In June 2023, the International Sustainability Standards Board (the ISSB) released their first global, investor-focused sustainability and climate-related disclosure standards, IFRS S1 and IFRS S2. These standards will underpin further disclosure aligned with the industry-specific SASB standards. 

The release of the IFRS standards demonstrates a trend towards reporting framework consolidation and the intersection of climate risk and financial performance. Whether or not your organization is already disclosing to SASB, or uses other climate-risk assessment frameworks like TCFD, you may still be wondering how the IFRS standards will impact your sustainability reporting. We’ve compiled a list of frequently asked questions below.

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FAQ #1: This seems like quite the alphabet soup. Can you please explain the difference between SASB, IFRS, and ISSB? 

The Sustainability Accounting Standards Board (SASB), is a non-profit organization that develops sustainability accounting standards. As of August 1, 2022 the IFRS Foundation (another reporting standard) deferred to the SASB Standards, following the consolidation of the two Foundations. 

The International Sustainability Standards Board (ISSB) is an independent organization that produces and approves sustainability disclosure standards, similar to how the International Financial Reporting Standards (IFRS) are used for accounting. The IFRS Foundation oversees the ISSB. 

FAQ #2: What is the current status of the IFRS standards? 

IFRS standards are intended to go into effect for annual reporting periods on or after January 1, 2024. Currently, stakeholder feedback on the standards is being requested through September 27, 2023, with the standards expected to be released in 2025. 

FAQ #3. Will reporting to ISSB be required and regulated? 

Disclosing to IFRS S1 and IFRS S2 will not be mandatory; however, your country’s laws will determine which companies are required to report. Applying the ISSB standards is currently voluntary, as the ISSB cannot mandate who discloses. Disclosure is encouraged so that companies can communicate sustainability-related material impacts of their operations in a comparable way.

FAQ #4: There are already numerous reporting standards. How are the ISSB standards differentiating themselves?

The ISSB has several objectives, namely: 

1. Creating global standards that support comparable sustainability disclosures
2. Helping align disclosures with common investor data requests
3. Supporting alignment with jurisdiction-specific disclosures and extensive stakeholder groups
4. Allowing companies to provide comprehensive sustainability-related information across global markets

FAQ #5: I’m seeing IFRS S1 and IFRS S2 referenced a lot. Please break this down for me. 

These refer to the first two ISSB Standards. IFRS S1 is a general requirement and requests information relative to your organization’s sustainability efforts. IFRS S2 contains climate-related disclosures. Combined, these two are the ISSB Standards, and both ask a reporting organization to assess financial impact over short, medium, and long term. 

‍FAQ #6: My organization already reports to SASB. What will we need to do differently? 

The good news is that if you are already disclosing to SASB, you are likely prepared to respond to  IFRS S1 and IFRS S2. In addition, you will need to disclose industry-specific data for sustainability-related risks, opportunities, and other metrics. This level of disclosure is something you will already be familiar with via SASB Standards, which are foundational to the IFRS Sustainability Disclosure Standards. ‍

FAQ #7: How do the ISSB standards overlap with other reporting standards? ‍

ISSB standards consider several reporting standards and frameworks, especially those that are geared towards investors. These standards include:

• Task Force for Climate-related Financial Disclosures (TCFD) 
• Climate Disclosure Standards Board (CDSB) 
• Value Reporting Foundation’s Integrated Reporting Framework and industry-based SASB Standards 
• World Economic Forum’s Stakeholder Capitalism Metrics

ISSB also partners with the Global Reporting Initiative (GRI) to inform and align with the new standards. Further alignment may happen in the future to help alleviate the challenges of working with numerous standards with limited  internal bandwidth to gather all key data.

Source: ifrs.org