International developments in sustainability reporting – ISSB in focus

A key driver in the current landscape of international sustainability reporting is the International Sustainability Standards Board (ISSB), which was established in 2021 by the International Financial Reporting Standards (IFRS) Foundation at the 26th UN Climate Conference (COP26). The aim of the ISSB is to create a global minimum standard for sustainability reporting that may be supplemented – but not undercut – by the adopting countries. The focus is on transparent and comparable sustainability information, primarily addressed to meet the needs of investors and the financial sector.  

The foundation for the content of the ISSB standards includes, among others, the standards of the Sustainability Accounting Standards Board (SASB), the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and the guidelines of the Climate Disclosure Standards Board (CDSB). The publication of the first two standards in June 2023 – IFRS S1 (“General Requirements for Disclosure of Sustainability-related Financial Information”) and IFRS S2 (“Climate-related Disclosures”) – laid the groundwork for a global reporting architecture.  

IFRS S1 and S2 at a glance  

The IFRS S1 standard contains requirements for the disclosure of sustainability-related risks and opportunities, while IFRS S2 specifically addresses climate-related aspects. Both standards focus on the impacts of those factors on the entity’s cash flow, access to finance, and costs of capital over the short-, medium-, and long-term time horizon.  

Sustainability-related risks and opportunities required by IFRS S1 refer to a company’s interactions and interdependencies with various stakeholders, society, the economy as well as natural resources along the entire value chain. The climate-related risks and opportunities described in IFRS S2 include both physical risks – such as acute weather-related events, including storms, floods or droughts as well as long-term climate changes – and transition risks and opportunities. These arise in the course of the transition to a low-carbon economy and include market changes, regulatory requirements or reputational damage. 

For all material topics, disclosures must be provided in four content areas:  

A central element of IFRS S2 is the calculation of greenhouse gas emissions, including Scope 1, 2 and 3 emissions. Additionally, there are sector-specific requirements for certain industries such as the food, finance and service sector. However, it should be noted that all disclosure requirements in IFRS S1 and S2 are subject to a materiality analysis, meaning that entities are not obliged to disclose information that is not material to them. 

The ISSB standards themselves are not directly legally binding, but must be translated into national law in order to be enforceable. As of July 2025, 15 countries have already adopted the ISSB standards, and 16 other countries are currently in the process of implementation or have committed to future implementation. Together, these countries account for more than 57% of global gross domestic product.¹ There are some international differences in the implementation of IFRS S1 and S2, for example in the scope of application, area of application, and audit requirements. 

Australia requires large companies and financial institutions to report on climate-related risks and opportunities in accordance with IFRS S2 from January 1, 2025.² In Brazil, too, the ISSB standards have been incorporated into the legal framework, making sustainability reporting mandatory from January 1, 2026 onwards.³ Other countries, such as Canada, the United Kingdom, and Nigeria, have already announced or initiated concrete steps toward implementation. 

Mandatory reporting predominantly targets publicly listed companies, as is the case in Japan– but not exclusively. China is planning a phased approach to mandatory reporting for all companies, including listed, unlisted, and small and medium-sized enterprises (SMEs). In 2024, China released a draft of its sustainability reporting guidelines aligned with the ISSB.⁴ In Nigeria, the reporting requirement covers a wide user group—by 2030, all SMEs must report in accordance with IFRS S1 and S2, with PIEs starting as early as 2028.⁵  

There are also significant differences with regard to the audit requirement for sustainability-related information: only two countries are currently planning to require audits with reasonable assurance, while half of the remaining countries currently have no requirements for mandatory auditing.

The ISSB is currently working on a revision of IFRS S2 to address practical challenges in applying the greenhouse gas reporting requirements. In addition, initial steps have been taken toward developing a potential standard on biodiversity and ecosystem services, as these are increasingly recognized as relevant factors for business risks and opportunities. At the same time, the ISSB is investigating the topic of human capital – focusing on aspects such as working conditions, qualifications, and their importance for companies' long-term value creation. 

The development of sustainability reporting continues to progress internationally – despite the current deregulation debate surrounding the CSRD as part of the Omnibus Initiative in EU. It may therefore be worthwhile for companies worldwide to continue to approach sustainability reporting strategically and use the ISSB standards as a voluntary framework.