IFRS S1 and S2 Explained: The ISSB's Global Sustainability Standards

A global baseline for sustainability disclosure

Most of the sustainability reporting conversation in Europe has been about CSRD and the ESRS. Outside the EU, a different pair of standards has been doing the same job for capital markets: IFRS S1 and IFRS S2, issued by the International Sustainability Standards Board (ISSB) in June 2023.

They are not an EU requirement, and most European companies will never file under them directly. But they are fast becoming the common language investors, lenders and foreign parent companies use when they ask about sustainability. If you report under ESRS, or you are building your first climate data set, it pays to know what S1 and S2 ask for and where they differ from what you already do.

What the ISSB is and where S1 and S2 came from

The ISSB was set up by the IFRS Foundation — the body behind IFRS Accounting Standards — and announced at COP26 in Glasgow in November 2021. Its brief was to end the “alphabet soup” of voluntary frameworks with a single global baseline for sustainability-related financial disclosure.

It did that largely by consolidation. The Climate Disclosure Standards Board and the Value Reporting Foundation, home of the SASB Standards and the Integrated Reporting Framework, were folded into the IFRS Foundation. The ISSB’s standards are built on the four-pillar structure of the Task Force on Climate-related Financial Disclosures (TCFD), and when the TCFD disbanded in 2023 it handed its monitoring role to the ISSB. If your company has published a TCFD report, S1 and S2 will look familiar.

The two standards were issued on 26 June 2023 and are effective for annual periods beginning on or after 1 January 2024, but only where a jurisdiction adopts them, or a company chooses to apply them voluntarily.

IFRS S1: the general requirements

IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, is the framework standard. It tells a company what to disclose about all of its sustainability-related risks and opportunities, and how to present it.

• Financial materiality. S1 covers sustainability-related risks and opportunities that could reasonably be expected to affect the company’s cash flows, access to finance or cost of capital over the short, medium or long term. Information is material if leaving it out, misstating it or obscuring it could reasonably be expected to influence the decisions of investors, lenders and other creditors.
• Four pillars of core content. Governance, strategy, risk management, and metrics and targets — the TCFD structure, applied to every material sustainability topic rather than only to climate.
• Connected to the financial statements. Disclosures cover the same reporting entity and period as the financial statements and are published at the same time, as part of general purpose financial reporting. The company must explain how sustainability information connects to the figures in the accounts.
• SASB as the starting point. To identify relevant risks and opportunities and the metrics to report, a company must refer to and consider the industry-based SASB Standards. Other sources, including the ESRS and GRI Standards, may also be used.

S1 also contains the transition reliefs most companies lean on in their first year: they may report only on climate (“climate first”), publish the sustainability disclosures after the financial statements, and leave out comparative information.

IFRS S2: climate-related disclosures

IFRS S2, Climate-related Disclosures, is the first topical standard. It applies the S1 architecture to climate and adds specific requirements.

• Physical and transition risks. A company describes the climate-related risks and opportunities that could affect its prospects, and their current and anticipated effects on its business model, strategy and financial position.
• Climate resilience and scenario analysis. Every company must assess the resilience of its strategy using climate-related scenario analysis. The approach is proportionate: the method should be commensurate with the company’s circumstances, using reasonable and supportable information available without undue cost or effort.
• Transition plans. Where a company has a climate transition plan, including targets and the assumptions behind them, it discloses that plan and its progress against it.
• Greenhouse gas emissions. Gross Scope 1, Scope 2 (location-based) and Scope 3 emissions, measured in line with the GHG Protocol Corporate Standard. Scope 3 reporting covers the categories included in the measurement; banks, asset managers and insurers also disclose financed emissions. In the first year, Scope 3 can be omitted.
• Cross-industry metrics. Beyond emissions: the amount and share of assets or business activities vulnerable to transition and physical risks, those aligned with climate opportunities, capital deployed towards climate, any internal carbon price, and how climate considerations feed into executive remuneration.
• Industry-based metrics. Accompanying guidance, derived from SASB, sets out metrics for each industry.

S2 has already been adjusted once. On 11 December 2025 the ISSB issued targeted amendments to its greenhouse gas requirements: financial institutions can limit Scope 3 Category 15 disclosure to financed emissions, there is relief from using the GICS industry classification in some circumstances, and jurisdictions that require a different measurement method or different global warming potential values can be followed. The amendments apply from 1 January 2027, with earlier application permitted.

