The world of corporate reporting has long been cluttered with multiple sustainability-related disclosure frameworks—Corporate Social Responsibility (CSR), Integrated Reporting (IR), and Environmental, Social, and Governance (ESG) disclosures—leading to inconsistencies and confusion. To streamline sustainability reporting and unify global standards, the International Sustainability Standards Board (ISSB) has introduced the Sustainability Disclosure Standards (IFRS S1 & IFRS S2).
These standards align with multiple frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD) and the Global Reporting Initiative (GRI), ensuring consistency and comparability in sustainability reporting. This development is particularly crucial for ACCA students, as sustainability reporting is now a key area of examination and will continue to be tested in ACCA exams.
Sustainability reporting involves the public disclosure of a company’s economic, environmental, and social impacts. It covers:
Although ESG reporting and sustainability reporting are often used interchangeably, they have distinct differences:
The ISSB is responsible for developing the Sustainability Disclosure Standards, which provide a comprehensive framework for businesses to report sustainability-related information. In June 2023, ISSB issued two major standards:
While these standards are not mandatory worldwide, jurisdictional authorities can decide whether to require companies to apply them. Companies can also voluntarily adopt them for improved transparency.
IFRS S1 establishes the core principles for sustainability-related financial disclosures. It requires companies to disclose information on sustainability-related risks and opportunities that could impact the company’s financial position, cash flows, or access to capital.
IFRS S2 focuses specifically on climate-related risks and opportunities, requiring companies to disclose how climate factors impact financial performance and resilience. It builds on the recommendations of the TCFD (Task Force on Climate-Related Financial Disclosures).
Climate-Related Risks
Governance and Strategy
Risk Management & Metrics
While IFRS S1 & S2 are global voluntary standards, reporting in Europe follows mandatory guidelines under the Corporate Sustainability Reporting Directive (CSRD) through the European Sustainability Reporting Standards (ESRS).
| Feature | ISSB Standards (IFRS S1 & S2) | European Sustainability Reporting Standards (ESRS) |
|---|---|---|
| Enforceability | Voluntary (unless mandated) | Mandatory for CSRD-covered Companies |
| Effective Date | From 2024 (first reports in 2025) | From 2024 (first reports in 2025) |
| Applicability | All public and private companies (if adopted) | Large EU-based undertakings, listed and non-listed |
| Materiality Approach | Financial Materiality | Double materiality (financial + impact materiality) |
| Target Audience | Investors, lenders, creditors | Investors, stakeholders, regulators |
| Reporting Structure | No prescribed format | Defined “sustainability statements” as part of the management report |
As sustainability reporting becomes an essential part of ACCA exams, mastering IFRS S1, IFRS S2, and ESRS is crucial. If you need help understanding these standards, practicing exam-style questions, or building your sustainability reporting knowledge, Megha Bhansali Classes is here to assist you!
Megha Bhansali Classes offers expert ACCA coaching with a focus on concept clarity, interactive learning, and exam-oriented preparation. Led by Megha Bhansali, a Big 4-trained tutor, the institute provides personalized guidance, mock tests, and continuous student support. It also offers personality development courses to enhance communication, confidence, and leadership skills, shaping future finance professionals.
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