IFRS S1 and IFRS S2 are the first ESG reporting standards released by the International Sustainability Standards Board. Together, these standards provide a framework for aligning financial and sustainability reporting. While these are voluntary standards, they also help build stakeholder trust and unlock long-term value through transparency.

What is the ISSB?

The International Sustainability Standards Board is an independent organization charged with developing consistent sustainability reporting standards. The goal is to coalesce the previously fragmented sustainability standards into one recognized framework that will meet the needs of investors – and make it easier and cheaper for companies to provide sustainability information to capital markets.

Why IFRS S1 and S2 Matter

IFRS S1 focuses on general sustainability disclosures. IFRS S2 is focused on climate-related disclosures. The standards work together to provide a global baseline for sustainability disclosures, allowing businesses to:

  • Enhance transparency. Deliver consistent, decision-useful data on sustainability risks.
  • Build investor confidence. Demonstrate the financial impact of sustainability efforts.
  • Prepare for the future. Anticipate and adapt to evolving regulatory requirements.

IFRS S1 and S2 went into effect January 1, 2024. Organizations that need more time to prepare for the broader S1 sustainability standards can start with the climate-focused S2 standards for the first year. The phased rollout of ISSB compliance enables companies to gradually expand their reporting capabilities while maintaining transparency.

These standards are not mandatory, however, companies looking to communicate sustainability information in a consistent, comparable, and credible way can voluntarily apply the standards. Regulators also can decide to require them.

4 Steps to Comply with IFRS S1 and S2

The IFRS S1 and S2 reports are filed at the same time as financial statements. Here are four steps to help prepare:

  • Focus on climate risks first. Focus first on IFRS S2’s climate-related disclosures by integrating them into broader risk management practices. A phased approach that expands disclosures incrementally will help balance compliance with resource capacity.
  • Leverage existing practices. Use established frameworks such as TCFD and SASB as the basis for your ISSB-aligned reporting. While there will be some differences in what is needed under IFRS S1 and S2, companies that are already reporting sustainability information in some way have a head start.
  • Determine what data needs to be collected. What additional data points are needed? Companies that use integrated risk management technology to collect all risk-related information in one place may find that existing data is easy to find and ready to pull into the framework. Companies that use spreadsheets and other disparate systems will need to allocate more time and resources to track down needed data. In either case, make a plan to identify any data gaps, who is responsible for addressing them, and a timeline for completion.
  • Communicate progress. Provide regular updates on progress, limitations, and future compliance plans to enhance stakeholder trust.

Assess Your Technology

Collecting the data and information needed for IFRS S1 and S2 can be extremely complex – especially if you don’t have the right tools for cohesive risk assessment and management. If your existing tools can’t easily handle the requirements, it may be worth investing in an integrated solution to streamline and automate the process.

ESG software can help overcome the challenges of adopting IFRS S1 and S2, including data quality, phased implementation, and resource constraints. The right software can help you transform sustainability reporting into a strategic advantage by embedding these risks within broader risk frameworks. This positions businesses to:

  • Build resilience. Proactively manage sustainability and financial risks.
  • Create value. Align sustainability initiatives with organizational goals.
  • Strengthen trust. Deliver reliable, transparent disclosures to stakeholders.

With the help of a modern tool, you will be able to confidently embrace the ISSB standards, ensuring compliance while driving long-term success.

For more on managing ESG risks, download our ebook, Taking a Stand on ESG, and check out Riskonnect’s ESG software solution.