IFRS S1 and IFRS S2 Explained: The ISSB Standards Guide for 2026

IFRS S1 and IFRS S2 are the two sustainability disclosure standards issued by the International Sustainability Standards Board (ISSB), the global baseline for climate reporting, mandatory or heading that way in Australia, Japan, Hong Kong, Singapore, the UK and beyond. This guide covers what each standard requires, how they differ, how they relate to the TCFD, who must comply and when, and how to produce a first compliant report, verified against primary sources, July 2026.

What is the ISSB, and why do IFRS S1 and S2 exist?

The ISSB was created to end the alphabet soup. The IFRS Foundation, the body behind the accounting standards used in over 140 countries, set it up at COP26 in November 2021 to produce a single, investor-focused global baseline for sustainability disclosure, folding in the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation, home of the SASB Standards and the Integrated Reporting Framework.

The result arrived in June 2023: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures, both effective for annual reporting periods beginning on or after 1 January 2024, with earlier application permitted.^1,2

The word to hold onto is financial. These are not general-purpose ESG standards: they give investors and lenders decision-useful information about sustainability-related risks and opportunities that could reasonably affect a company's cash flows, access to finance or cost of capital over the short, medium or long term.² That is the "single materiality" lens, how the world affects the company, versus the EU's double-materiality ESRS regime, which also asks how the company affects the world.

What does IFRS S1 require?

IFRS S1 is the architecture standard: the rules of the game for disclosing sustainability information:

• Disclose all material sustainability-related risks and opportunities: not just climate: water scarcity, workforce issues or supply-chain human-rights exposure are in scope if they could affect enterprise value.
• Structure every disclosure around four content areas: governance, strategy, risk management, and metrics and targets.¹
• Report for the same period, at the same time, and for the same reporting entity as the financial statements: not a separate PDF six months later.
• Connect the information to the financial statements: users must see the links between climate commitments, assumptions and the numbers in the accounts.
• Use sources to identify topics and metrics: where no IFRS topic standard exists, look to the SASB Standards and other frameworks as guidance.
• Materiality follows the accounting definition: information is material if omitting, misstating or obscuring it could influence investor decisions.

A frequently missed point: the "climate-first" relief. IFRS S1 lets an entity report only climate-related information under IFRS S2 in its first year.^1,15 Most adopting jurisdictions lean on exactly this relief, which is why real-world mandates (Australia, Hong Kong's listing rules, Singapore) start with climate.

The practical takeaway: get S1's mechanics right, entity, period, connectivity, materiality, and every later topic standard slots into the same frame.

What does IFRS S2 require?

IFRS S2 is the first, and so far only, ISSB topic standard. Applied always alongside S1, it fills the architecture with climate-specific content:

• Climate-related risks and opportunities, split into physical risks (acute and chronic) and transition risks (policy, legal, technology, market, reputation).²
• Governance: which board body oversees climate, its competence, how often it is informed, and management's role.
• Strategy: effects on business model and value chain; transition plans; current and anticipated financial effects of climate risks on financial position, performance and cash flows.
• Climate resilience, assessed using scenario analysis commensurate with the company's circumstances.
• Greenhouse gas emissions: absolute gross Scope 1, Scope 2 and Scope 3 emissions, measured per the GHG Protocol Corporate Standard unless a jurisdiction requires a different method.
• Industry-based metrics: entities must refer to and consider the industry-based guidance derived from the SASB Standards.²
• Targets: climate targets and the metrics tracking them, how they were set, whether science-informed, progress, and the planned use of carbon credits.

In December 2025 the ISSB issued targeted amendments easing emissions-measurement pain points, detailed in the Scope 3 section below, effective 1 January 2027, early application permitted.⁴

IFRS S1 vs IFRS S2: what is the difference?

S1 is the operating system; S2 is the first application that runs on it. S2 cannot be applied without S1's general requirements; S1 without S2 would leave climate, the most investor-critical topic, undefined. Side by side:

Drawn as a stack, the base layer, the four content areas, is what every jurisdictional mandate inherits unchanged.

What are the four pillars of IFRS S1 and S2?

Both standards organise every disclosure around the four content areas the TCFD made famous; treating them as questions makes drafting far easier.