Where the standards apply

The ISSB writes the standards; jurisdictions decide whether to require them. According to the IFRS Foundation, 40 jurisdictions had decided to use the ISSB Standards or were taking steps to introduce them as of February 2026. Some apply them in full, some start with climate only, and some adapt them into local standards. Among them:

• Australia requires climate disclosures based on IFRS S2 for its largest companies from financial years beginning 1 January 2025, with smaller entities phased in.
• Japan’s Sustainability Standards Board published ISSB-based standards in March 2025, with mandatory use being phased in for the largest companies on the Prime Market.
• Brazil has made ISSB-based reporting mandatory for listed companies from 2026.
• The United Kingdom is introducing UK Sustainability Reporting Standards based on S1 and S2.

Hong Kong, Singapore, Canada, Turkey, Nigeria and others are at various stages of the same path. The picture moves quickly, so check the IFRS Foundation’s jurisdictional profiles for the status in any market that matters to you.

ISSB and ESRS: what is the same and what is not

The EU did not adopt the ISSB Standards. It wrote its own, the ESRS, and the most important difference sits in the definition of materiality.

• ISSB is single (financial) materiality. It asks how sustainability matters affect the company, because its audience is the providers of capital.
• ESRS is double materiality. It asks that question too, and also how the company affects people and the environment. That second, impact perspective has no direct ISSB equivalent, which is why a double materiality assessment covers more ground than an ISSB materiality process.
• Scope differs. ESRS covers climate, pollution, water, biodiversity, resource use, workforce, value-chain workers, communities, consumers and business conduct. The ISSB has so far issued only the climate standard; other topics fall under the general requirements of S1.
• Climate is closely aligned. EFRAG and the IFRS Foundation published joint interoperability guidance in May 2024 showing a high degree of alignment between ESRS E1 and IFRS S2. A company that reports climate under ESRS has done most of the work S2 requires, though not all of it — the guidance lists the specific points to check, such as industry-based metrics.

The Omnibus simplification of the ESRS, covered in our post-Omnibus overview, has narrowed the set of mandatory EU datapoints, but it has not changed this basic relationship: ESRS remains the broader standard, and climate remains the main place where the two meet.

Why a European company should care

Even if no regulator asks you to apply S1 and S2, someone else may.

• Investors and lenders. Banks and asset managers increasingly frame their questionnaires in ISSB terms, because that is the standard their own regulators and international clients use.
• Parent companies and listings abroad. A subsidiary of an Australian, Japanese, British or Brazilian group may be asked to feed its parent’s ISSB report, and a company listed outside the EU may face the standards directly.
• Companies outside CSRD scope. After Omnibus, many companies are no longer required to report under CSRD at all. Those that still need to answer investors about climate risk may find S2 a recognised, proportionate framework to use voluntarily.

How to prepare

1. Get your greenhouse gas inventory right. Scope 1, 2 and 3 measured to the GHG Protocol is the foundation of S2, of ESRS E1 and of almost every investor questionnaire. It is the most reusable work you can do.
2. Look at climate through a financial lens. Identify the transition and physical risks that could move cash flows, financing or cost of capital, and connect them to the numbers in your financial statements.
3. Start scenario analysis simply. A qualitative assessment against two or three recognised scenarios is a legitimate starting point under S2’s proportionality principle; refine it over time.
4. Map once, report many times. If you already report under ESRS, use the EFRAG–ISSB interoperability guidance to find the gaps rather than starting from scratch.
5. Keep evidence behind every number. ISSB disclosures sit alongside the financial statements and are increasingly subject to assurance. Data that cannot be traced to its source will not survive that.

How Planmark helps

Planmark is built around the idea that sustainability data should be collected once and reused wherever it is needed. The work that S2 depends on is the same work that CSRD and investor questionnaires depend on:

• GHG accounting to the GHG Protocol. Planmark’s carbon accounting calculates Scope 1, 2 and 3 emissions from invoices, meter readings and supplier data, with AI extracting the activity data and matching emission factors.
• An audit trail on every figure. Version history and source documents stay attached to each number, so it holds up when an investor, a parent company or an assurance provider asks where it came from.
• Materiality and ESRS reporting in one place. The double materiality assessment and ESRS reporting share the same data, so the financial-materiality view an investor asks for is already part of your assessment.

Book a demo and we will show you how your climate data can serve your ESRS report and your investors’ ISSB-based questions from the same source.