ISSB Implementation Guide: IFRS S1 and S2

Overview

The International Sustainability Standards Board (ISSB), established under the IFRS Foundation in November 2021, issued its inaugural standards—IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures)—in June 2023. These standards represent a global baseline for investor-focused sustainability disclosure, designed to be adopted or built upon by jurisdictions worldwide.

IFRS S1 establishes the overarching framework for reporting sustainability-related risks and opportunities that could reasonably be expected to affect an entity's cash flows, access to finance, or cost of capital over the short, medium, and long term. IFRS S2 provides specific requirements for climate-related disclosures, effectively absorbing and building upon the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

The ISSB standards are gaining rapid traction. As of April 2026, 28 jurisdictions had adopted IFRS S1 and S2 in some form, among them Australia, Brazil, Japan, Nigeria, and Singapore, while the United Kingdom and Canada have issued ISSB-based standards for voluntary use as their regulators decide on requirements. The standards are also influencing voluntary reporting practices globally, making ISSB implementation a strategic priority for any multinational corporation.

Who Does It Apply To?

The ISSB does not directly mandate reporting—it sets standards that individual jurisdictions adopt through their own regulatory processes. Applicability therefore depends on where your company operates and is listed.

Entities likely in scope across adopting jurisdictions:

• Publicly listed companies on regulated exchanges
• Large private companies meeting jurisdiction-specific thresholds
• Financial institutions including banks, insurers, and asset managers
• State-owned enterprises in some jurisdictions

Specific jurisdiction examples:

• United Kingdom: The government issued the UK Sustainability Reporting Standards (UK SRS), based on IFRS S1 and S2, in February 2026 for voluntary use. The Financial Conduct Authority has proposed requiring UK-listed companies to report against them for periods beginning on or after January 1, 2027 (climate disclosures mandatory except Scope 3, other topics on a comply-or-explain basis), with final rules expected in autumn 2026.
• Canada: The Canadian Sustainability Standards Board (CSSB) issued CSDS 1 and CSDS 2 in December 2024 for voluntary use from January 1, 2025. In April 2025 the Canadian Securities Administrators paused work on a mandatory climate disclosure rule, so no mandatory reporting date has been set.
• Australia: Mandatory climate reporting under AASB S2, based on IFRS S2, phases in for reporting periods starting on or after January 1, 2025 (largest entities), July 1, 2026, and July 1, 2027. AASB S1 is voluntary.
• Japan: Under Financial Services Agency rules adopted in 2026, Tokyo Stock Exchange Prime Market companies must report under the ISSB-based SSBJ Standards in phases: market capitalization of ¥3 trillion or more for years ending March 2027, ¥1 trillion or more from March 2028, and ¥500 billion or more from March 2029.

Even if your jurisdiction has not yet mandated ISSB-aligned reporting, investors, lenders, and supply chain partners increasingly reference these standards in their information requests.

Key Requirements

1. Governance Disclosures Describe the governance body or individual responsible for oversight of sustainability-related risks and opportunities. Disclose how sustainability is integrated into the entity's governance structure, including the skills and competencies available, how often the topic is addressed, and how it connects to strategy, risk management, and target-setting.

2. Strategy Disclosures Identify sustainability-related risks and opportunities that could reasonably affect the entity's prospects. Describe the current and anticipated effects on the business model, value chain, strategy, and financial position. For climate specifically (IFRS S2), this includes climate-related scenario analysis.

3. Risk Management Disclosures Describe the processes used to identify, assess, prioritize, and monitor sustainability-related risks and opportunities. Explain how these processes are integrated into the entity's overall risk management framework—ISSB expects sustainability risk management to be embedded, not siloed.

4. Metrics and Targets Disclose metrics used to measure and manage sustainability-related risks and opportunities, including industry-specific metrics derived from the SASB Standards (which ISSB has incorporated). For climate, mandatory metrics include absolute Scope 1, 2, and 3 greenhouse gas emissions, climate-related transition risks and physical risks in financial terms, and the amount of capital deployment toward climate-related opportunities.

5. Climate-Specific Requirements (IFRS S2) Beyond the four-pillar framework, IFRS S2 requires climate scenario analysis, disclosure of any climate transition plan the entity has, Scope 1/2/3 emissions measured per the GHG Protocol, and industry-specific metrics from the SASB climate-related standards. The Scope 3 requirement includes a one-year relief provision for first-time adopters.

6. Connected Disclosures ISSB requires connectivity between sustainability disclosures and financial statements. Where a sustainability risk or opportunity has a material effect on the financial statements, the entity must explain the connection. This requirement demands close collaboration between sustainability and finance teams.

7. Proportionality Provisions ISSB provides several transition reliefs for first-time adopters: a one-year exemption from Scope 3 reporting, the ability to focus on climate-only disclosures in year one, and relief from certain comparative period requirements. Jurisdictions may add further proportionality measures.

Timeline & Milestones

Timelines vary significantly by jurisdiction. Companies operating across multiple markets should map the earliest mandatory adoption date among their reporting obligations and plan accordingly.

Step-by-Step Compliance Roadmap

Step 1: Jurisdictional Mapping and Scoping

Identify every jurisdiction where your entity has reporting obligations or significant operations. Map current and forthcoming ISSB adoption timelines. Determine which entities within your group will need to report, whether on a consolidated or entity-level basis. Engage with legal counsel in each relevant jurisdiction to understand local modifications or additions to the ISSB baseline.

