Key points

The International Sustainability Standards Board (ISSB) issued its first two sustainability reporting standards on 26 June 2023. This included:
What is the issue?
The ISSB™ mandate is to develop and issue a comprehensive global baseline of sustainability reporting standards (IFRS Sustainability Disclosure Standards) for consistent, comparable and high-quality sustainability reporting designed to meet investor needs. IFRS S1 and IFRS S2 are the first of these standards to be issued.
The IFRS Sustainability Disclosure Standards are structured on the Task Force on Climate-Related Financial Disclosures four-pillar approach: governance, strategy, risk management, and metrics and targets.
IFRS S1 requires entities to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general purpose financial reporting in making decisions relating to providing resources to the entity. In order to meet this objective, entities need to have an understanding of the resources it relies on and the relationships along its value chain. This is because the entity’s relationships and interactions with stakeholders, society, the economy and the natural environment throughout its value chain, is inextricably linked to the ability of the entity to generate, amongst other things, cash flows over the short, medium or long term.
Sustainability-related risks and opportunities may influence an entity’s cash flows, access to finance or cost of capital over the short, medium or long term through current and anticipated effects.
IFRS S1 provides guidance on identifying sustainability-related risks and opportunities, and the relevant disclosures to be made in respect of those sustainability-related risks and opportunities. To achieve this objective, IFRS S1 requires entities to follow a two-step process to identify and disclose all material sustainability-related risks and opportunities that impact the entity’s prospects:
  • Step one helps identify sustainability-related risks and opportunities that could affect an entity’s prospects over the short, medium and long term.
  • Step two helps determine the disclosures to provide in relation to the sustainability-related risks and opportunities identified in step 1.

IFRS S2 is a thematic standard that builds on the requirements of IFRS S1 and is focussed on climate-related disclosures. IFRS S2 requires an entity to identify and disclose climate-related risks and opportunities that could affect the entity’s prospects over the short, medium and long term. To achieve this objective, an entity is required to refer to and consider the applicability of industry-based disclosure topics as defined in the Industry-Based Guidance on Implementing IFRS S2.
In addition, IFRS S2 requires entities to consider other industry-based metrics and seven cross-industry metrics when disclosing qualitative and quantitative components on how the entity uses metrics and targets to measure, monitor and manage the identified material climate-related risks and opportunities. The cross-industry metrics include disclosures on greenhouse gas (GHG) emissions, transition risks, physical risks, climate-related opportunities, capital deployment, internal carbon prices and remuneration. For example, when providing GHG emissions disclosures, IFRS S2 requires an entity to measure and disclose its Scope 1, Scope 2 and Scope 3 GHG emissions in accordance with the GHG Protocol Corporate Standard, subject to certain transition reliefs.
Further information on the requirements of IFRS S1 and IFRS S2 will be provided in PwC’s upcoming In depth.
When does it apply?
IFRS S1 and IFRS S2 are effective for annual reporting periods beginning on or after 1 January 2024, with early adoption permitted. This is subject to the endorsement of the standards by local jurisdictions.
There are a number of transition reliefs when the standards are first applied. These include the ability to elect to only report on IFRS S2 climate-related risks and opportunities for the first year of adoption along with the relevant requirements in IFRS S1 to the extent that they relate to the disclosure of climate-related information.
Where do I get more details?

UK guidance

What does this mean for UK companies and groups?
As the In brief indicates, the ISSB standards will only apply in any particular territory once they have been endorsed and incorporated into the local legal or regulatory framework. In the UK this is expected to happen in the relatively near future because the Government, in its Green Finance Strategy published in March 2023 (see our 'Where do I start?' guide for more information), signalled its intention to endorse these first two ISSB standards within 12 months of their publication.
The first of the new standards requires entities to disclose information about their sustainability-related risks and opportunities, and the second focuses on reporting on climate change. This means that the number of detailed new disclosures for UK listed companies might be limited in practice given the requirements that are already in place, including the need to report on a company’s principal risks and full reporting against the TCFD framework.
The publication of the new standards will, however, generate increased scrutiny from a range of stakeholders. UK companies and groups should therefore review both standards and carry out a gap analysis against them - bearing in mind that the first standard will involve applying general concepts to a range of different areas of sustainability. And, while these are reporting standards, the related internal processes and controls on which the reporting is based will also need to be considered.
How do the ISSB standards relate to the EU CSRD and other developments?
Where a UK group has significant operations in the EU it will also need to consider the requirements of the EU Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards, initially for in-scope EU subsidiaries and subgroups (generally from December 2025 year ends) and later for the whole global group (for 2028 year ends). These are considerably more extensive and detailed than the ISSB standards at the present time, and also include specific requirements for information to be assured. See our 'Where do I start?' guide for an overview of the EU CSRD requirements, and this 'In the loop' publication for further guidance on them.
One of the main drivers for the ISSB’s work was to provide a consistent globally accepted framework for non-financial or sustainability reporting, and the EU CSRD requires arrangements to be established to determine whether other frameworks can be treated as equivalent to it for reporting purposes. In the course of the drafting process the ISSB and EU worked toward consistency in structure, approach and definitions but it is not yet clear how or when the relevant decisions on equivalence will be made. Both parties have also committed to publish a detailed analysis of differences between the two frameworks once the standards are finalised.
US registrants will also need to be aware of the SEC’s proposals in respect of climate change reporting specifically. Again, see the 'Where do I start?' guide.
For more information please contact Mark O'Sullivan, Ollie Law or Rachel Price.
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