The International Sustainability Standards Board (ISSB) is a standard-setting body established in 2021 under the International Financial Reporting Standards (IFRS) Foundation. The ISSB’s main objective is to develop sustainability reporting standards that will enable businesses to provide consistent and comparable information on their sustainability performance to stakeholders.

In March 2022, the ISSB released two new exposure drafts, namely, IFRS S1 General Sustainability-related Disclosures and IFRS S2 Climate-related Disclosures. The final standards are expected to be issued by the end of June 20231 and will take effect for annual reporting periods beginning on or after 1 January 2024.

Here, we will discuss these upcoming standards and their potential impact on businesses.


What are the current developments?

It is not entirely clear if the proposed standard will only be applicable to publicly listed companies and some market participants have urged ISSB to consider the needs of small and medium-sized entities (SMEs) while phasing in the new standards to better support SMEs’ ability to comply, such as introducing proportional reporting requirements.

In February 2023, the ISSB introduced a new requirement where preparers “shall consider” industry-based SASB standards and “may consider” CDSB Framework application guidance for water and biodiversity-related disclosures, as well as Global Reporting Initiative (GRI) standards and the European Sustainability Reporting Standards (ESRS) when identifying sustainability disclosures and metrics, in the absence of a relevant IFRS sustainability standard that has yet to be released2. It is also recommended that companies start reviewing TCFD Recommendations as they form the foundation of IFRS S1 and S2.

In April 2023, the ISSB introduced a one-year transition relief under IFRS S1, allowing companies to choose to report only on climate-related disclosures in the first year that they apply IFRS S1 and S2 to support initial application before providing a full range of sustainability-related risks and opportunities reporting from the second year onwards. Companies are also required to disclose if they applied the transition relief.

This will provide companies with adequate time to adapt to this new reporting structure under ISSB, resulting in more accurate and meaningful disclosures. These disclosures will, in turn, translate into meaningful, action-driven value for stakeholders.


What will be included?

According to the exposure drafts, IFRS S1 will set out general reporting requirements for an entity to disclose material information about its sustainability-related financial risks and opportunities, including:

  • Governance: The processes, controls and procedures that are in place to manage sustainability risks.
  • Strategy: The sustainability approaches used and how they are incorporated into financial planning.
  • Risk management: How sustainability risks and opportunities are identified and assessed under its overall risk management processes.
  • Metrics and targets: How sustainability risks and opportunities are measured and monitored and how the targets are set.


IFRS S2 focuses on identifying and measuring climate-related disclosures, building upon the above-mentioned framework to disclose on:

  • Governance
    • Climate risk management responsibilities
  • Strategy
    • Impact on business model, finances and cash flows
    • Physical and transition risks
    •  Plans for meeting climate goals and how progress is reviewed
    • Assessment of climate resilience
  • Risk management
    • Assessment of climate risks and opportunities and explanation of risk assessment techniques or tools.
  • Metrics and targets
    • Disclosure of gross GHG emissions (Scopes 1, 2, and 3) in metric tonnes of CO2 equivalent, along with the company’s intensity using the GHG Protocol.


Why should you be concerned?

With sustainability becoming increasingly important for investors and stakeholders, companies will need to be transparent about their sustainability performance to maintain trust.

Many jurisdictions, including Singapore, are working towards adopting ISSB disclosure standards over time; therefore, it is important for companies to gear up for mandatory sustainability reporting.

Additionally, in the fight against greenwashing, financial misinterpretations and even green fraud that are prevalent in our midst, it is imperative for independent assessments, conducted by external auditors that refers to the standards, to be reliable as a measure against over-optimistic sustainability reports.


How to prepare for this?

Moving forward, it is highly recommended that companies strive to gain a comprehensive understanding of the factors that affect their implementation of sustainability standards. Companies should start early on establishing internal systems that allow for the collection and reporting of data.

Companies that have already adopted sustainability reporting guidelines such as the TCFD recommendations are notably better equipped to comply with the disclosure requirements in IFRS S2 than those that have not, according to a study3 by ACCA and Adam Smith Business School.

Here are 5 steps developed by RSM (abbreviated as ABCDE) to help you hit the ground running:

1) Analysis: Conduct a gap analysis to assess your current sustainability reporting practices and compare them to the requirements of ISSB standards. Identify areas where your company's reporting falls short and where improvements are needed to align with ISSB standards.

2) Build: Build a sustainability framework that aligns with ISSB standards. This includes defining key sustainability indicators, setting targets, and establishing data collection and reporting processes.

3) Collect: Collect accurate and reliable sustainability data, and implement mechanisms to track and measure relevant sustainability metrics and performance indicators.

4) Decision-making: Integrate sustainability into your company's decision-making processes. This involves incorporating sustainability principles into decision-making and corporate strategies.

5) Engage: Engage and communicate with stakeholders about your commitment to adopting ISSB standards and the steps you are taking to improve sustainability reporting. Seek feedback and input from stakeholders to enhance quality and relevance of your sustainability disclosures.

Whilst the “how” of adopting the ISSB standards can seem daunting, we believe a good starting point would be to first conduct a gap analysis.

It is important to note that the specific steps and processes may vary depending on the nature and size of the company. Consulting with sustainability experts specialising in sustainability reporting can provide valuable guidance and support throughout the adoption process.

To find out more about RSM’s Sustainability Practice, please contact our specialists:

Adrian Tan
Partner & Head of ESG Practice
T: +65 6594 7876
[email protected] 

Dennis Lee
T: +65 6594 7627
[email protected] 


1 According to IFRS news article dated 19 April 2023 
2 According to IFRS Staff paper Agenda reference: 3A
3 According to