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Understanding the ISSB standards
Deciphering the first two ISSB standards and what they mean for business’ financial reporting and sustainability disclosure.
Understanding the ISSB Standards
The International Sustainability Standards Board (ISSB) has fundamentally changed how companies disclose sustainability information to capital markets. For global enterprises already navigating EU CSRD, US SEC climate rules, and legacy frameworks like TCFD and GRI, understanding where ISSB fits — and what it requires — is now a compliance priority, not a planning exercise.
This article covers what the ISSB is, what its two inaugural standards require, how they relate to other major frameworks, and what practitioners need to know to apply them.
What is the ISSB?
The ISSB is an independent standard-setting body established by the IFRS Foundation. It was announced on 3 November 2021 at COP26 in Glasgow, in response to sustained demand from capital markets for consistent, comparable, and decision-useful sustainability disclosures.
The ISSB was created with four formal objectives: to develop a comprehensive global baseline of sustainability disclosure standards for capital markets; to meet the information needs of investors and other capital market participants; to enable companies to provide high-quality, transparent, and comparable disclosures; and to facilitate interoperability with jurisdiction-specific reporting requirements.
Its formation has received backing from the G7, G20, IOSCO, and over 40 jurisdictions worldwide.
Why were the ISSB standards created?
Before the ISSB, sustainability reporting was dominated by a proliferation of voluntary frameworks: TCFD for climate risk, SASB for industry-specific metrics, the Climate Disclosure Standards Board (CDSB), the Value Reporting Foundation (VRF), and the Integrated Reporting Framework, among others. Companies operating across multiple jurisdictions often maintained parallel disclosures under several of these simultaneously, with no clear mechanism for reconciling them.
The ISSB consolidated this fragmented landscape into a single, authoritative baseline. It incorporated TCFD, CDSB, and the VRF (which itself included SASB and the Integrated Reporting Framework) into its standard-setting architecture – building on the most widely adopted predecessor initiatives rather than starting from scratch.
Information is material if its omission, obscuring, or misstatement could reasonably be expected to influence investor decisions.
IFRS Accounting StandardsThe two ISSB standards: IFRS S1 and IFRS S2
The ISSB published its two inaugural standards in June 2023. They are designed to work together: IFRS S1 sets the general requirements; IFRS S2 applies them specifically to climate.
IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
IFRS S1 requires companies to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance, or cost of capital over the short, medium, and long term.
Disclosures are structured around four pillars drawn directly from the TCFD framework: governance (the processes used to monitor and manage sustainability-related risks and opportunities), strategy (how identified risks and opportunities affect the business model and financial position), risk management (how the company identifies, assesses, prioritises, and monitors sustainability-related risks), and metrics and targets (the performance measures used to track progress).
Where no specific ISSB standard exists for a given topic, IFRS S1 requires companies to refer to SASB Standards for industry-specific guidance — effectively bringing SASB metrics into the ISSB architecture without requiring a separate disclosure process.
IFRS S2: Climate-related Disclosures
IFRS S2 applies the same four-pillar structure to climate specifically. It fully integrates the TCFD recommendations, meaning companies applying IFRS S2 need not maintain a separate TCFD disclosure.
Key requirements include disclosure of climate-related risks and opportunities across physical and transition risk categories; climate scenario analysis to assess strategic resilience; disclosure of Scope 1, Scope 2, and Scope 3 greenhouse gas emissions in accordance with the GHG Protocol Corporate Standard, covering all 15 Scope 3 categories; and disclosure of any climate-related transition plans, including associated targets and milestones.
For first-time reporters, a climate-first relief option allows initial application of IFRS S2 without simultaneously meeting all IFRS S1 requirements, giving companies time to build broader sustainability disclosure capabilities.
How ISSB standards relate to other frameworks
One of the most common questions from practitioners is how ISSB interacts with frameworks already embedded in their reporting processes.
TCFD is the most direct relationship. IFRS S2 fully integrates TCFD recommendations, and the TCFD was formally disbanded in October 2023 with its monitoring responsibilities transferred to the IFRS Foundation. Companies that apply IFRS S2 need not apply TCFD separately.
SASB Standards are referenced by IFRS S1 as the default source of industry-specific metrics where no dedicated ISSB standard exists. Existing SASB disclosures can largely be carried forward into an ISSB-aligned process.
The GHG Protocol underpins the emissions disclosure requirements in IFRS S2. Companies already using GHG Protocol methodology for Scope 1, 2, and 3 reporting have a strong foundation for meeting IFRS S2’s quantitative requirements.
CSRD and ESRS pursue different but compatible goals. ISSB uses single materiality, focused on investor relevance; CSRD uses double materiality, which also captures impacts on people and the environment. EFRAG and the ISSB worked to maximise interoperability, so companies subject to both can design a single disclosure process that satisfies each, with targeted additions to address the differences in scope.
