Learn: Regulation & reporting

The ISSBs - what they mean, the benefits and how they apply to your organisation

The International Sustainability Standards Board (ISSB) was established to create the comprehensive standards that create the global baseline for sustainability-based financial disclosures. 

The ISSB standards are designed to create common language for required reporting on climate risks and business opportunities. The are two standards that have been available since 2023: 

  • IFRS S1 - General Requirements for Disclosure of Sustainability-Related Financial Information 
  • IFRS S2 - Climate Related Disclosure

The above standards were built on the 4 pillars of governance, strategy, risk management, and metrics and target from the Task Force on Climate-related Financial Disclosures (TCFD), as well as going beyond their recommendations. 

In the words of the ISSB Chair, Emmanuel Faber: 

“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 ISSB underwent  an extensive consultation process in order to develop the standards and have since received strong support from private business, governments, and regulatory bodies.

Through the ISSB’s extensive consultation process, the standards have built strong support from business sectors, government and regulators and others around the world including:

Current Standards and Reporting Frameworks

The conversation around reporting frameworks and requirements has been ongoing for a number of years and consequently there are existing (but separate) standards that some businesses already use to create their climate related reporting. IFRS S1 and IFRS S2 leverage these existing standards to minimise implementation cost and create unification. Some of the frameworks and standards that are embedded into IFRS 1 and IFRS 2 include: 

  • TCFD pillars and recommendations 
  • Sustainability Accounting Standards Board (SASB) Standards 
  • Climate Disclosure Standards Board (CDSB) Framework 
  • Integrated Reporting Framework 
  • World Economic Forum metrics 

IFRS S1 - General Requirements for Disclosure of Sustainability-Related Financial Information 

The ISSB IFRS S1 sets forth a requirement for companies to transparently communicate sustainability risks and opportunities that pertain to their business operations across three defined timeframes: short-term, medium-term, and long-term. This standard places significant importance on providing information that is reasonably expected to affect not only the current state but also the future prospects and sustainability of the company, ensuring stakeholders have a comprehensive view of the organisation's sustainability landscape.

IFRS 1 very importantly defines how these climate-related disclosures relate to a company’s regular financial reporting. Therefore, it is designed so that sustainability related financial disclosures can be included as part of other standard financial reports that reporting organisations would usually produce each year. 

IFRS S2 - Climate Related Disclosure

Like IFRS S1 disclosures, IFRS S2 disclosures are based on risks and opportunities that could reasonably be expected to affect the company’s prospects but are related specifically to climate-related disclosures. IFRS2 is used with IFRS S1 in that when a company meets the requirements of S1, they apply S2 to climate related risks and opportunities. 

Organisations using this IFRS standard are also required to report on the processes used to identify opportunities and risks and further how they perform against these specific identifications. 

So, What’s a Climate Risk and What’s a Climate Opportunity? 

Climate change creates both risks and opportunities for companies. The original definition of climate risk and opportunities was outlined by the TCFD and has been leveraged in the creation of the existing ISSBs. 


During the transition to a lower-carbon economy, companies often face ‘risks’ that affect their ability to continue providing their service or good at their baseline rate due to necessary operational or administrative changes. Despite this list not being comprehensive, these risks are classified in 4 ways:

  • Policy and legal 
  • Technology 
  • Market 
  • Reputation

Companies can also experience physical risks, categorised in two ways:

  • Acute risks such as extreme weather events. 
  • Chronic risks such as sea level rise.  


Inverse to climate risks are what are known as climate opportunities. These are also disclosed through the ISSB and are defined as a companies ability to take advantage of specific climate related disruptions. 

Some broad and common, yet not complete, climate-related opportunities include: 

  • Resource efficiency
  • Energy sources
  • Products and services
  • Markets
  • Resilience   

What are the benefits of ISSB standards?

The standards fill a longstanding market blindspot by providing frameworks for companies to create robust, internationally comparable, and verifiable sustainability reporting that can be used by consumers and investors to support informed decision making. 

The standards also work to unify increasingly fragmented standards for reporting that are currently spread over 300 mandatory reporting schemes and more than 200 voluntary reporting schemes. The fragmentation of these requirements adds costs, complexity, and risk for companies (particularly SMEs) who want to engage in sustainability or climate related reporting. The ISSBs open opportunities for more businesses to share decision-useful, reliable, and comparable sustainability related risks and opportunities by providing a single baseline to provide this information. 

Businesses that use the ISSBs are also predicted to benefit from them as it will streamline their sustainability reporting process and in turn improve interpretation of their reporting and open up new business opportunities as a result of information transparency. 

Are ISSB standards mandatory?

The ISSB standards are voluntary. However, regional authorities are able to make decisions on whether it is required for companies to follow the ISSB’s standards. Due to the widespread support from governments and regulatory bodies, it is not unlikely that these standards will be enforced at some stage. 

If implementing the standards has been made mandatory in an area, other jurisdictional requirements can be built upon the existing global baseline in line with broader policy or stakeholder needs. 

Companies can individually choose to apply the standards. 

Australia and the ISSBs

Prior and during the announcement of the ISSBs in June 2023, the Australian government was closely following their consultation process to better understand how and when ISSB-aligned requirements could apply to Australia. Consequently a proposed phase-in timeline and roadmap has been released. 

Based on the current roadmap, it is likely that these disclosure will become mandatory at various stages depending on the size and complexity of an organisation: 

  • Group 1 (2024-25 onwards): entities with over 500 employees, control over assets worth $1 billion or more, and/or has revenue (including from sub-entities) of $500 million or more
  • Group 2 (2026-27 onwards): entities with over 250 employees, control over assets worth $500 million or more, and/or has revenue (including from sub-entities) of $200 million or more
  • Group 3 (2027-28 onwards): entities with over 100 employees, control over assets worth $25 million or more, and/or has revenue (including from sub-entities) of $50 million or more

In each group, an organisation must fulfil two of the three requirements.

The UK and the ISSBs

The UK has also long indicated their intention to integrate ISSB standards into law. Over the next year, the UK government will continue to consider their endorsement of the  ISSB standards as part of their creation of the UK’s Sustainability Disclosure Standards (SDS) with a decision on this endorsement expected in 2023. 

While there is no finalised or publicly available roadmap for the integration of the ISSBs into UK reporting requirements at the time of writing this article we expect it to follow a similar approach to Australia. It is likely that it will impact all companies that are in the scope of existing UK Sustainability Disclosure Requirements.

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