IFRS S1 and S2: what the ISSB standards require and how to prepare

The International Sustainability Standards Board (ISSB) issued its first two standards, IFRS S1 and IFRS S2, in June 2023. Jurisdictions around the world are adopting or adapting them, which is turning investor-focused sustainability disclosure into a global baseline. Here is what the standards ask for and how to get ready.

Two standards, one baseline

IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, sets out how a company discloses information about all the sustainability-related risks and opportunities that could reasonably be expected to affect its prospects. IFRS S2, Climate-related Disclosures, sets out the specific requirements for climate-related risks and opportunities.

Both standards focus on investors and other providers of capital. They use financial materiality: the question is whether the information could reasonably be expected to influence decisions that primary users of financial reports make. That is narrower than the double materiality used in the European standards, though the two are designed to work together.

The standards became effective for annual reporting periods beginning on or after 1 January 2024, but they only become mandatory for a company when its jurisdiction adopts them. According to the IFRS Foundation, more than 45 jurisdictions have adopted the standards or are taking steps to do so, on a voluntary or mandatory basis. The details vary by jurisdiction, so check the rules that apply to you.

The four pillars

IFRS S1 and S2 build on the structure of the Task Force on Climate-related Financial Disclosures (TCFD). Disclosures are organised around four core content areas:

• Governance: the processes, controls and procedures used to monitor and manage sustainability-related risks and opportunities, including the role of the board and management.
• Strategy: the risks and opportunities that could affect the company, their effects on the business model and value chain, on strategy and decision-making, and on financial position, performance and cash flows, now and in future.
• Risk management: how the company identifies, assesses, prioritises and monitors those risks and opportunities, and how this is integrated into overall risk management.
• Metrics and targets: how the company measures and monitors performance, including progress towards any targets it has set or is required to meet.

What IFRS S2 asks for on climate

IFRS S2 requires specific climate disclosures, including:

• Climate-related physical risks, such as extreme weather and chronic shifts in temperature, and transition risks, such as policy, technology and market changes.
• Climate resilience, assessed using climate-related scenario analysis proportionate to the company's circumstances.
• Any transition plan the company has, including how it plans to achieve climate-related targets.
• Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, measured according to the GHG Protocol Corporate Standard, unless a jurisdiction requires a different method.
• Cross-industry metrics: the amount and percentage of assets or business activities vulnerable to transition and physical risks, those aligned with climate opportunities, capital deployment towards climate-related risks and opportunities, internal carbon prices, and how climate considerations factor into executive remuneration.
• Industry-based metrics, with guidance drawn from the SASB Standards.

Transition reliefs in the first year

To make adoption practical, the ISSB built in reliefs for the first annual reporting period. A company can report only on climate-related risks and opportunities in its first year (the so-called climate-first approach), does not have to disclose comparative information, may report its sustainability information after its financial statements, and does not have to disclose Scope 3 emissions in the first year. Jurisdictions may set their own reliefs on top of these.

In December 2025 the ISSB also amended IFRS S2 to ease greenhouse gas reporting. Companies can limit Scope 3 Category 15 to financed emissions, and can use a method or global warming potential values that their jurisdiction requires. The amendments apply to annual periods beginning on or after 1 January 2027, and earlier application is allowed.

Connecting sustainability and financial reporting

One of the most demanding aspects of IFRS S1 is connectivity. The sustainability disclosures must be published as part of general purpose financial reporting, cover the same reporting entity and period as the financial statements, and use consistent assumptions where possible. If the climate disclosures assume a carbon price that rises sharply, a reader will expect the financial statements' impairment testing to reflect that.

In practice this means finance, risk and sustainability teams must work together, with shared data and a shared timetable.

A practical preparation plan

1. Check the adoption status in each jurisdiction where you are listed or have reporting obligations.
2. Run a gap analysis of current disclosures against IFRS S1 and S2, starting with climate.
3. Identify climate-related risks and opportunities with input from operations, finance and strategy, not only the sustainability team.
4. Build or refresh your GHG inventory for Scopes 1 and 2, and begin a Scope 3 screening so you are ready when the relief ends.
5. Choose scenarios for resilience analysis that fit your sector and exposure.
6. Define the cross-industry and industry-based metrics you will report, and the controls behind them.
7. Align the reporting timetable with the financial close.

How NCV helps

NCV prepares companies for IFRS S1 and S2 with gap assessments, climate risk and opportunity identification, scenario analysis and disclosure drafting. SustainOS holds the metrics, evidence and approvals, and maps the same data to IFRS, GRI, CDP and regional frameworks, so each disclosure starts from one consistent dataset.