Governance, who is accountable? The board body or individual with oversight, its skills, how often it is informed, how climate factors into major decisions, and management's delegated role.

Strategy, what does it do to the business? The risks and opportunities identified over defined short-, medium- and long-term horizons; effects on business model and value chain; the transition plan; anticipated financial effects; and resilience under different climate scenarios.

Risk management, how do you find and manage it? The processes used to identify, assess, prioritise and monitor these risks, and, crucially, how they are integrated into enterprise risk management rather than run as a side exercise.

Metrics and targets, how do you measure it? GHG emissions, industry-based metrics, internal carbon prices, the proportion of assets or activities exposed to climate risks, remuneration links, and progress against every target set or required.

The practical takeaway: answer those four questions with evidence and you can draft against any ISSB-based mandate.

TCFD vs ISSB: how does IFRS S2 differ from the TCFD recommendations?

IFRS S2 is TCFD's successor, not its twin. The Task Force on Climate-related Financial Disclosures published its recommendations in 2017 and, for six years, was the reference point for climate reporting. It completed its work in 2023: the Financial Stability Board transferred monitoring to the IFRS Foundation from 2024, and companies applying IFRS S1 and S2 automatically meet the TCFD recommendations.⁵ The reverse does not hold, expect to do more in five areas:

• From framework to standard. TCFD was principles-based guidance you could apply loosely; IFRS S2 is drafted for regulatory enforcement, with "shall disclose" requirements and defined terms.
• Scope 3 is required, not encouraged. TCFD asked for Scope 3 "if appropriate"; S2 requires it (with reliefs) across all 15 relevant GHG Protocol categories.
• Quantified financial effects. S2 expects current and anticipated financial effects of climate risks on the balance sheet, performance and cash flows, proportionate, but far beyond typical TCFD narrative.
• Industry-based metrics. S2 imports the SASB-derived industry guidance; TCFD had nothing comparable.
• Connectivity and timing. S2 disclosures accompany the financial statements, using consistent assumptions, no standalone report months later.

In short: a good historical TCFD report is a head start on governance and risk management, and roughly half an answer on metrics and financial effects.

Who do IFRS S1 and S2 apply to? ISSB adoption by country in 2026

The standards have no direct legal force. Each jurisdiction decides whether, how and for whom to adopt them. Here is where the key jurisdictions stand as of July 2026, under each country's own adopting instrument:

Two practical notes for UK readers. First, "voluntary" understates the position: with FCA rules expected in autumn 2026 and first reporting proposed for periods beginning January 2027, UK-listed companies effectively have one financial year to build capability, and the UK SRS amendments (SASB references made optional; time limits removed from most transition reliefs) make an early dry run cheaper than the international baseline.⁷ Second, even unlisted UK companies are being pulled in indirectly, as subsidiaries of overseas groups already in scope or as suppliers asked for Scope 3 data by customers who are.

What are the Scope 1, 2 and 3 emissions requirements, and the reliefs?

Emissions are where most first-time preparers spend most of their effort, so it is worth being precise about what IFRS S2 asks for:

• Scope 1: absolute gross direct emissions from owned or controlled sources, in tonnes of CO₂-equivalent.
• Scope 2: absolute gross emissions from purchased energy, using the location-based method, plus information about contractual instruments (a market-based view) where relevant.
• Scope 3: absolute gross value-chain emissions across all 15 GHG Protocol categories that are relevant, from purchased goods and services through to financed emissions, with disclosure of which categories are included and the measurement approach. Category 15 (investments) carries extra requirements for financial-sector entities.
• Method: the GHG Protocol Corporate Standard, unless a jurisdictional authority requires a different method.

The standards are demanding, but the transition architecture is pragmatic. Four sets of reliefs matter:

• First-year reliefs in the standards: no Scope 3 in year one; permission to keep your existing measurement method in year one; no comparatives in year one; climate-only reporting under the S1 relief; and a timing relief allowing first-year sustainability disclosures to be published later than the financial statements.¹⁵
• The December 2025 amendments to IFRS S2: entities may limit Scope 3 Category 15 measurement to financed emissions; may use industry classification schemes other than GICS when disaggregating financed emissions; the relief from applying the GHG Protocol is clarified to work where only part of an entity is subject to a different jurisdictional method; and a jurisdictional relief applies to using global warming potential values from the latest IPCC assessment report. Effective 1 January 2027, early application permitted.⁴
• Jurisdictional add-ons: Australia defers Scope 3 to each entity's second reporting year;⁹ Singapore requires Scope 3 only of STI constituents from FY2026;¹² the UK's proposed listing regime puts Scope 3 on a comply-or-explain footing initially.⁷
• Proportionality mechanisms: entities may use reasonable and supportable information available without undue cost or effort, and estimation is expected for Scope 3, the obligation is a faithful, well-evidenced estimate, not utility-bill precision across 15 categories.

