The IFRS Foundation plays a crucial role in setting global Accounting and Sustainability Disclosure Standards. However, it’s important to note that the Foundation itself is not a regulatory body and does not have the authority to require companies to apply Standards.

The ISSB’s focus is to promote adoption from a regulatory perspective but also to facilitate voluntary adoption of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. A number of jurisdictions have already announced their plans for the adoption of IFRS S1 and IFRS S2, while others are finalising their roadmaps to adoption, deliberating on whether to mandate or permit companies to adhere to the Standards, and determining the scope of companies to which these requirements will apply.

The IFRS Foundation’s focus is on meeting the information needs of existing and potential investors, lenders and other creditors, referred to as primary users of general purpose financial reports (primary users).

IFRS Sustainability Disclosure Standards therefore require a company to disclose material information about the sustainability-related risks and opportunities that could reasonably be expected to affect its prospects. The definition of material information is aligned with that used in IFRS Accounting Standards—that is, information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports (IFRS S1.17–18).

Information about a sustainability-related risk or opportunity might be material because of the nature or magnitude of that risk or opportunity, or a combination of both, judged in relation to the company’s circumstances. The provisions in IFRS S1 apply broadly to all sustainability-related financial disclosures (including climate-related disclosures) (IFRS S1.21).

See IFRS S1.BC67–84 for more information. 

Although IFRS S1 and IFRS S2 require that information is presented in general purpose financial reports, the Standards do not further specify a location because they are designed to cater to different regulatory requirements globally. In jurisdictions that do not specify a location to present sustainability-related financial information, preparers are responsible for deciding the best location for providing their disclosures (IFRS S1.60).

The Standards are effective from 1 January 2024. However, local jurisdictions will decide when to mandate adoption of the IFRS Sustainability Disclosure Standards. A company is also required to provide sustainability-related financial disclosures for the same period and at the same time as its annual financial statements (IFRS S1.64).

The requirement to use ‘all reasonable and supportable information that is available … without undue cost or effort’ is designed to ease concerns around the need for flawless data. More specifically, it is intended to support preparers in dealing with measurement uncertainty and to scale the requirements in IFRS S1 and IFRS S2 specifically for companies with fewer resources, which could include small companies, companies new to sustainability reporting, and companies operating in jurisdictions where capital markets are less developed or that have had little exposure to (or experience with) sustainability reporting.

The requirement considers the following: 

• information has to be reasonable and supportable (the company can neither ignore nor fabricate information that would inform its disclosure); and
• information must be available without undue cost or effort (an exhaustive effort to obtain, develop or analyse information is unnecessary).

This concept is not unique to sustainability-related financial disclosures. IFRS Accounting Standards also use this concept in specific circumstances to facilitate application of requirements that involve a high level of outcome or measurement uncertainty. As a result, this will be familiar to preparers, users, regulators and auditors.

Reasonable and supportable information:

• is specific to the company;
• takes account of general conditions in the external environment;
• includes information about past events, current conditions and forecasts of future conditions; and
• is specified by the Standards in some cases.

Undue cost or effort applies, for example, to:

• information used by a company when preparing its financial statements, operating its business model, setting its strategy and managing its risks and opportunities; and
• information available without undertaking an exhaustive search —primary users’ information needs and the costs and efforts for the company should be balanced.

The assessment of what constitutes undue cost or effort can change over time as circumstances change. As much as possible, a company should use consistent data and make consistent assumptions when preparing sustainability-related financial information.

See IFRS S1.B6–10 and IFRS S1.BC8–17 for more information.

The requirements in IFRS Sustainability Disclosure Standards are designed to be proportionate—that is, a company is required to use an approach that ‘scales’ or is commensurate with its available skills, capabilities and resources. For example, a smaller company with limited resources and limited experience of sustainability reporting may not be able to disclose to the same level as a larger company with substantial resources and extensive experience of sustainability reporting. However, over time the ISSB expects that companies with limited skills and capabilities will be able to further advance and improve their reporting.

The ISSB recognises that industry-specific disclosures are decision-useful for primary users because the effects of sustainability topics vary by industry, and primary users analyse companies and portfolios by industry and sector.

In providing industry-specific disclosures, companies can focus on reporting that better describes their business and is more relevant to existing and potential investors, lenders, and other creditors. This focus helps to simplify the reporting process and reduce the associated costs.  

