The IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2) are a set of global standards that require companies to disclose information about their sustainability-related risks and opportunities. The standards were developed by the International Sustainability Standards Board (ISSB), which is part of the IFRS Foundation.
What is the IFRS Foundation?
The IFRS Foundation is a not-profit, public interest organization established to develop high-quality, understandable, enforceable, and globally accepted accounting and sustainability disclosure standards. Its accounting disclosures standards are used in more than 140 jurisdictions.
What are the IFRS Sustainability Disclosure Standards?
The IFRS Sustainability Disclosure Standards are designed to help investors and other stakeholders make informed decisions about providing resources to companies. On June 26th, 2023, the International Sustainability Standards Board (ISSB) published its first two standards, The IFRS S1, which focuses on general disclosures on sustainability risks and opportunities, and the IFRS S2, requesting more specific climate-related disclosures.
The IFRS S1 - General Requirements for Disclosure of Sustainability-related Financial Information
This standard mandates that companies report information regarding sustainability-related risks and opportunities in their operations. These disclosures are intended to provide valuable insights to users of general-purpose financial reports, aiding them in making informed decisions about allocating resources to the company, such as investment choices. The standard is built around 4 main content areas:
- Governance: Information on how the company manages sustainability risks and controls.
- Strategy: Disclosures on the company's approach to handling sustainability risks and opportunities.
- Risk Management: Information on how the company identifies, assesses, and monitors sustainability risks.
- Metrics and Targets: Information on the company's sustainability goals and its progress toward achieving them.
The IFRS S2 - Climate-Related Disclosures
This standard extends the scope by focusing on climate-related disclosures. In addition to encompassing the provisions of IFRS S1, this standard lays out specific requirements for companies to report on their climate-related risks and opportunities. IFRS S2 is designed to align with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). It compels companies to disclose information regarding climate-related risks and opportunities, not only in a cross-industry context but also tailored to industry-specific nuances. This standard has the same structure as IFRS S1:
- Governance: Companies must disclose their governance procedures for monitoring climate-related risks and opportunities.
- Strategy: Companies must reveal how climate change affects them, including planned changes, mitigation strategies, transition plans, financial impacts, and resilience measures.
- Risk Management: Companies should provide insights into how they identify, assess, and manage climate-related risks, integrating them into their overall risk strategy.
- Metrics and Targets: Companies must disclose Information on climate-related targets and industry metrics. Greenhouse gas emissions (Scope 1, 2, and 3) must be disclosed, along with progress-tracking methods.
Benefits of adopting the IFRS S1 and S2 standards
There are several benefits to adopting the IFRS S1 and IFRS S2 standards, including:
- Improved comparability: The standards provide a global baseline for sustainability-related disclosures, which will make it easier for investors and other stakeholders to compare companies across jurisdictions.
- Increased transparency: The standards require companies to disclose comprehensive information about their sustainability-related risks and opportunities, as well as their governance, management, and performance. This will help investors and other stakeholders to make more informed decisions about providing resources to companies.
- Reduced costs: Adopting the standards can help companies to reduce the costs associated with sustainability reporting. The standards provide a single set of requirements for sustainability-related disclosures, which can help companies to streamline their reporting processes.
The IFRS Sustainability Disclosure Standards are a significant development in the field of sustainability reporting. The standards provide a global baseline for sustainability-related disclosures, which will help to improve comparability and transparency. Companies that adopt the standards can benefit from reduced costs and increased investor confidence.
How can ESGgo software help you with the IFRS?
ESGgo serves as a valuable asset in navigating the complexities of IFRS. Through its ESG (Environmental, Social, and Governance) assessment capabilities, ESGgo aids organizations in effectively addressing the sustainability-related reporting requirements outlined in IFRS S1 and S2. ESGgo streamlines the process of collecting, analyzing, and disclosing critical sustainability data, ensuring that companies can meet the standards' governance, strategy, risk management, and metrics and targets obligations.
ESGgo's robust features empower businesses to not only achieve regulatory compliance but also enhance transparency, comparability, and accuracy in their sustainability reporting, ultimately fostering trust and confidence among investors and stakeholders.
*Disclaimer: This summary is for general education purposes only and may be subject to change. ESGgo, Inc., and its affiliates (the “Company”, “ESGgo”, “we”, or “us”) cannot guarantee the accuracy of the statements made or conclusions reached in this summary and we expressly disclaim all representations and warranties (whether express or implied by statute or otherwise) whatsoever.
