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IFRS SDS: Sustainability Reporting Is Concretised

ISSB defines the how, where and what

IFRS SDS: New Standards for Sustainability Reporting as of 2024
Digital Transformation

As early as November 2021, the IASB - the International Accounting Standards Board - established a body specializing in sustainability reporting. The ISSB - International Sustainability Standards Board - is mandated to concretize corporate reporting on environmental issues. The ISSB has now delivered and published the first IFRS SDS standards, IFRS S1 and IFRS S2, in June 2023, which will define the general guidelines and specific reporting content in the future. Further steps are in preparation.

IFRS S1: General Requirements for the Disclosure of Financial Information on Sustainability

As early as the 2024 financial year, capital market-oriented groups will be required by IFRS S1 to publish certain sustainability information. So IFRS reporters need to hurry.


The focus of the IFRS S1 regulations is on information that is currently and in the future related to sustainability-related risks and opportunities - and is thus useful to financial statement readers when making decisions about the provision of resources for the company, e.g. investment and/or financing calculations.


Since the cash flows generated by the company are decisive for its valuation and future viability, their dependencies on sustainability-related resources should primarily be disclosed.


IFRS S1 thus requires publicly traded groups to disclose information about all sustainability-related risks and opportunities that have the potential to affect the entity's short-, medium- or long-term cash flows, access to finance or cost of capital.


This information must be integrated into the financial reporting in a prominent place, e.g. in the management report or the MD&A, and must be provided for the first time for financial years beginning on 1 January 2024. However, the ISSB has been lenient and has suspended the obligation to disclose comparative figures for the previous year as a start-up measure for the first-time disclosure. 


The content of the new reporting modules focuses on process-related reporting on governance, corporate strategy, risk management and key figures as well as corporate objectives, which is oriented towards the value creation process of the company.

Figure 1 - Content requirements for reporting according to IFRS S1

Here, the workload may not be fairly distributed: Single-product companies with a strong focus on a universal manufacturing process or a manageable portfolio of suppliers and customers can certainly reduce the reporting complexity significantly compared to heterogeneously structured conglomerates.

IFRS S2: Climate-Related Disclosure

The second module of the currently published IFRS SDSs focuses on the concrete content of environmental reporting.


The focus is consequently on all existing risks and opportunities from business activities with environmental relevance and those that will result from transformation developments.


About the reporting components codified in IFRS S1 (governance, strategy, risk management, and objectives), more extensive requirements are formulated in IFRS S2.


Here, too, the ISSB has provided for simplifications in the context of the first-time application and allows, for example, established procedures of the CO2 footprint calculation if these deviate from the legislative definitions.

Figure 2 - Context of application of IFRS S2

IOSCO: International ESG Convergence Through Acceptance of IFRS SDSs

The disclosures on sustainability reporting formulated by the ISSB and ISAB in Europe were upgraded globally at the end of July 2023. IOSCO - The International Organization of Securities Commissions - the international umbrella organization of stock exchange supervisory authorities - has officially recognized the SDSs and recommended its members to include these regulations in their frameworks for integrated capital market reporting. This strong signal will strengthen international ESG convergence in the long term and create planning security for all affected and globally active corporations.

IFRS Sustainability Disclosure Taxonomy

To establish the future integrated environmental reporting in the digital reporting platforms of companies, the IASB already took an important next step in July 2023. A proposal for the digital taxonomy of the new disclosure obligations has been available since the end of July 2023. Comments for this draft can be submitted within 60 days, ending September 2023. The ISSB would then like to make the finalized taxonomy, again based on XBRL, available at the beginning of 2024. 

Capital Market Oriented Companies Get Implementation Security

As early as 20 years ago, IOSCO, whose 130 member countries claim to cover more than 95% of global capital market trading, advised its members to apply IFRS standards. As a further essential step on this roadmap for increased reporting convergence, the application recommendation for the IFRS SDS has now also been issued. Other measures on the highway for more deeply integrated financial and non-financial reporting will certainly follow.


Capital market-oriented groups of companies are subject to NFRD, CSRD, and Pillar II. They will undoubtedly be pleased with the "plus" in implementation security they have now gained. Software manufacturers, e.g., the German company SAP, have already started with the cloud application Group Reporting Data Collection in SAP S/4HANA and also offer ESG templates for integrated reporting.

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Written by

Prof. Dr. Martin Wünsch
Expert for SAP S/4HANA Transformation & Finance