Published in June 2023, the IFRS S1 and S2 standards have introduced a precise, industry-specific framework for businesses worldwide to measure, monitor, and disclose sustainability-related and climate-related risks and opportunities. While the adoption of these standards is at the discretion of national authorities, there is a global trend towards embracing the IFRS S1 and S2.
Leading the adoption wave, Brazil has committed to voluntary ISSB compliance from 2024, with a mandatory shift by 2026. The Australian Accounting Standards Board is crafting sustainability disclosure standards inspired by the ISSB, and the UK’s official stance aligns closely with these global benchmarks, deviating only for local matters.
The ISSB standards, particularly IFRS S1 and S2, are becoming the universal foundation for sustainability reporting across the financial sector. But what does adherence to IFRS S1 and S2 entail for businesses?
The ISSB’s Pioneering Role
In the maze of ESG regulations, which have surged by 155% globally over the past decade, the ISSB standards aspire to create a consistent reporting language worldwide. Endorsed by international securities regulators, these standards are becoming the “global baseline” for organisations to report on ESG matters, enhancing clarity for investors, stakeholders, and regulators.
Introducing IFRS S1 and S2
IFRS S1 and S2 mark a milestone in standardising ESG reporting. These frameworks, incorporating the TCFD’s recommendations, offer detailed guidelines for organisations to report on sustainability and climate-related activities, thereby establishing a consistent, comparable, and relevant global reporting standard.
IFRS S1 addresses the ‘E,’ ‘S,’ and ‘G’ aspects of ESG, demanding organisations to disclose their sustainability strategies, governance, and performance metrics, thus providing a global benchmark for ESG progress.
Amidst the climate crisis, IFRS S2 zeroes in on climate-specific disclosures, requiring reports on climate strategies, risk management, and environmental impacts, and includes industry-specific guidance for over 77 industries, potentially aligning with GRI and ESRS for broader interoperability.
The Bright Side of IFRS S1 and S2
The IFRS S1 and S2 standards are particularly significant for asset managers, investment banks, and financial institutions, simplifying global compliance and market access, and enhancing strategic ESG initiatives. They ensure accurate sustainability information, support benchmarking, and facilitate seamless integration with existing financial reporting frameworks.
The adoption of these standards equips financial entities with a comprehensive guide to the ESG landscape, encouraging sustainable practices as a strategic choice.
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