Worked example: an Australian Group 2 company caught by AASB S2.

AASB S2 requires Scope 3 only from an entity's second reporting year, so a Group 2 company's first mandatory report (FY2026–27) covers Scope 1 and 2, and Scope 3 lands in the FY2027–28 report.

The reliefs buy time; they do not change the destination. A company that uses year one to stand up Scope 1 and 2 with a defensible methodology, then phases in Scope 3 category by category with an evidence trail behind every factor and assumption, will be in a strong position when assurance arrives.

How do you prepare a first IFRS S2-aligned report? A step-by-step approach

Based on what actually works for mid-market and newly regulated companies, in the order that avoids rework:

Step 1: Confirm scope, timing and reliefs

Establish which regime applies (UK SRS via the FCA, AASB S2, HKFRS, SGX rules, SSBJ, or voluntary IFRS S1/S2), your first reporting period, and exactly which transition reliefs you will take. Write this down as a formal reporting basis, the first thing an assurance provider will ask for.

Step 2: Run a gap analysis against the four pillars

Map what you already have, risk registers, energy data, board papers, any TCFD reporting, against each S2 requirement. Governance and risk management are usually 60% there; metrics and anticipated financial effects are the real gaps.

Step 3: Build the GHG inventory first

Emissions data has the longest lead time. Set the organisational boundary consistent with your financial statements, get Scope 1 and 2 onto a documented, repeatable footing, then screen all 15 Scope 3 categories for relevance and materiality, recording the rationale for every exclusion.

Step 4: Identify climate risks and opportunities, then test resilience

Workshop physical and transition risks across short-, medium- and long-term horizons tied to your planning cycles, then run scenario analysis commensurate with your circumstances. For a first-time mid-market preparer, a clearly documented qualitative analysis against two contrasting scenarios, say, a below-2°C pathway and a hot-house pathway, is a defensible start.

Step 5: Connect to the numbers

Sit sustainability and finance teams together to articulate current and anticipated financial effects, and check consistency with the accounts, impairment assumptions, useful lives, provisions. Disconnects between the front and back halves of the annual report are the most common regulator finding worldwide.

Step 6: Draft against the standard, evidence everything, then assure-proof it

Draft requirement by requirement, keep an evidence file behind every data point and judgement, and have someone independent challenge the draft as an auditor would: boundary consistency with the accounts, factor provenance, the rationale for every excluded Scope 3 category, whether the scenario analysis supports the resilience statement. Building the audit trail now is dramatically cheaper than retrofitting it in year two.

This is also where tooling bites: spreadsheets can produce a first inventory, but not the audit trail, version control and factor provenance that assurance-ready ISSB reporting demands. Purpose-built platforms such as EcoLedger, full Scope 1–3 GHG accounting across all 15 Scope 3 categories on DEFRA/IEA factors, with an evidence register behind every figure and guided scenario-analysis and materiality workflows, exist to close that gap without an enterprise budget.

The bottom line

IFRS S1 and S2 have done what a decade of voluntary frameworks could not: created a single, enforceable global baseline that regulators from Tokyo to London are writing into law. The four pillars are stable, the reliefs are generous but temporary, and assurance follows two to three years behind every mandate. Companies that treat the first report as the foundation of a repeatable, evidenced process, rather than a one-off document, will spend less and disclose better every year after. Start with the GHG inventory, write down every judgement, and build for audit from day one.

Frequently asked questions

What is the difference between IFRS S1 and IFRS S2?

IFRS S1 is the general standard: it sets the architecture for disclosing any material sustainability-related risk or opportunity alongside the financial statements. IFRS S2 is the climate topic standard, adding specific requirements, Scope 1–3 emissions, scenario analysis, transition plans, industry metrics, within that architecture. S2 is always applied with S1, never alone.

