Reporting in compliance with ISSB standards

Companies can only declare compliance with ISSB Standards (IFRS S1 and IFRS S2) if they fulfil all specified requirements. Entities vary significantly in reporting maturity, data availability, and industry risk exposure. To accommodate these differences, entities applying ISSB Standards voluntarily might progress gradually. They must clearly disclose their compliance extent, aiding investor assessment. Full compliance initially is achievable by utilising provided transition reliefs and proportionality mechanisms.

Transition reliefs

IFRS S1 and IFRS S2 offer multiple transition reliefs to ease initial adoption. Entities can initially opt for ‘climate-first’ reporting, limiting disclosure solely to climate-related risks and opportunities in the first reporting period. Non-climate disclosures must follow in subsequent years. Entities may also delay their sustainability-related financial disclosures initially, aligning them with half-year financial reports instead of annual ones. Comparative information for disclosures is not required during the first year, but must be provided from the second year onward.

IFRS S2 mandates using the GHG Protocol for greenhouse gas (GHG) emissions measurement unless alternative methods are regulatory requirements. Entities using different methods before adoption can continue with those methods for the initial year. Scope 3 GHG emissions disclosures are optional in the first reporting year under IFRS S2. Entities employing these transition reliefs remain compliant if all other requirements are met but lose compliance status if reliefs extend beyond allowed periods.

Proportionality mechanisms

ISSB Standards incorporate proportionality mechanisms to balance disclosure expectations against practical capabilities of entities. These mechanisms include utilising “reasonable and supportable information available without undue cost or effort” and adopting qualitative disclosures where quantitative data might be limited. Such flexibility is especially helpful for entities newly applying these standards or lacking sufficient skills and resources. Entities employing these measures can still assert compliance with ISSB Standards.

Table—Proportionality mechanisms

Proportionality mechanisms specifically facilitate areas like climate-related scenario analysis, anticipated financial effects determination, Scope 3 GHG emissions measurement, identification of risks and opportunities, value chain scope determination, and cross-industry metric calculation. Entities can leverage qualitative approaches if they lack sufficient quantitative data, thus maintaining compliance while progressively enhancing disclosure quality and comparability.

Starting from investor-oriented disclosure frameworks and standards—Task Force on Climate-Related Financial Disclosures (TCFD), SASB, CDSB and the Integrated Reporting Framework

Entities already employing investor-focused disclosure frameworks such as TCFD, SASB, CDSB, and the Integrated Reporting Framework have a foundational advantage in meeting IFRS S1 and IFRS S2. IFRS S2 incorporates TCFD recommendations comprehensively, enabling entities already using TCFD disclosures to progress smoothly towards full ISSB compliance by supplementing existing disclosures with additional industry-specific requirements from IFRS S2.

SASB reporters similarly possess a solid foundation for meeting ISSB standards, as IFRS S1 explicitly guides entities to consider SASB standards for sustainability-related risks beyond climate-related ones. CDSB frameworks for water and biodiversity disclosures provide robust foundations for integrating environmental and social data into comprehensive ISSB-aligned reporting.

Communicating partial application

Entities partially applying ISSB Standards must transparently disclose their compliance extent, clearly outlining omitted information and rationales. Regular updates on compliance progress and clearly defined future goals for achieving complete compliance are recommended. Independent assurance may enhance stakeholder confidence and comparability of disclosed sustainability-related financial information, particularly when entities adopt a phased approach towards full ISSB compliance.