ISSB Gaining Momentum: Set to become global sustainability reporting baseline

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Global Adoption of ISSB Standards: An Overview

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The International Sustainability Standards Board (ISSB) released its groundbreaking standards in June 2023, marking a pivotal moment in global sustainability reporting. While these standards have been embraced worldwide, the rate and method of adoption differ significantly across regions.

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The IFRS S1 and S2 Standards Explained

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The ISSB has introduced two key standards: IFRS S1, which focuses on general sustainability-related financial disclosures, and IFRS S2, which targets climate-related disclosures. These standards are designed to equip investors and stakeholders with reliable and comparable information, enabling them to assess the financial implications of sustainability and climate change on companies. Additionally, these standards evaluate how effectively companies govern and strategize to manage sustainability-related risks and opportunities.

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  "From major economies to emerging markets, jurisdictions around the world such as  Brazil, Costa Rica, Japan, Nigeria and the UK are recognising the value of the ISSB Standards. Supporting completion of their regulatory processes, as well as the engagement with other jurisdictions around the world, is our priority in the near future in creating the global baseline of proportionate, high-quality sustainability-related financial disclosures."​ 

                                      Emmanuel Faber, ISSB Chair

 

Diverse Approaches Across the Globe

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Europe

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In Europe, the European Financial Reporting Advisory Group (EFRAG) has strongly supported the ISSB standards. EFRAG emphasizes that the European Sustainability Reporting Standards (ESRS) have been designed to incorporate ISSB disclosures through a comprehensive interoperability framework. This alignment means that organizations preparing sustainability reports according to the ESRS, particularly on climate change, will largely meet the ISSB standards, thus minimizing the need for dual reporting. An interoperability map, developed by EFRAG and ISSB, illustrates this close alignment between the ESRS and IFRS Sustainability Disclosure Standards.

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United Kingdom

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The United Kingdom has already implemented mandatory climate-related financial disclosure requirements for large companies and LLPs through the Companies Act 2006 and for financial institutions via the Financial Conduct Authority. These requirements initially followed the Task Force on Climate-related Financial Disclosures (TCFD) guidelines, now under the ISSB's umbrella. In May 2024, the UK Government announced an update to its Sustainability Disclosure Requirements, confirming its intention to assess the ISSB standards for potential implementation. Pending a favorable endorsement, the UK plans to introduce UK-endorsed ISSB standards, or UK Sustainability Reporting Standards, by the first quarter of 2025.

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United States

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In March 2024, the U.S. Securities and Exchange Commission (SEC) approved its climate disclosure rulemaking, which aligns broadly with the TCFD framework. The SEC's final rule requires companies to disclose material climate-related risks and Scope 1 and 2 GHG emissions and Scope 3 emissions only if they are deemed material. Companies must also report the financial impacts of climate-related events or transition planning activities on their income statement and balance sheet for the reporting period, subject to a specific reporting threshold. However, following litigation challenging the SEC's authority and the adequacy of the rule, the implementation has been paused until these legal issues are resolved.

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Canada

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The Canadian Securities Administrators (CSA) have announced their plans to harmonize their sustainability reporting framework with the ISSB standards. In a consultation paper released in December 2023, the CSA revealed that Canada is not adopting the ISSB standards directly but is developing its own Canadian Sustainability Disclosure Standards (CSDS).

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Singapore

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Singapore has made strides in sustainability reporting by finalizing mandatory climate-related disclosure requirements fully aligned with the ISSB standards. This move positions Singapore as a leader in adopting global standards.

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Brazil

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In October 2023, Brazil became the first South American country to embrace the ISSB standards. The Brazilian Ministry of Finance and the Comissão de Valores Mobiliários (CVM), the country's securities regulator, announced that these standards would be integrated into Brazil's regulatory framework.​

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Last but not the least, in fact, perhaps the best example of ISSB implementation is in Turkey.

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Turkey's Public Oversight, Accounting, and Auditing Standards Authority (KGK) announced in December 2023 that businesses meeting certain asset, revenue, or employee thresholds, along with regulated banks, would need to adhere to mandatory sustainability disclosure requirements beginning in 2024. The KGK has adopted IFRS S1 and S2, publishing them as the Turkish Sustainability Reporting Standards (TSRS) 1 and 2, covering general sustainability and climate-related disclosures, respectively. Starting 2026, sustainability reports will undergo mandatory assurance audit. The KGK will oversee and develop the auditing standards to ensure transparency and compliance.

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In April 2024, Earth Academy signed an MOU with KGK for a nationwide capacity building on TSRS.

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Earth Academy: Your Partner in ISSB Competency Development

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As the global landscape of sustainability reporting evolves, staying ahead of the curve is crucial. Earth Academy, as the official FSA certification partner of IFRS, offers unparalleled expertise in IFRS S1 and S2 standards. Our newly launched ISSB Hub provides premium content designed to help organizations and professionals develop competencies in these critical areas. With Earth Academy’s resources, you can ensure that your sustainability reporting aligns with international standards, paving the way for transparent and effective communication with stakeholders.

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