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ISSB publishes first ever global sustainability reporting standard

IFRS S1 represents a significant step in the drive to help companies report sustainability information to investors and other stakeholders.

In brief

  • Companies need to identify, disclose and measure the widening spectrum of sustainability issues that could affect their performance.
  • Companies will have to identify a complete and valid set of sustainability-related risks and opportunities for effective monitoring and reporting.
  • Companies need to select appropriate metrics and targets for sustainability reporting, which can be more forward looking than historical financial information.

The International Sustainability Standards Board (ISSB) has published its first ever global sustainability reporting standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. This article takes a closer look at IFRS S1, which will require companies to disclose information about their sustainability-related risks and opportunities to investors, lenders and other creditors. For a more detailed look at the ISSB’s first topic-based standard, IFRS S2 and its climate-related disclosure objectives and requirements, see our accompanying article .

IFRS S1 covers the disclosure of information about a company’s governance, strategy, risk management, metrics and targets. The standard is effective for annual reporting periods beginning on or after 1 January 2024; however, the effective date in each country will also depend on the local legislation. Companies that wish to adopt IFRS S1 earlier may do so if they adopt IFRS S2 at the same time. Recognizing the scale of the task faced by companies trying to implement the new reporting framework, IFRS S1 provides several transition reliefs available to them in the first annual period in which they apply the standard. For example, a company may report only on climate-related risks and opportunities and it is also permitted to publish its sustainability-related disclosures after its related general purpose financial statements within time frames specified by IFRS S1.

When a company’s leadership evaluates the implementation plan for IFRS S1, they need to take into account various important considerations, like sharing a much wider range of information than before with investors, lenders and other creditors.

Strengthen governance to support robust sustainability reporting

Many companies operating in industries and/or geographical locations that are considered highly exposed to climate-related risks may have already been disclosing not only their boards’ oversight of climate-related risks and opportunities but also management’s role in assessing and dealing with such risks, as recommended by the Task Force on Climate-Related Financial Disclosures (TCFD). However, it is important to note that IFRS S1 covers a much broader spectrum of sustainability topics besides climate change and the disclosure requirements include, for example:

  • How the board oversees the setting of targets and monitors progress towards them, including whether those metrics influence the remuneration policies;
  • Whether dedicated controls and procedures are applied to management of sustainability-related risks and opportunities; and
  • How these controls and procedures are integrated with other internal functions.

To reap the full potential of IFRS S1, companies need to strengthen their governance, redesign controls and rethink their processes and procedures. To capture and monitor sustainability-related financial disclosures required by the standard, companies will need to go far beyond updating the organization chart and will have to match their commitments with the necessary expertise and experience of leadership teams as well as sustainability professionals.

Identify a comprehensive set of sustainability-related risks and opportunities

Although a company may take advantage of the relief permitting it to report on only climate-related risks and opportunities in the first year of applying IFRS S1, eventually, to make sure it is aligned with IFRS S1 from the second year of application, it needs to identify a complete and valid set of sustainability-related risks and opportunities. This would directly impact how companies define what the risk management activities could be as well as how the metrics and targets could be identified and used.

Companies need to plan way ahead and allocate sufficient time and resources in
this identification phase. This should be an important focus for the leadership
teams when assessing the company’s sustainability reporting.

In the identification process of sustainability-related risks and opportunities, IFRS S1 requires a company to refer to a broader list of IFRS Sustainability Disclosure Standards (i.e., IFRS S1, IFRS S2 and other future standards) as well as consider how the disclosure topics in the industry-based Sustainability Accounting Standards Board (SASB) standards could be applicable. Also, it may be beneficial for a company to look at its competitors in the same industry or region to take note of the risks and opportunities they identified, to make its own identification process more comprehensive.

Under IFRS S1, companies are required to disclose material information about sustainability risks and opportunities that could impact the business. Specifically, companies must provide details about how these risks and opportunities could influence the company's business model, strategic plans, and consequently, cash flows, ability to raise funding, or cost of capital over the short, medium and long term. The goal is to give users a clear understanding of how environmental and social factors may affect the company financially, both now and in the future. This emphasizes how sustainability issues can directly impact a company’s financial performance. The emerging trend for companies to report on both financial and non-financial information reflects the growing need for integrated business reporting. Since IFRS S1 uses the same key concepts as IFRS Accounting Standards - like materiality, primary users, and general-purpose financial reports - it is in a position to facilitate integration in IFRS reporting in the future. However, the scope and objectives of IFRS S1 are not necessarily the same as those for other existing sustainability reporting frameworks and jurisdictional requirements. Therefore, companies currently reporting on sustainability will need to identify any differences when applying IFRS S1 for the first time.

Understand the differences between historical financial information and sustainability metrics and targets

In financial reporting, companies usually use the historical cost and fair value (or similar variations) to measure the items in financial statements. Accounting standards generally provide detailed requirements on how these items are measured, with examples like inventories and revenue. IFRS S1, however, doesn’t provide direct measurement guidance. Instead, companies are required to apply judgement and to consider metrics associated with the industry-based SASB standards and other frameworks. Metrics and targets cannot be established in isolation and a company has to take into account business models, activities and other common features that characterise participation in an industry together with stakeholders in other relevant business units. Sustainability-related financial disclosures are set to become more forward-looking than historical financial information, given that metrics will show a company’s progress towards targets it has set, or is required to meet by law or regulation.


The launch of IFRS S1 represents the beginning of the journey towards convergent global sustainability reporting. Sustainability reporting will likely remain a hot topic for investors, lenders, creditors, customers, suppliers and regulators for upcoming years. Effective leadership through appropriate and timely oversight will be a key factor in driving robust and reliable sustainability reporting by companies.


With the issue of IFRS SI in June 2023, companies are required disclose information about their sustainability-related risks and opportunities to help users of sustainability reports make informed investment decisions. Companies need to commit sufficient time and resources now to ensure they identify the spectrum of risks and opportunities for their business models and future plans, including setting targets which are monitored and measured. This involves changes to processes, controls and governance and is a significant development in the drive to support the flow of capital to sustainable enterprises and to help make global capital markets more resilient.

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