The International Financial Reporting Standards (IFRS) Foundation has proposed two Exposure Drafts Sustainability Disclosure Standards IFRS S1 & IFRS S2, to meet the growing demand for sustainability reporting.
These standards aim to provide a global baseline for disclosing sustainability-related risks and opportunities, including climate-related factors.
IFRS S1 focuses on disclosing significant sustainability-related risks and opportunities beyond climate-related aspects, incorporating recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).
IFRS S2 specifically addresses climate-related risks and opportunities, aligning with TCFD, the Greenhouse Gas Protocol, and industry-specific standards from the Sustainability Accounting Standards Board (SASB). The International Sustainability Standards Board (ISSB), under the IFRS Foundation, is working on implementing the proposed Exposure Drafts IFRS Sustainability Disclosure Standards IFRS S1 and S2.
The ISSB is collaborating with international organizations and jurisdictions to ensure global consistency and alignment with stakeholder expectations. Adopting sustainability reporting and adhering to the proposed Exposure Drafts IFRS Sustainability Disclosure Standards IFRS S1 & IFRS S2 brings benefits such as enhanced reputation, capital attraction, improved profitability, employee retention, and positive environmental and social impact.
The proposed Exposure Drafts IFRS Sustainability Disclosure Standards IFRS S1 & IFRS S2 outline key disclosures in governance, strategy, risk management, and metrics and targets. These disclosures enable users of financial reports to assess an entity's resilience, future cash flows, and enterprise value. Entities need to act promptly to meet the proposed Exposure Drafts IFRS Sustainability Disclosure Standards IFRS S1 & IFRS S2 are expected to become effective on or after January 1, 2024.
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