Step 2: Gap Analysis Against IFRS S1/S2

Assess your current sustainability disclosure practices against the specific requirements of IFRS S1 and S2. If you have been reporting under TCFD, you have a head start on governance, strategy, risk management, and metrics pillars—but ISSB adds specificity, particularly around financial connectivity, scenario analysis rigor, and industry-specific metrics. Catalog gaps in data, processes, governance, and skills.

Step 3: Build Data Architecture and Controls

Establish or strengthen the data infrastructure needed to produce ISSB-compliant disclosures. This includes GHG emissions measurement systems (particularly for Scope 3), climate scenario analysis capabilities, processes for identifying and assessing sustainability-related risks and opportunities, and internal controls over sustainability information. Design these controls with assurance readiness in mind from the outset.

Step 4: Prepare and Review Disclosures

Draft disclosures for each required element across governance, strategy, risk management, and metrics/targets. Ensure financial connectivity by working closely with the CFO's team to identify and explain links between sustainability disclosures and financial statement line items. Apply the transition reliefs available to first-time adopters where appropriate, but document a plan for phasing in full compliance.

Step 5: Assurance Engagement and Iteration

While ISSB itself does not mandate assurance, most adopting jurisdictions are requiring or recommending it. Engage an assurance provider early. Use their feedback to refine data quality, strengthen controls, and improve disclosure clarity. Establish a continuous improvement cycle that raises the bar each reporting period.

Common Pitfalls

Assuming TCFD compliance equals ISSB compliance. ISSB builds on TCFD but goes further. The requirements for financial connectivity, industry-specific metrics (via SASB), Scope 3 emissions, and scenario analysis specificity exceed what many TCFD reporters have disclosed to date. A detailed gap analysis is essential.

Neglecting industry-specific metrics. ISSB incorporates SASB industry-specific disclosure topics and metrics. Companies that focus only on the cross-industry requirements of IFRS S1/S2 and ignore SASB's sector guidance will produce incomplete disclosures. Identify your SASB industry classification and review the associated metrics early.

Delaying Scope 3 preparation. The one-year relief from Scope 3 reporting is a transition provision, not a permanent exemption. Companies that use it as an excuse to defer Scope 3 measurement will face a difficult catch-up. Begin Scope 3 data collection and methodology development immediately, even if you apply the relief in year one.

Treating sustainability disclosure as a standalone exercise. The ISSB's emphasis on financial connectivity means sustainability reporting must be integrated with financial reporting processes. Companies that keep these functions separate will struggle to produce the connected disclosures ISSB requires and investors expect.

How Council Fire Can Help

Council Fire helps organizations move from ISSB awareness to ISSB readiness with a practical, strategy-first approach. We understand that compliance is necessary but insufficient—the real value lies in using ISSB implementation as a catalyst for better climate strategy and stakeholder communication.

Our climate resilience expertise directly supports the scenario analysis and transition planning requirements at the heart of IFRS S2. We work with clients to develop science-based scenarios that are analytically rigorous and strategically actionable, going beyond compliance to inform genuine business decisions.

For organizations grappling with the stakeholder dimensions of ISSB—including investor engagement, supply chain data collection for Scope 3, and cross-functional governance design—Council Fire's stakeholder strategy practice provides structured approaches that build lasting capabilities rather than one-off compliance fixes.

Council Fire also brings ocean and biodiversity expertise that positions clients ahead of the ISSB's forthcoming nature-related disclosure requirements. Starting with climate but building toward comprehensive sustainability reporting gives organizations a strategic advantage as the disclosure landscape continues to evolve.

Frequently Asked Questions

How do ISSB standards differ from the CSRD/ESRS?

The core difference is perspective. ISSB standards focus on enterprise value—information material to investors and capital markets. CSRD/ESRS apply a double materiality lens, requiring disclosure of both financial impacts and the company's impacts on people and the environment. In practice, companies subject to both frameworks will find significant overlap, but ESRS includes social and governance disclosures that go beyond ISSB's current scope. EFRAG and ISSB have published detailed interoperability guidance to help companies report efficiently under both regimes.

Do we need to report Scope 3 emissions under ISSB?

Yes, IFRS S2 requires disclosure of Scope 3 greenhouse gas emissions measured in accordance with the GHG Protocol Corporate Value Chain Standard. A one-year transition relief allows first-time adopters to omit Scope 3 in their inaugural report. After that, Scope 3 disclosure is mandatory. The standard acknowledges that Scope 3 measurement involves estimation and provides guidance on using industry averages and spend-based methods where primary data is unavailable, but the trajectory is clearly toward more granular, supplier-specific data.

Is assurance required under ISSB?

The ISSB standards themselves do not mandate assurance, but most jurisdictions adopting ISSB are introducing assurance requirements alongside the disclosure mandate. The IAASB issued ISSA 5000, a stand-alone global standard for sustainability assurance engagements, in November 2024. Companies should plan for at least limited assurance from the outset and build the internal controls and documentation necessary to support it.

Can we apply ISSB standards if our jurisdiction hasn't adopted them yet?

Absolutely. IFRS S1 and S2 have been effective for annual periods beginning on or after January 1, 2024, and any company can apply them voluntarily. Many companies are voluntarily aligning their disclosures with ISSB ahead of mandatory requirements, both to prepare internal capabilities and to meet investor expectations. Voluntary adoption also positions you favorably if your jurisdiction subsequently mandates ISSB-aligned reporting.