and downstream, involving suppliers, customers and other activities. As opposed to Scope 1 and Scope 2 emissions, where companies have more direct influence in assessing and reducing emissions, Scope 3 emissions present a unique challenge as they often require collaboration and data sharing with various entities or stakeholders in the value chain.  


Companies looking to remain complaint with ISSB Standards will need to seek granular and specific Scope 3 data to effectively monitor and disclose their progress.  


Carbon accounting tools are emerging to facilitate the collection and monitoring of emissions data across the value chain. Automating carbon accounting makes tasks like data collection, emissions tracking and analysis a lot more streamlined. Additionally, it enhances transparency, auditability and traceability for carbon reporting. Not to mention that the transformational insights offered by these tools often leads to cost savings too, as the greatest sources of emissions are typically also sources of financial inefficiency. 


Get in touch with our expert team to see how our carbon accounting software can help your business streamline its Scope 3 tracking and reporting. 


Tips for ISSB compliance 


When it comes to complying with the new ISSB standards, here are some tips: 

  • Start preparing now - Don't wait until the standards take effect to start planning your compliance strategy. These new standards will require substantial effort to implement.  

  • Identify gaps - Get a head start by beginning to identify gaps in your current reporting and what will be required under the ISSB standards. Look at where you may lack data, metrics and governance processes. Begin developing a roadmap for how to fill those gaps. 

  • Invest in tools to help you – Gathering data for various metrics across different functions can be overwhelming. Utilising technologies to streamline and automate processes, such as carbon accounting software, can save time and resources in the long term. 

  • Collaborate across business units - Compliance will require cross-functional collaboration. Bring sustainability, finance, risk, investor relations and other teams together to coordinate on ISSB implementation. Make sure you have buy-in from leadership. Appoint a dedicated team or executive to drive the process and assign accountability. 


Getting ready now, rather than waiting, will ensure a smoother transition to ISSB compliance. While challenging, these new standards also present an opportunity to unify sustainability management and reporting within your organisation. 




The new ISSB Standards represent a major step forward in sustainability reporting and ESG disclosures.  


Key takeaways include: 


  • The ISSB provides a global baseline for sustainability disclosures, enabling comparability across companies and industries. This allows investors to better understand ESG risks and opportunities. 

  • The standards focus on financially material ESG information, meeting investor needs. IFRS S1 covers general sustainability disclosures, while IFRS S2 specifically addresses climate-related risks. 

  • ISSB builds on established sustainability reporting frameworks like TCFD, aiming to provide continuity and minimise disruption for companies. 

  • Disclosure requirements will evolve over time as more jurisdictions endorse the standards. Firms should prepare now to collect data and implement necessary processes and controls. 

  • Compliance will require cross-functional coordination between sustainability, finance, risk and other teams to identify material issues. Investing in technologies to streamline the process will save resources in the long term. 




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