Both IFRS S1 and IFRS S2 require a company to disclose industry-specific information but do not stipulate the exact information required—that is for the company to decide. However, guidance is provided to assist companies in providing these disclosures and giving more comparable, decision-useful information.

IFRS S1 requires companies to consider the industry-based SASB Standards for topics that aren’t covered in IFRS S2. The SASB Standards help companies to identify sustainability-related risks and opportunities and disclose appropriate, investor-relevant information.

IFRS S2 requires a company to provide industry-specific climate-related disclosures. The Standard provides illustrative guidance derived from—and aligned with—the climate-related content in the SASB Standards to support those requirements. In certain circumstances, a company might conclude that the disclosure topics in the SASB Standards are not applicable.

Estimations, approximations and forecasts may be necessary when preparing sustainability-related financial disclosures. This does not diminish the usefulness of the information to primary users. Instead, by ensuring transparency around this type of information, companies can be comfortable in providing disclosures where there may be uncertainty. IFRS S1 requires companies to identify any estimates, approximations and forecasts it uses and to provide information about the inputs and calculation methods it has used. Additionally, the company is required to ensure that its process for selecting and applying estimates is free from material error.

In the case of measurement uncertainty, a company is required (IFRS S1.81) to disclose:

• the nature of the assumption or other source of measurement uncertainty;
• the sensitivity of the disclosed amount to the methods, assumptions and estimates underlying its calculation, including the reasons for the sensitivity;
• the expected resolution of an uncertainty and the range of reasonably possible outcomes for the disclosed amount; and
• an explanation of changes made to past assumptions concerning the disclosed amount if the uncertainty remains unresolved.

Many leading investor-focused sustainability and integrated reporting organisations contribute to the work of the ISSB. The content, staff, technical expertise and other resources of the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (Integrated Reporting Framework and SASB Standards) were fully consolidated into the IFRS Foundation in 2022. Both the Task Force for Climate-related Financial Disclosures (TCFD) and the World Economic Forum fully supported the creation of the ISSB.

IFRS S1 and IFRS S2 include the recommendations of the TCFD, which was established in 2017 at the request of the Financial Stability Board (FSB). The FSB noted that the Standards mark ‘the culmination of the work of the TCFD’ and has asked the IFRS Foundation to take over from the TCFD in 2024. The IFRS Foundation will then assume responsibility for monitoring the progress of companies’ climate-related disclosures.

The ISSB has signed a Memorandum of Understanding (MOU) with the Global Reporting Initiative (GRI) to ensure compatibility between:

• investor-focused sustainability information disclosed in accordance with the ISSB Standards and designed to meet the needs of the capital markets; and
• information disclosed in accordance with the GRI standards and intended to serve the needs of a broader range of stakeholders.

This work will help reduce the reporting burden for companies and further harmonise international sustainability reporting.

The IFRS Foundation’s mandate does not include requiring assurance from companies that use its Standards or developing assurance standards. The requirements to have sustainability-related financial disclosures assured are within the remit of individual jurisdictions. However, the International Auditing and Assurance Standards Board (IAASB) has consulted with the ISSB as the IAASB works on developing future assurance standards on sustainability-related disclosure.

The ISSB anticipates that, as the ISSB Standards are adopted into national regulatory and legal frameworks, jurisdictional regulators around the world will require that information disclosed in accordance with these Standards will be subject to some level of assurance. Both IFRS S1 and IFRS S2 are designed for the reported information to be to assurable.

Ultimately each company decides how best to apply the ISSB Standards, taking account of relevant jurisdictional requirements.

The IFRS Foundation offers a broad range of educational material to support the widespread adoption and implementation of the ISSB Standards. The Foundation does not provide templates because each company’s facts and circumstances differ. Specific examples to illustrate aspects of IFRS S2 have been provided in the IFRS S2 Accompanying Guidance on Climate-related Disclosures. These examples are not intended to provide interpretative guidance.

In addition, the Knowledge Hub includes resources designed to support preparers with implementing IFRS S1 and IFRS S2. The resource database includes the annual TCFD status reports, which point to examples of disclosures that demonstrate good practice in relation to governance, strategy, risk management, and metrics and targets. The Foundation will add further guidance and resources to this database over time.

More information is available on the IFRS Sustainability education, membership and licensing page.