Introduction to IFRS Sustainability Standards

In November 2021, at the COP26 climate summit in Glasgow, a small group of standard-setters made an announcement that would reshape how every major company communicates with its investors. They called it the International Sustainability Standards Board. Its mandate: create a global baseline for sustainability disclosure. Its model: the IASB, the body that had given the world IFRS financial reporting standards, now used in 140 countries. Its first chair: Emmanuel Faber, the former CEO of Danone, who had spent years watching sustainability data flow through his company without ever reaching the board in a form that could drive decisions.

Two years later, in June 2023, the ISSB published its first two standards: IFRS S1, the general requirements for sustainability disclosure, and IFRS S2, the climate-related disclosure standard. Together, they ran less than 100 pages. Together, they created something that had never existed: a single, global language for climate and sustainability reporting. Twenty-five jurisdictions — representing over half of global GDP — had already endorsed, adopted, or announced plans to align. From Tokyo to Toronto, Lagos to São Paulo, companies were preparing to report under the same standards for the first time.

The standards are built on four pillars: governance, strategy, risk management, and metrics and targets. They require companies to disclose what they know, how they manage it, and what they plan to do about it. They connect sustainability disclosures to financial statements. They incorporate the TCFD recommendations. They use the SASB industry standards for sector-specific metrics. They are not optional guidance. They are requirements. And they are changing how the world's largest companies report on the risks that matter most.