What U.S. companies need to know about the ISSB standards

Updated on October 21, 2026

The IFRS Sustainability Disclosure Standards, issued by the International Sustainability Standards Board (ISSB), are now the basis for sustainability reporting rules in a growing number of jurisdictions. There’s no federal requirement to use them in the U.S. Even so, they’re relevant to any U.S. company with international operations, listings, or investors.

The standards build on frameworks many companies already use, particularly TCFD and SASB. The work is in understanding how they fit with what you already report.

Foundational understanding

What are the IFRS Sustainability Disclosure Standards?

They’re a set of baseline requirements for sustainability-related financial disclosures. They’re designed to give investors consistent information about the sustainability risks and opportunities that could affect a company’s enterprise value.

The intent is similar to IFRS Accounting Standards: a common language that works across borders and capital markets. In practice, the disclosures read more like a 10-K than a traditional sustainability report, with a focus on financial risk rather than case studies and narrative.

There are currently two standards:

• IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information
• IFRS S2: Climate-related Disclosures

How do IFRS S1 and S2 differ?

S1 is the foundational standard. It sets the structure for sustainability disclosure overall and requires companies to report on any sustainability-related risks and opportunities that could reasonably affect their cash flows, access to financing, or cost of capital over the short, medium, or long term.

S2 applies that structure to climate. It’s more prescriptive, requiring detailed disclosures on climate-related risks and opportunities, greenhouse gas emissions (Scopes 1, 2, and 3), and climate resilience assessed through scenario analysis.

Most companies apply both standards together. In the first year of reporting, the standards allow a “climate first” approach, reporting under S2 only, with both standards applied from the second year.

Who created the standards?

The ISSB was created by the IFRS Foundation, the organization behind IFRS Accounting Standards, in response to demand from investors and regulators for consistent, comparable sustainability information. It launched in 2021 and published S1 and S2 in June 2023.

The Task Force on Climate-related Financial Disclosures (TCFD) disbanded in October 2023, and the IFRS Foundation took over monitoring of companies’ climate-related disclosures. S2 incorporates the TCFD recommendations.

Is this the same as IFRS Accounting Standards?

No, but they’re related. Both come from the IFRS Foundation:

• IFRS Accounting Standards, set by the International Accounting Standards Board (IASB), govern how companies prepare financial statements.
• IFRS Sustainability Disclosure Standards, set by the ISSB, govern sustainability-related financial disclosures.

The ISSB standards are designed to complement financial statements, not replace them. They cover sustainability matters with financial implications for the company.

Applicability and requirements

Does my company need to comply?

It depends on where you operate, where you’re listed, and where your investors are. The ISSB standards aren’t mandatory on their own. Each jurisdiction decides whether and how to adopt them, and many adopt local versions with modifications.

Where do the standards apply?

As of October 2026, adoption is moving at different speeds, and several jurisdictions have slowed their timelines.

In effect or finalized:

• Australia: Mandatory climate reporting under its ISSB-based standard has begun for the largest companies, phasing in to smaller ones.
• Singapore: Scope 1 and 2 GHG emissions reporting is mandatory for all listed companies from FY2025, and Scope 3 for STI constituent listed companies from FY2026. For other listed companies, Scope 3 reporting is voluntary until further notice. acraallenandgledhill
• United Kingdom: The UK-endorsed versions of IFRS S1 and S2 (UK SRS S1 and S2) were published on 25 February 2026. The FCA has finalized rules requiring in-scope listed companies to report against UK SRS on a ‘comply or explain’ basis for accounting periods beginning on or after 1 January 2027. dlapipericaew
• Japan: Japan’s ISSB-based standards become mandatory for the largest companies on its Prime market with a market capitalization of ¥3 trillion or more from the fiscal year ending March 2027, with smaller Prime companies phasing in through 2029. fsa
• Malaysia: Large companies listed on its main market report ISSB-aligned disclosures from 2025, and other listed companies from 2026. singaporelawwatch

Adopted or in progress elsewhere: Brazil, Hong Kong, Nigeria, and others are at various stages.

