by Emily Johnson & Kamayani Barshilia | February 19, 2025
In January 2024, the International Financial Reporting Standards (IFRS) Foundation’s new sustainability standards took effect. The standards—developed by the International Sustainability Standards Board (ISSB), which falls under the IFRS Foundation—aim to provide a universal set of sustainability disclosures amidst a fragmented reporting landscape, building upon widely-used frameworks such as the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD). How have global businesses and jurisdictions responded to one year into the standards, and what can we expect in 2025 and beyond?
Recap of the Standards
International investors and businesses alike have long urged streamlining the complex “alphabet soup” of sustainability frameworks. The IFRS Sustainability Standards (also known as the ISSB Standards) aim to ease the burden of sustainability reporting while creating a harmonized set of disclosures that can be applied globally. They were developed with interoperability in mind and focus on decision-useful information that can be compared across jurisdictions and reporting entities.
International investors and businesses alike have long urged streamlining the complex “alphabet soup” of sustainability frameworks. The IFRS Sustainability Standards (also known as the ISSB Standards) aim to ease the burden of sustainability reporting while creating a harmonized set of disclosures that can be applied globally. They were developed with compatibility in mind and focus on decision-useful information that can be compared across jurisdictions and reporting entities.
There are currently two disclosure standards:
- IFRS S1: General requirements for disclosure of sustainability-related financial information: This standard, built from SASB, requires disclosing information about sustainability-related risks and opportunities that could impact a company’s financial performance. This includes information about governance, strategy, metrics, and progress toward sustainability targets.
- IFRS S2: Climate-related disclosures: This standard, built from TCFD, requires disclosing information about climate-related risks (including physical and transition risks) and opportunities that could impact a company’s financial performance. Companies must also report quantitative metrics, including Scope 1, 2, and 3 greenhouse gas emissions.
The standards were designed to meet the needs of investors and others involved in capital markets. They focus on financial materiality—meaning entities must disclose information about sustainability-related risks and opportunities that could impact their financial prospects. This contrasts with other frameworks, such as the Global Reporting Initiative (GRI) and the European Union’s Corporate Sustainability Reporting Directive (CSRD), which apply impact materiality and double materiality, respectively.
The IFRS standards are built upon widely used frameworks such as SASB, TCFD, CDP, and the Integrated Reporting (IR) Framework. In fact, the work of SASB, TCFD, and IR are now all part of the IFRS Foundation (CDP remains a separate entity that scores corporate environmental performance but has updated its environmental disclosure platform to incorporate IFRS S2 disclosures). The IFRS Foundation has also worked alongside the European Financial Reporting Advisory Group (EFRAG) and the Global Sustainability Standards Board (GSSB) to ensure the standards are interoperable with the CSRD and GRI.
In short, the IFRS Sustainability Standards consolidate disclosures from SASB, IR, and TCFD, and the IFRS Foundation has made concerted efforts to ensure their compatibility with CSRD, GRI, and CDP.
Impact of the Standards in 2024
According to a report from the IFRS Foundation, over 1,000 companies have referenced the ISSB in their reporting so far, with some already aligning with the standards or announcing their intention to do so. A survey conducted by the IFRS Foundation found that of the asset managers and asset owners who responded, most want or expect their portfolio companies to transition from disclosures prepared using the SASB and TCFD recommendations to disclosures prepared using the IFRS Sustainability Standards.
Jurisdictions worldwide either work toward introducing the standards in their regulatory frameworks or have already adopted them. This includes Canada, Mexico, Brazil, Turkey, Hong Kong, Australia, and Japan, and others. As of September 2024, jurisdictions representing over half of global gross domestic product and worldwide greenhouse gas emissions have made progress towards the adoption or other use of the standards, according to the IFRS Foundation. The specific requirements and criteria for reporting vary by jurisdiction, but many have included Scope 3 emissions disclosures and industry-specific disclosure requirements in their proposed or finalized regulatory frameworks. Limiting modifications to the standards can help ensure comparability of disclosures globally, reduce regulatory fragmentation, and avoid unnecessary reporting burdens, particularly for entities with cross-border operations or those who comply with multiple reporting frameworks. For example, the current IFRS Sustainability Standards are already aligned with CSRD. They both require information on Scope 1, 2, and 3 emissions and details on climate-related risks and opportunities, among other similarities.