Are the ISSB standards mandatory?

Only where a jurisdiction adopts them into law or listing rules. As of July 2026 they are mandatory on phased timetables in Australia, Japan, Hong Kong, Singapore, Malaysia and Türkiye among others; voluntary-but-heading-mandatory in the UK; and voluntary in Canada and, since CVM Resolution 244, Brazil.

Does IFRS S2 require Scope 3 emissions reporting?

Yes, absolute gross Scope 3 emissions across all 15 relevant GHG Protocol categories, measured per the GHG Protocol. Reliefs soften the start: no Scope 3 in the first year of application, plus jurisdictional deferrals such as Australia's second-year start, Singapore's STI-only requirement and the UK's proposed comply-or-explain phase.

What replaced the TCFD?

IFRS S2 effectively replaced the TCFD recommendations. The TCFD completed its work in 2023 and the Financial Stability Board handed monitoring to the IFRS Foundation from 2024. Reporting under IFRS S1 and S2 automatically satisfies the TCFD recommendations, but a TCFD-only report will not satisfy IFRS S2.

When did IFRS S1 and IFRS S2 come into effect?

Both were issued in June 2023 and are effective for annual periods beginning on or after 1 January 2024, subject to jurisdictional adoption. The December 2025 amendments to IFRS S2's GHG requirements apply from 1 January 2027, with early application permitted.

Does the EU use the ISSB standards?

No, the EU applies its own European Sustainability Reporting Standards (ESRS) under the CSRD, a double-materiality framework designed for interoperability with IFRS S1 and S2. ESRS climate disclosures can largely satisfy IFRS S2, but companies caught by both regimes must map the differences deliberately.

Do IFRS S1 and S2 require external assurance?

The standards do not; jurisdictions do. Japan phases assurance in one year after each mandatory tier begins, Singapore requires assurance of listed issuers' Scope 1 and 2 emissions from FY2029, and Brazil requires assurance from companies that opt in. Assume assurance is coming and build the evidence trail now.

References

1. IFRS Foundation, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, accessed July 2026.
2. IFRS Foundation, IFRS S2 Climate-related Disclosures, accessed July 2026.
3. IFRS Foundation, IFRS Foundation publishes jurisdictional profiles evidencing progress towards adoption of ISSB Standards (June 2025), accessed July 2026.
4. IFRS Foundation, ISSB issues targeted amendments to IFRS S2 to support implementation (December 2025), accessed July 2026.
5. IFRS Foundation, IFRS Foundation welcomes culmination of TCFD work and transfer of TCFD monitoring responsibilities to ISSB from 2024 (July 2023), accessed July 2026.
6. GOV.UK, UK Sustainability Reporting Standards: UK SRS S1 and UK SRS S2 (February 2026), accessed July 2026.
7. CMS Law, UK Government publishes final Sustainability Reporting Standards (2026), accessed July 2026.
8. Anthesis Group, Mandatory Sustainability Reporting in the Middle East: ISSB Standards and Climate Disclosure, accessed July 2026.
9. Australian Accounting Standards Board, AASB S2 Climate-related Disclosures (September 2024); see also Anthesis, ASRS and AASB S2: A Guide to Mandatory Climate Reporting in Australia, accessed July 2026.
10. Financial Services Agency of Japan, Japanese Roadmap on Sustainability Disclosure and Assurance (updated April 2026), accessed July 2026.
11. Financial Services and the Treasury Bureau (Hong Kong), Roadmap on Sustainability Disclosure in Hong Kong, accessed July 2026.
12. ACRA (Singapore), Extended Timelines for Most Climate Reporting Requirements to Support Companies (25 August 2025), accessed July 2026.
13. Canadian Securities Administrators, CSA issues market update on climate-related disclosure project (April 2025); see also Torys LLP, CSA's climate disclosure rule on hold, accessed July 2026.
14. Reporting Academy, Brazil Makes ISSB-aligned Sustainability Reporting Voluntary (CVM Resolution 244) (June 2026), accessed July 2026.
15. KPMG, Timing of sustainability reporting, ISSB transition reliefs, accessed July 2026.