Paused: In Canada, securities regulators paused work on a mandatory climate disclosure rule, and the national sustainability standards remain voluntary. lexpert

The EU uses its own standards (ESRS) under CSRD rather than adopting ISSB, though the two are designed to work together on climate.

Even outside these jurisdictions, international subsidiaries, listings, or investors can bring ISSB-aligned expectations to a U.S. company.

When do we need to start reporting?

That depends on your jurisdiction and company profile. Most jurisdictions phase in requirements:

• Largest companies first: usually the largest listed companies or those above revenue or employee thresholds
• Smaller companies later: often one or more years behind
• Climate first: most require S2 before S1

Timelines have also shifted. Singapore, for example, extended deadlines for smaller listed companies in 2025. Check current requirements in each jurisdiction where you operate or are listed.

Can we phase in implementation?

Yes. The standards include transition relief for the first year of reporting:

• Scope 3 emissions don’t need to be disclosed in the first year.
• Companies can report on climate only (S2) in the first year.
• Companies can use estimation where precise data isn’t yet available, and provide qualitative information in some areas where quantitative information isn’t yet feasible.

Phasing in still takes lead time. Data collection, governance, controls, and internal training need to be in place before your first reporting deadline.

Relationship to other frameworks

How do the ISSB standards relate to CSRD and ESRS?

The key difference is materiality:

• ISSB (investor-focused): Single materiality. Which sustainability risks and opportunities affect your business financially?
• CSRD/ESRS (multi-stakeholder): Double materiality. What affects your business financially, and what impacts does your business have on people and the environment?

Both require reporting only on material matters. Under ESRS, double materiality generally means more matters qualify. Companies reporting under ESRS will cover much of what the ISSB requires, particularly on climate, but ISSB reporting alone won’t meet CSRD. A single materiality assessment can be designed to serve both.

CSRD’s scope has also narrowed. The final Omnibus Directive was adopted by the Council of the EU on 24 February 2026, raising thresholds substantially. See our [CSRD after Omnibus] article for details. akd

We already report using TCFD. How do S1 and S2 build on that?

If you report in line with TCFD, you’re well positioned. S2 uses TCFD’s four-part structure (governance, strategy, risk management, and metrics and targets) and incorporates its recommendations.

The main differences:

• More prescriptive: S2 specifies what must be disclosed where TCFD offered recommendations.
• More detailed emissions requirements: Including methodology disclosures and Scope 3.
• Required scenario analysis: Companies must use climate-related scenario analysis to assess their climate resilience.
• Industry metrics: Companies must refer to and consider industry-based disclosure topics and metrics, derived largely from the SASB Standards.
• Financial effects: S2 requires more detail on the current and anticipated effects of climate-related risks and opportunities on financial position, performance, and cash flows.

If TCFD is the foundation, S2 adds specificity.

What’s the relationship between the ISSB and SASB?

When the ISSB was created, the SASB Standards were consolidated into the IFRS Foundation. S1 requires companies to refer to and consider the SASB Standards when identifying sustainability-related risks and opportunities, and the ISSB maintains and updates them.

If you already use the SASB Standards, that work supports ISSB reporting directly.

How do U.S. requirements fit in?

There’s no federal ISSB requirement in the U.S., and the SEC’s climate disclosure rules never took effect. The SEC submitted a proposed rulemaking titled “Rescission of Climate-Related Disclosure Rules” for White House review on May 5, 2026. jdsupra

California’s laws are the main U.S. requirements. SB 253 requires large companies doing business in California to report greenhouse gas emissions, with a first-year deadline of August 10, 2026, for Scopes 1 and 2. SB 261, which requires climate-related financial risk reports, is on hold: the Ninth Circuit issued an injunction blocking enforcement pending appeal, and as of now the stay remains in effect. cooleycooley

What happens if my company doesn’t comply?

In jurisdictions where ISSB-based reporting is mandatory, the consequences are similar to those for other mandatory disclosure requirements: regulatory penalties, potential legal liability for material omissions or misstatements, and, in some markets, effects on listing status.

