ISSB issues IFRS S1 and IFRS S2
On 26th June, the International Sustainability Standards Board (ISSB) issued the first two IFRS Sustainability Disclosure Standards – IFRS S1 and IFRS S2. The standards were created by the ISSB, which is part of the IFRS Foundation.
A4S welcomes this important step towards achieving global sustainability reporting standards targeted at meeting capital market needs, and encourages businesses, investors and other stakeholders to engage in their implementation and further developments
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information sets out the overall requirements for an entity to disclose sustainability-related financial information about its sustainability-related risks and opportunities. IFRS S2 Climate-related Disclosures requires an entity to provide material information about its significant climate-related risks and opportunities. Both standards fully incorporate the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).
On the day of the launch, Emmanuel Faber, ISSB Chair, said "Today represents the outcome of more than 18 months of intense work to deliver an inaugural set of sustainability disclosure standards for the global capital markets. The ISSB Standards have been designed to help companies tell their sustainability story in a robust, comparable and verifiable manner. We have consulted closely with the market to ensure the Standards are proportionate and will result in disclosures that are relevant for investment decision-making."
The standards are now available for endorsement by different jurisdictions globally and for voluntary adoption in the meantime. They will be effective for annual reporting periods beginning on or after 1st January 2024.
Transition reliefs have been put in place for adopting organizations, including:
- Entities are not required to provide the disclosures specified in the standards for any period before the date of initial application. As such, an entity is not required to disclose comparative information in its first annual reporting period of adopting the standards.
- In the first annual reporting period in which an entity applies the standards, the entity is permitted to report its sustainability-related financial disclosures after it publishes its related financial statements.
- In the first annual reporting period in which an entity applies IFRS S1, the entity is permitted to disclose information on only climate-related risks and opportunities (in accordance with IFRS S2) and to apply the general requirements only in so far as they relate to the disclosure of information on climate-related risks and opportunities.
- For the first year of adoption, entities do not need to disclose scope 3 greenhouse gas emissions, and they do not need to use the Greenhouse Gas Protocol to measure emissions if they are currently using a different approach.
Further information on the standards can be found on the IFRS website.
How A4S is supporting the standards and the finance teams who are implementing them
A4S contributed to the development of the two standards by taking part in the consultation process in 2022. Through the consultation response, A4S provided constructive feedback to support the development of a robust and effective sustainability reporting system. Alongside A4S’s full response, it also coordinated the voice of the business and finance community in calling for global alignment and for the ISSB to strengthen its proposed standards in a number of ways.
A4S will further support the implementation of the IFRS Sustainability Disclosure Standards through capacity building. A4S will use its extensive experience working within the finance and accounting community to accelerate the adoption and effective implementation of the IFRS Sustainability Disclosure Standards. Through this work A4S will support better-informed investor decision making and help companies to overcome practical challenges faced during implementation, so that the whole community can use effective reporting as a mechanism to deliver ambitious targets and strengthen action.
A4S has partnered with the IFRS Foundation through its Partnership Framework for capacity building.[1] A4S’s global networks within the CFO, investor and wider finance and accounting community will play an important role in helping to raise awareness of the standards and their implementation.
What next?
The ISSB will now focus on beginning new research and standard-setting projects as well as supporting the implementation of IFRS S1 and IFRS S2. With this in mind, the board has now published two new consultations:
- On agenda priorities, seeking feedback on the ISSB’s strategic priorities and to identify areas of focus for the coming two years. The consultation closes on 1st September 2023, and A4S will be taking part in this process.
- On the proposed methodology for enhancing the international applicability of the SASB Standards.[2] The consultation closes on 9th August 2023.
The A4S Controllers Forum
A4S has also launched the A4S Controllers Forum for financial controllers, ESG controllers, chief accounting officers or other similar roles from large organizations. The forum supports those who are leading, and have oversight of, the delivery of an organization’s sustainability related data management, the associated control environment and internal and external reporting. Members will learn from peers and share insights, challenges and opportunities to accelerate progress towards best practice. This includes discussing roles, responsibilities, organizational structure, emerging requirements, approaches, available tools and methodologies, and lessons learned to date.
Membership is invitation-only. For those interested in joining, you can register your interest via the A4S website.
For more information on changes to the reporting landscape please register for the A4S Newsletter and read our reporting webpage.
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