What’s Next and How to Prepare
In 2025 and beyond, countries worldwide will continue progressing on sustainability-related regulatory requirements incorporating the IFRS Sustainability Standards. The IFRS Foundation has published a guide to assist jurisdictions looking to adopt or otherwise use the standards.
While revisions and additions to the IFRS Sustainability Standards and SASB Standards may arise in the future, companies should not delay aligning to these standards for the first time. Regulatory mandates to comply with the standards will come into effect in many jurisdictions soon—such as Australia in 2025 and Taiwan in 2026—and stakeholders increasingly expect companies to report on sustainability information. Therefore, it is critical that companies take the following actions to prepare:
- Review the sustainability regulatory requirements in your jurisdiction and determine whether the requirements apply to your business. Some jurisdictions only require businesses to report if they reach a specified revenue threshold, are in certain industries, or meet other criteria.
- If your business is not required to align with the IFRS Sustainability Standards, consider doing so voluntarily—particularly if you already report under other frameworks such as TCFD, SASB, CDP, or IR. Investors and other stakeholders increasingly expect companies to report on sustainability information, and with the standards gaining traction, it is becoming best practice to move from reporting in alignment with TCFD and other frameworks to the IFRS Sustainability Standards. Businesses can position themselves as sustainability reporting leaders by aligning with the standards and supporting the transition toward comprehensive, comparable reporting.
- If your business must or chooses to align with the IFRS Sustainability Standards, review the standards, determine any information gaps that must be closed, and make a plan to close those gaps. Note that the ISSB has implemented several transition reliefs in applying the standards. For example, companies are not required to disclose Scope 3 greenhouse gas emissions in the first year they report under IFRS S2.
ClimeCo continues to follow ISSB developments and is well-equipped to guide companies in aligning with the standards and other sustainability reporting regulations and frameworks. To learn more, please contact us.
Works Cited
IFRS Foundation: Progress on Corporate Climate-related Disclosures—2024 Report
Financial Stability Board: Achieving Consistent and Comparable Climate-related Disclosures, 2024 Progress report
IFRS Sustainability Disclosure Standards Knowledge Hub
Sustain.Life: Frameworks explained: What is the ISSB?
IFRS Foundation: GRI and IFRS Foundation collaboration to deliver full interoperability that enables seamless sustainability reporting
IFRS Foundation: Comparison: IFRS S2 Climate-related Disclosures with the TCFD recommendations
IFRS Foundation: Feedback Statement, IFRS Sustainability Disclosure Standards: Consultation on Agenda Priorities
ECOFACT: A global baseline for sustainability reporting: the ISSB standards
Workiva: ISSB Reporting Standards: How Will Your Business Be Impacted?
S&P Global: June 2024—Where does the world stand on ISSB adoption?
About the Authors
Emily Johnson serves as an Associate Manager and supports Environmental, Social, and Governance (ESG) reporting and other sustainability projects for clients in various industries. She was previously an ESG consultant at VOX Global, where she supported Fortune 500 and midsize businesses in advancing their ESG reporting and strategy, materiality assessments, and sustainability programs and communications. Emily holds a Bachelor of Science in Environmental Studies from the University of Central Florida.
Kamayani Barshilia brings over 7+ years of consulting and industry experience in ESG across several geographies and sectors. Her focus areas are corporate ESG strategizing and strategic investor and stakeholder communication planning. She has delivered turnkey projects, advising clients on sustainability reporting and assurance, peer benchmarking and ESG materiality assessment, social impact assessment, and climate actions. Kamayani has served institutions in India, advancing financial inclusion, and scaling up clean energy access in underserved communities. She holds a Master’s degree in Carbon Management from the University of Edinburgh, United Kingdom, and a Master of Science in Resource Management from the University of Delhi, India.