GRI and ISSB serve different audiences. GRI targets broader stakeholders; ISSB targets capital markets. The two are complementary rather than competing, and many companies use both in parallel.
Applying the ISSB standards: key practical considerations
Materiality assessment
IFRS S1 uses a single materiality threshold: information is material if omitting, misstating, or obscuring it could reasonably be expected to influence investor decisions. The materiality assessment starts with investor relevance — identifying sustainability-related risks and opportunities, assessing their potential financial effects across time horizons, and disclosing those that meet the threshold. The assessment process and the judgements behind it are themselves subject to disclosure.
Scope of reporting
IFRS S1 requires disclosure across the company’s entire value chain, including upstream suppliers and downstream customers where relevant to identified risks and opportunities. For first-time IFRS S2 reporters, the climate-first relief option allows phased adoption, with full IFRS S1 compliance to follow.
GHG emissions disclosure
IFRS S2 requires absolute gross GHG emissions for Scope 1, Scope 2, and Scope 3, measured using the GHG Protocol. Scope 3 covers all 15 categories, including purchased goods and services, capital goods, transportation, use of sold products, and investments. A one-year relief period applies for Scope 3 in the first year of application, recognising the complexity of supply chain data collection. Where quantitative data is not yet available, qualitative disclosures with a timeline for quantitative reporting are permitted.
Proportionality and relief provisions
Where companies lack the capability for full quantitative disclosure, qualitative alternatives are available — but companies must state that they are using this relief and provide a timeline for building quantitative capability. The relief provisions are transitional, not permanent exemptions.
The regulatory context: where ISSB sits globally
The ISSB standards are not themselves mandatory at a global level. They are a baseline that individual jurisdictions adopt, adapt, or mandate through domestic regulatory mechanisms. A growing number – including Australia, Canada, Japan, Singapore, and the UK, have moved toward mandatory adoption or alignment. The EU’s CSRD and the US SEC’s climate disclosure rules draw on closely related conceptual foundations.
For multinationals operating across 20 or more countries, the practical question is not whether ISSB applies in isolation but how ISSB-aligned disclosures integrate with the jurisdiction-specific requirements already in scope. The regulatory landscape is consolidating around a small number of authoritative frameworks, and ISSB sits at the centre of the capital market strand of that consolidation.
Monitoring how each jurisdiction adopts or mandates ISSB requirements, and how those adoptions interact with CSRD, SEC rules, and national equivalents — is where the compliance complexity concentrates. That requires ongoing regulatory intelligence, not a one-time implementation exercise.
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Frequently asked questions
What is the ISSB and who created it?
The ISSB is an independent standard-setting body established by the IFRS Foundation, announced at COP26 in Glasgow on 3 November 2021. It was created in response to capital market demand for consistent, comparable sustainability disclosures and has received backing from the G7, G20, IOSCO, and 40+ jurisdictions.
What is the difference between IFRS S1 and IFRS S2?
IFRS S1 sets general requirements for disclosing all sustainability-related risks and opportunities material to investors, using a four-pillar structure. IFRS S2 applies those requirements specifically to climate and fully integrates the TCFD recommendations. The two standards are designed to be applied together.
Who do the ISSB standards apply to?
The ISSB standards are designed as a global baseline for companies with public accountability, primarily those with publicly traded securities. Mandatory application depends on jurisdiction-specific adoption; companies should monitor requirements in each country where they operate or are listed.
When did the ISSB standards come into effect?
IFRS S1 and IFRS S2 were published in June 2023 and are effective for annual reporting periods beginning on or after 1 January 2024. Adoption timelines vary by jurisdiction.
How do ISSB standards relate to TCFD?
IFRS S2 fully integrates the TCFD recommendations. The TCFD was formally disbanded in October 2023, with monitoring responsibilities transferred to the IFRS Foundation. Companies applying IFRS S2 need not maintain a separate TCFD disclosure.
Are ISSB standards mandatory or voluntary?
At a global level, the ISSB standards are a voluntary baseline. Mandatory application depends on whether a company’s jurisdiction has adopted or mandated them through domestic regulation. A growing number of jurisdictions have moved toward mandatory adoption or alignment, and companies should track jurisdiction-specific timelines rather than treating ISSB as uniformly optional.
How can Enhesa help with ISSB compliance?
ISSB compliance is not a one-time implementation exercise. As jurisdictions adopt and adapt IFRS S1 and S2 at different rates, the regulatory picture shifts continuously. Enhesa’s Corporate Sustainability Intelligence tracks sustainability and ESG regulatory requirements across 400+ jurisdictions, giving compliance teams a single source of truth as ISSB-aligned mandates come into force in each country where they operate. With 160+ in-house regulatory experts and 35+ years of experience, Enhesa translates complex, fast-moving disclosure requirements into clear, actionable intelligence – so your team knows what applies, where, and when.
