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New Year, New Reporting Standards: IFRS S1 and S2

2024 marks the commencement of a new age of sustainability reporting guided by the recently introduced International Financial Reporting Standards (IFRS) S1 and S2. With these standards, the IFRS establishes a baseline for transparent sustainability information sharing for internal and external stakeholders alike. Though the primary beneficiary is investors, whose decision-making can be better-informed by the provision of reliable comparative data, companies will also benefit from streamlined reporting processes.

Until now, there have been many voluntary reporting standards (i.e. GRI, SASB, TCFD, etc.), and some jurisdictions have created their own mandatory reporting schemes, but these myriad approaches are inconsistent and can lack critical information. ISSB standards foster transparency by guiding the delivery of reliable, useful, and comparable information. The International Sustainability Standards Board (ISSB), a subgroup of IFRS launched at COP26, released the standards in June of 2023, which are expected to have widespread adoption by jurisdictions and organizations in this year’s reporting and beyond.

The novel IFRS S1 and S2 leverage existing standards and use the Task Force on Climate Related Financial Disclosures (TFCD) framework of the four pillar standard:

  • Governance: organizational policies and plans in place, including organizational bodies responsible for climate policies, process for setting climate targets

  • Strategy: understanding of an organization’s factoring in of climate-related risks and opportunities into future business plans, the effect of climate change on the business value chain, financial planning, and organizational resilience

  • Risk management: definition of processes related to risk identification and disclosure on how risks and opportunities are factored into management process 

  • Metrics and targets: details on organizational targets and metrics that are used

S1 sets out the general requirements for disclosure of sustainability-related financial information, while S2 provides material information about climate-related risks and opportunities. These include transition plans, climate resiliency assessments, and Scope 1, 2, 3 emissions based on GHG corporate protocol (though Scope 3 emissions are not required in the first year of reporting), along with internal carbon prices used to assess cost of emissions. For more specifics, visit the S1 and S2 website.

Now What? 

The standards are not mandatorily applied to any organization, rather they require the endorsement of a jurisdiction, or can be taken up voluntarily. Thus far, the standards have been well received internationally and have the support of many oversight and regulatory bodies. COP28 saw close to 400 organizations from 64 jurisdictions commit to advancing the adoption of the ISSB standards (including European Union regulators, the International Monetary Fund (IMF), the Asian Development Bank, and more). Organizations are therefore encouraged to use S1 standards in 2024 reporting, while gathering the necessary information for S2 disclosure in the next year following the expected transition relief period. 

The preparation for reporting is extensive. An overview of the process follows: 

  • Conducting a comprehensive materiality assessment – either a new evaluation or a review of an existing one – and to guarantee the inclusion of financial considerations and value trade-offs. Materiality here refers to an organization’s economic, environmental, and social impacts that significantly influence stakeholders’ assessments or decision making. 

  • Carrying out a gap analysis between current reporting practices and management procedures, leading to the formulation of a plan to bridge any identified gaps. 

  • Educating internal leadership and stakeholders on the new reporting standards.

  • Continuously monitoring relevant jurisdictions to determine when regulations go into effect. 

How Climate Tech Propel Can Help? 

The ISSB requirements are most relevant for corporations or startups that have completed their series D raises, but the foundational information gathering is relevant for all climate techs. While Climate Tech Propel is focused on providing sustainability strategy rather than sustainability reports, we see materiality assessments as tools to frame and inform marketing, PR, sales, and fundraising efforts for all climate tech startups. In our experience, a comprehensive understanding of impact leads to more successful outcomes in all aforementioned business activities. We can help you get the ball rolling by determining the best next steps for your business. Set up a meeting with us to get started.

Catch the hint? Our next blog post will take on materiality assessments and discuss their importance for your company, stay tuned.

Helpful Resources: 


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