• Dr. Marcus Fleig, Liridona Prvetica and Mariia Lototska
  • Published: 21 June 2023

The final requirements for a global corporate reporting system on sustainability-related information are due to be published at the end of June 2023, as confirmed by the International Financial Reporting Standards Foundation (IFRS). The publication date was postponed from June 2022 to offer enterprises more time to achieve the essential compliance prerequisites, ready for the execution of the final standards.  

To gain a better understanding of where the potential modifications in the soon-to-be-published final regulations are stemming from, this article identifies significant topics highlighted by the majority of respondents, representing over 700 stakeholder groups, following the initial presentation of the proposed criteria. 


While universal approval and acceptance of the standards are desired by authorities, purposeful coordination across jurisdictions is essential. In this regard, the figure below depicts how the ISSB communicates with other organizations such as the Task Force on Climate-related Financial Disclosures (TCFD) and the Sustainability Accounting Standards Board (SASB).

The ISSB is in a unique position to connect and collaborate with these institutions to develop comprehensive sustainability standards that are acknowledged internationally and aligned with the needs of all stakeholders. Here the ISSB aims to construct the standards upon the four pillars of the TCFD's recommendations and a jurisdiction-agnostic framework, integrating guidelines based on SASB Standards, while working with the Global Reporting Initiative (GRI) to standardize terminology, direction, and norms where possible. As a result, the promised harmonization appears to be already taking place. Together, these organizations can develop a sustainability reporting structure that is more comprehensive and robust, enabling businesses to control their impact on the economy, society, and environment more effectively and sustainably. 


Figure 1. Original Source: Auditboard

Overall, the anticipated final standards are based on two exposure drafts: the IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft) and the IFRS S2 Climate-related Disclosures (Climate Exposure Draft). Following the conclusion of the 120-day consultation period on these drafts, the regulators are currently engaged in making adjustments in response to the feedback from over 700 stakeholder groups. This is consistent with the publicly available information on the IFRS website, which states that the justifications and arguments offered by respondents help decide whether to affirm, modify, or retract a specific proposal and whether to evaluate alternative techniques for constructing the final specifications.


On the one hand, the IFRS S1 General Requirements Exposure Draft would require firms to disclose important sustainability-related risks and opportunities arising from the entity's impact and dependencies on people, the environment, and the economy. Estimating the information's materiality would be done in the context of what the users of financial reporting need to know in order to evaluate a company's enterprise value. The fundamental substance of a firms' sustainability-related financial information would need to focus on the entity's governance, strategy, risk management, and the key indicators used to monitor and manage sustainability-related risk and opportunities would be as follows:

GOVERNANCE: This data should inform investors about the firm's governance systems, controls, and procedures for monitoring and managing significant sustainability-related risks and opportunities. 

STRATEGY: The strategy information should explain whether risks and opportunities are incorporated into strategy planning, including financial planning, and whether they are critical to the strategy success.

RISK MANAGEMENT: The risk management data will be required to report how the company assesses the probability and effects of the corresponding risks based on qualitative factors, quantitative thresholds, and other criteria, also how the sustainability-related risks are prioritized relative to other types of risks. 

METRICS AND TARGETS: Information with regards to metrics and targets should make it possible for investors to get an overview and understanding on how a company measures, monitors, and manages major sustainability-related risks and opportunities and estimates its performance towards its targets. 

The IFRS2 Climate Exposure Draft, on the other hand, suggests seven cross-industry metrics that every entity would be required to report on: greenhouse gas (GHG) emissions, transition risks, physical risks, climate-related opportunities, capital deployment towards climate-related risks and opportunities, internal carbon prices, and the proportion of executive management compensation that is linked to climate-related considerations.


Based upon these requirements, the majority of respondents appear to support the ISSB's eventual goal of creating a “global baseline” of sustainability-related disclosures for capital markets. The European Banking Authority (EBA), for example, has emphasized the crucial role of the proposed standards, which are intended to simplify the transmission of standardized and comparable information critical to sustainability. Furthermore, a lower degree of complexity owing to structural homogeneity was highlighted as a supporting justification for developing this universal baseline.

Finally, other respondents also emphasized how crucial it is for the ISSB to collaborate with nations, notably those in Europe and the United States.

However, several respondents questioned the absence of guidance, advice, and examples to encourage the effective use of the concepts, despite their approval for the objectives of the drafts to actualize a greener economic system. Moreover, several stakeholders recommended that the ISSB must consider the variety of capabilities and readiness of organizations globally to implement the suggestions. According to the UK Financial Conduct Authority (FCA), there are measures that the ISSB could take to promote the ubiquitous implementation of the baseline norms worldwide, for example, through acknowledging the varying degrees of commonality and competence in corporate reporting on climate change and sustainability in various jurisdictions. By addressing these issues, the global baseline efficacy may be further increased, and implementation problems may be reduced.

Another key theme emphasized by various entities was the need for strong cooperation with the International Accounting Standards Board (IASB), in addition to the existing network with other initiatives shown in Figure 1. The ISSB and the IASB were cited as being specially positioned within the IFRS Foundation to safeguard the interconnection of the financial statements and sustainability-related financial disclosures. By employing the same terminology and principles throughout all IFRS Sustainability Disclosures, the importance of establishing understandability, connectivity, and clarity is evident. 

In this regard, the European Central Bank (ECB) emphasizes the need for fostering integrated disclosures, citing the compatibility between EFRAG's efforts in developing the Corporate Sustainability Reporting Directive (CSRD) and the ISSB drafts. The ECB urges both institutions to intensify their bilateral communication to guarantee the closest possible adherence to the two standards.

However, there are certain differences between the two climate standards that are important to be aware of, such as the deviation of the exposure drafts from the CSRD's double materiality approach by focusing on enterprise value and incorporating the investor perspective. Nonetheless, some asset management companies encourage the ISSB to consider a double materiality approach that would incorporate the firms’ impact on the environment and wider society, in line with the European Commission proposals.

Finally, numerous respondents stated that the ISSB suggestions and jurisdictional acts had important conceptual, terminological, and definitional gaps that must be addressed in order to build the most efficient path towards a greener overall economy. Furthermore, not all sustainable legislation has a high level of correlation, making large-scale standardization difficult, if not impossible, to apply.

Overall, there is little doubt that a global baseline is wanted and needed for an effective economic restructuring designed for a more sustainable future. There are numerous reporting initiatives already in place, as organizations anticipate how the ISSB incorporates the diverse requirements into the upcoming final standards.

Capco’s experts keep abreast of the most recent changes in the financial industry affecting ESG concerns and are eagerly anticipating the final ISSB standards to provide an appropriate response in terms of compliance management. Accordingly, we can support your organization in executing critical transformation procedures in an optimized and efficient way, to ensure full compliance as well as providing added value.