Environmental Impact Data

Series

04. International Sustainability Standards Board (ISSB)

Part 4 of 12

Overview. The ISSB sets a global baseline for investor‑focused sustainability disclosure under the IFRS Foundation. Its first two standards—IFRS S1 (General Requirements) and IFRS S2 (Climate)—aim to reduce fragmentation, improve comparability, and connect sustainability information to enterprise value and financial statements.

1) What ISSB Covers

  • IFRS S1 – General Requirements: Principles for reporting material sustainability‑related risks and opportunities that could affect enterprise value; requires governance, strategy, risk management, metrics & targets—across all sustainability topics when material.
  • IFRS S2 – Climate: Climate‑specific disclosures aligned with TCFD pillars and GHG Protocol: governance, strategy (incl. transition plan), risk management, metrics & targets (Scopes 1–3, financed emissions where relevant), scenario analysis, carbon pricing/credits policies.
  • Future thematic standards (e.g., biodiversity, human capital) are expected to expand coverage beyond climate.

2) Core Concepts

  • Investor materiality (enterprise value): Focuses on information reasonably expected to influence provider-of-capital decisions (cash flows, cost/availability of capital).
  • Connectivity with financials: Consistency of assumptions, time horizons, and risks across sustainability and financial statements; explain links to business model and performance.
  • TCFD lineage: ISSB operationalizes the TCFD architecture (Governance, Strategy, Risk Management, Metrics & Targets) for standardized, decision‑useful reporting.
  • Industry‑based metrics: Draws on SASB‑style sector metrics; entities should use relevant industry metrics where decision‑useful.

3) IFRS S1 – General Requirements (Minimum Backbone)

  1. Governance: Oversight, roles, competencies, remuneration linkages, information flows.
  2. Strategy: Business model and value creation, sustainability‑related risks/opportunities, resilience, and time horizons.
  3. Risk management: Identification, assessment, mitigation, and integration with ERM.
  4. Metrics & targets: Decision‑useful KPIs, baselines, methodologies; progress against time‑bound targets.

4) IFRS S2 – Climate (Spotlight)

  • GHG accounting: Scope 1 & 2 (location/market‑based); Scope 3 by material categories; methods and data hierarchies disclosed.
  • Transition plan: Near/mid/long‑term targets, capex and R&D alignment, dependencies on carbon‑intensive assets and suppliers, role of renewables and offsets.
  • Scenario analysis: Qualitative/quantitative analysis of transition and physical risks; disclose parameters, assumptions, and implications.
  • Internal carbon price & carbon credits: If used, disclose rationale, price levels, coverage, credit types/quality, and limits in target achievement.
  • Sector specifics: Use industry metrics (e.g., tCO2e/MWh, tCO2e/ton, gCO2e/pkm, financed emissions for FIs) where relevant.

5) Data Quality, Estimates, and Controls

  • Estimates & uncertainty: Explain estimation techniques, emission factors, data gaps, and improvement roadmaps.
  • Controls & traceability: Document data owners, process controls, change logs, and restatement policies.
  • Assurance‑readiness: While assurance depends on jurisdiction, ISSB expects sufficient evidence and audit trails to support credibility.

6) Interoperability: ISSB vs. ESRS (at a glance)

Topic ISSB (IFRS S1/S2) ESRS (CSRD)
Materiality Enterprise‑value focused (investor materiality) Double materiality (impact and financial)
Architecture S1 general + S2 climate; sector metrics (SASB heritage) ESRS 1/2 general + topical E/S/G
GHG Scopes 1–3; scenario analysis; transition plan E1 Climate (Scopes 1–3), transition plan, energy mix
Tagging No single mandated EU‑style taxonomy; depends on jurisdiction XHTML/XBRL tagging required under CSRD
Assurance Jurisdiction‑dependent (trending toward assurance) Mandatory (initially limited) under CSRD

7) Practical Implementation Roadmap

  1. Scoping & gap assessment: Map current disclosures to S1/S2; identify sector metrics.
  2. Data pipelines: Activity data for energy, process, logistics; supplier engagement for Scope 3; factor governance; systems integration.
  3. Scenario & resilience: Define scenarios, parameters, and frequency; link to strategy and capital planning.
  4. Targets & transition plan: Time‑bound targets, marginal abatement cost view, investment plan, and governance oversight.
  5. Controls & evidence: Owner matrix, change control, documentation pack; assurance pre‑checks.
  6. Interoperability mapping: If reporting under CSRD, build a crosswalk ESRS↔ISSB to avoid duplication and ensure consistency.
Key takeaways.
  1. ISSB provides an investor‑focused global baseline; jurisdictions can add local requirements (e.g., CSRD/ESRS).
  2. IFRS S1/S2 prioritize connectivity with financials, sector relevance, and decision‑useful metrics.
  3. Successful adoption hinges on robust data governance, scenario capability, and transition planning.

Note: Use industry‑relevant metrics and align assumptions across sustainability and financial reporting to maintain credibility and comparability.