Sustainability Reporting

What you need to know about the ISSB and IFRS

March 18, 2024

At some point, you’ve already heard of the IFRS or ISSB. But what do these acronyms mean, and how are they connected with the IASB? This article picks apart the forthcoming IFRS Sustainability Disclosure Standards within the ecosystem of the IFRS Standards.

What is the ISSB?

ISSB stands for International Sustainability Standards Board. It was created to develop a worldwide standard for sustainability reporting. The IFRS Foundation created it in November 2021 due to the growing interest in ESG issues in the capital market and the need for a standardized reporting framework.

The IFRS Foundation, a non-profit working in the public interest to set the standard for corporate disclosures, has since 2001 operated with the mission to promote transparency and accountability through its standards. It is governed by Foundation trustees from around the world and a Monitoring Board composed of public market authorities.

The ISSB and the International Accounting Standards Board (IASB) are the standard-setting bodies under the umbrella of the Foundation. The IASB is the standard setter for the IFRS Accounting Standards for traditional financial accounting, while the ISSB develops the IFRS Sustainability Disclosure Standards.

In other words: The ISSB does the same for sustainability disclosures that the IASB has done for corporate financial accounting – setting standards and best practices that companies in all sectors and industries can follow, thus facilitating quality disclosures for investment decision-making. The ISSB works closely with the IASB on making sure that both IFRS Standards complement each other.

What are the IFRS Standards?

The IFRS Standards constitute two separate but complementary standards: the IFRS Accounting Standards and the IFRS Sustainability Disclosure Standards. The Standards do several things for capital providers and receivers of capital, for which they are primarily designed:

  • They narrow the information gap for critical information needed to understand the risks and opportunities faced by an organization.
  • They encourage transparency of corporate practices.
  • They facilitate comparison between investment choices, thus efficiently allocating capital to support sustainable behaviour.

What are the IFRS Sustainability Disclosure Standards?

The IFRS Sustainability Disclosure Standards are currently in development. The standard is expected to be issued near the end of the second quarter of 2023.

They will serve as a guideline on reporting sustainability-related financial information that may have an impact on the enterprise value of the reporting organization. Amidst a fragmented reporting landscape with different frameworks and guidelines, the IFRS Sustainability Disclosure Standards are an effort to cut through the confusion. They are comprehensive investor-grade standards that are also used by regulators.

To date, two sustainability-related exposure drafts have been released for public consultation: general sustainability disclosures and climate-related disclosures.

How to use the IFRS

There are four elements to reporting: governance, strategy, risk management, metrics, and targets.

  • Governance: The policies and processes to manage sustainability-related risks and opportunities
  • Strategy: Consideration and integration of sustainability-related risks and opportunities in the strategic plans
  • Risk management: The approach to manage sustainability-related risks and how sustainability is integrated into the enterprise risk management framework
  • Metrics and targets: Monitoring and measurement of sustainability-related indicators and progress against targets

What is interesting to note is that the Standards require reporting impacts across the entire value chain of the company. This will present a significant challenge to organizations with complex and multi-tiered supply chains. As it stands, the IFRS definition of a value chain extends to the entire breadth of activity a business is involved in, including the external environment.

The IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information requires information about significant sustainability-related risks and opportunities that are most material to the entity. Sustainability disclosures should be reported alongside financial disclosures, in an attempt to emphasize the connection between the two.

The IFRS S2 Climate-related Disclosures target reporting climate-related risks and opportunities. This translates slightly differently through the four elements:

  • Governance: The governance structure responsible for oversight of climate-related issues, including the management’s role and competencies related to climate change.
  • Strategy: The physical and transition risks that the entity is projected to face over a time horizon, the degree of those risks, and any plan to mitigate and adapt to those risks, including climate-related targets. Scenario analysis is a requirement in the process of risk assessment, as is reporting any financial impacts due to climate change now or in the future.
  • Risk management: The process of assessing and managing climate-related risks and how they are incorporated into the existing risk management framework, including how climate is prioritized against other risks.
  • Metrics and targets: Scope 1, 2, and 3 emissions, in line with the requirement to report impacts along the value chain. Industry-specific metrics are listed in the guidance document, and companies in those industries are expected to report the specified data.

The ISSB uses the SASB Standards to inform the development of IFRS S1 and S2. While the latter is being developed, reporting organizations can use the SASB Standards for sustainability reporting. Having merged with the Value Reporting Foundation, ISSB is now responsible for maintaining the SASB Standards in addition to the IFRS Standards. The SASB Standards is an industry-focused reporting standard for ESG topics in 77 industries.

The future of IFRS for sustainability reporting

More than 140 jurisdictions around the world use the IFRS Accounting Standards, often to comply with local laws. Therefore, the IFRS Sustainability Disclosure Standards are expected to be highly relevant for these jurisdictions, as an additional layer that can complement their existing reporting practices.

As we see the adoption of sustainability and reporting-related legislation picking up speed in numerous economies around the world, it is likely that the Sustainability Disclosure Standards will also be adopted into force. This is especially true in cases where the IFRS Accounting Standards are currently required.

As it stands, the ISSB is already working with jurisdictional quarters to absorb the sustainability-related standards into their requirements.

How we help you

  • We explain the detailed requirements of IFRS S1 and S2, ensuring alignment with the new Standards.
  • We help you complete the information requests from regulators or investors and guarantee the protection of business-critical information.
  • We automate the collection of relevant data internally and simplify the process across the value chain, including guiding you through reporting Scope 3 emissions.
  • We provide a centralized platform to manage all your data, pulling data from enterprise software such as ERP, HRM, EMS, etc.
  • We advise you on the best reporting framework for your needs, as well as the related reporting criteria.
  • We offer insights powered by data analytics, enhancing your understanding of your sustainability performance and report strength.
  • We automate follow-ups to data sources, reminder emails, and calculations and free up more time for you to do other things.


Your ESG knowledge hub

Check out our latest guides and articles to help you in your sustainability journey

CSRD Super Guide
Everything you ever wanted to know about Double Materiality, Data Collection, Reporting under the ESRS and how we help you.

Blog title heading will go here

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim...

Blog title heading will go here

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim...

Start your sustainability journey

Talk to our experts to understand how Daato fits your ESG use cases.