Guide
ISSB Standards: A Guide for Companies
The ISSB standards impact an estimated 100,000 to 130,000 companies worldwide. Here's what businesses need to know.
What is the International Sustainability Standards Board (ISSB)?
The ISSB is an independent, global body responsible for developing and publishing environmental, social, and governance (ESG) disclosure standards. The ISSB's mission is to create a comprehensive set of standards that helps companies provide investors and other stakeholders with consistent, comparable, and reliable sustainability information.
In this article, we’ll cover:
Why was the ISSB developed?
Established in 2021, the ISSB was created in response to investors looking for reliable ESG information from companies. The ISSB standards simplify this process by standardizing disclosure to help investors more effectively compare and analyze ESG performance across companies. The ISSB also serves to harmonize and merge previously disparate frameworks to simplify the reporting process.
The ISSB was established by the International Financial Reporting Standards (IFRS) Foundation, which also oversees the International Accounting Standards Board (IASB). This ensures that ISSB standards are aligned with existing financial reporting frameworks and that sustainability reporting is integrated into mainstream financial reporting.
Companies impacted by the ISSB standards
It’s estimated the ISSB standards may affect 100,000 to 130,000 companies worldwide. This is largely due to the International Organization of Securities Commissions (IOSCO), which is considered the global standard setter for securities regulation, endorsing the ISSB standards in 2023. Companies may choose to adopt the standards voluntarily in response to stakeholder pressure and growing demand for transparency. Some countries, such as Australia, Brazil, Canada, Japan, Mexico, Singapore, and the UK, have also mandated or are developing ISSB-based regulations.
While exact rules for compliance vary based on jurisdiction, company size, and other factors, impacted businesses are expected to report as early as 2025. In general, the companies in scope are publicly traded — but in some countries, they also apply to larger private companies.
What are the ISSB standards?
In June 2023, the ISSB published its inaugural standards, IFRS S1 and S2:
- IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information
- IFRS S2: Climate-Related Disclosures
IFRS S1 and S2 simplify the evaluation of a company's sustainability and climate-related practices, enabling investors with more informed decision-making.
IFRS S1 Overview
IFRS S1 outlines the general requirements for a complete set of sustainability-related financial disclosures, including all risks and opportunities that could affect the entity’s cash flows, access to finance, or cost of capital.
IFRS S2 Overview
IFRS S2 is a topic-based standard that specifies disclosures relating to climate, including all risks and opportunities that could affect the entity’s prospects.
These standards are designed to be applied in conjunction with IFRS S2 building on IFRS S1. Both standards require disclosures about governance, strategy, risk management, and metrics and targets.
In time, the ISSB is planning to release other topic-based standards, eventually establishing specific guidelines for many ESG-related topics.
Here's the breakdown:
| IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information | IFRS S2: Climate-related Disclosures |
|---|---|
| Governance: “the governance processes, controls and procedures the entity uses to monitor and manage sustainability-related risks and opportunities.” | Governance: “the governance processes, controls and procedures an entity uses to monitor, manage and oversee climate-related risks and opportunities.” |
| Strategy: “the approach the entity uses to manage sustainability-related risks and opportunities” | Strategy: “an entity’s strategy for managing climate-related risks and opportunities.” |
| Risk management: “the processes the entity uses to identify, assess, prioritise and monitor sustainability-related risks and opportunities” | Risk management: “an entity’s processes to identify, assess, prioritise and monitor climate-related risks and opportunities, including whether and how those processes are integrated into and inform the entity’s overall risk management process.” |
| Metrics and targets: ”the entity’s performance in relation to sustainability-related risks and opportunities, including progress towards any targets the entity has set or is required to meet by law or regulation” | Metrics and targets: “an entity’s performance in relation to its climate-related risks and opportunities, including progress towards any climate-related targets it has set, and any targets it is required to meet by law or regulation.” |
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How the ISSB relates to other reporting frameworks
The ISSB relates to and expands on many other global sustainability reporting frameworks, including (but not limited to):
ISSB’s impact on TCFD
The TCFD is a framework that helps organizations disclose information about climate change, but was disbanded following the ISSB’s release of IFRS S1 and S2. While the TCFD is still available for use, companies are encouraged to instead use IFRS S2 as the new baseline for climate-related disclosures.
ISSB's impact on CDSB and VRF
The CDSB and VRF formally consolidated under ISSB and no longer exist independently.
ISSB’s impact on CDP
CDP and ISSB collaborate to more closely align CDP’s climate questionnaire with IFRS S2.
How you can prepare for the ISSB standards now
Following the ISSB standards is an important step toward achieving greater transparency and accountability in corporate sustainability reporting. Whether you've been reporting on sustainability for a while or are brand new to disclosures, Net Zero Cloud can help.
Check out our web page and demo to learn how Net Zero Cloud can help manage all your ESG initiatives and create disclosure reports in accordance with various frameworks and regulations. Built on the #1 AI CRM, Net Zero Cloud connects sustainability data with every corner of your business — including your suppliers, partners, and value chain — and automates reporting with Agentforce.