Where reporting is voluntary, the risks are different. Investors may ask for ISSB-aligned information, and companies that build capability later will have less time to do it.

Accuracy matters either way. Voluntary disclosure that’s inaccurate or misleading can create legal risk, including greenwashing claims and securities claims where disclosures are material.

Practical implementation

What data do we need?

For S1:

• Governance structures and processes for sustainability oversight
• Sustainability-related risks and opportunities that could affect enterprise value
• How those risks and opportunities connect to strategy and the business model
• Risk management processes
• Metrics and targets for material topics

For S2:

• Scope 1, 2, and 3 greenhouse gas emissions
• Climate-related physical and transition risks, and climate-related opportunities
• Effects on strategy, business model, and financial planning
• Climate resilience assessed through scenario analysis
• Capital deployment and internal carbon prices, if used
• Climate-related targets and progress
• Industry-based metrics, drawing on the SASB Standards

Do we need to report Scope 3?

Yes, after the first year. S2 requires Scope 1, 2, and 3 emissions, with relief allowing companies to omit Scope 3 in their first reporting year.

The ISSB has also eased some requirements. Targeted amendments to S2’s greenhouse gas requirements, issued on 11 December 2025, are effective for reporting periods beginning on or after 1 January 2027, with early application permitted. Among other changes, entities may restrict Scope 3 Category 15 disclosures to financed emissions, and no longer need to strictly follow the GHG Protocol Corporate Standard if a jurisdiction mandates a different method. eyforvismazars

Some jurisdictions also go beyond the baseline. In Australia, Scope 3 emissions receive limited assurance in years two and three, and reasonable assurance after that. auasb

What does “sustainability-related financial disclosure” mean?

It means sustainability information that could reasonably be expected to influence investors’ decisions about providing resources to your company. The focus is on how sustainability matters affect your cash flows, access to financing, cost of capital, and enterprise value, not your impact on the world (which is where double materiality under CSRD comes in).

So the question isn’t “What are all our sustainability impacts?” It’s “Which sustainability matters have financial implications for our business?”

How detailed does scenario analysis need to be?

S2 requires companies to use climate-related scenario analysis to assess their climate resilience, using an approach suited to their circumstances. It doesn’t prescribe a methodology.

Disclosures should help investors understand:

• Which scenarios you used and why
• The key assumptions and limitations
• What the analysis showed about your resilience to climate change
• How the results inform strategy and decisions

Materiality and scope

How does the ISSB define materiality?

Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence the decisions that investors, lenders, and other creditors make on the basis of a company’s general purpose financial reports.

This is single materiality. A matter can be material even if its financial effects aren’t fully quantifiable or won’t appear for several years.

What topics beyond climate does S1 cover?

S1 covers any sustainability-related risk or opportunity that could affect enterprise value, which depends on the company’s materiality assessment. Depending on the company, that could include:

• Nature and biodiversity
• Water
• Human rights in the value chain
• Labor practices
• Supply chain resilience
• Product safety and quality
• Data privacy and cybersecurity
• Business ethics and anti-corruption

Companies need to disclose the specific risk or opportunity, not just the topic. For water, that could be the risk of water stress at upstream suppliers’ facilities. S1 requires companies to consider the SASB Standards when identifying likely material topics for their industry.

More guidance on nature is coming. The ISSB is developing an IFRS Practice Statement on nature-related disclosures, to be issued as an exposure draft in October 2026, providing non-mandatory guidance that complements S1 and S2 without amending their requirements. bdo

Do we need to report on all ESG risks?

No, only material ones. Document your materiality assessment, though. Investors and regulators may want to understand how you reached your conclusions, especially for topics commonly considered material in your industry.

Assurance and verification

Do ISSB disclosures require external assurance?

The standards don’t require it. Each jurisdiction decides, and approaches vary:

• Australia: Assurance is required, starting with limited assurance and moving to reasonable assurance over time.
• UK: The FCA will keep mandatory sustainability assurance under review. Listed companies must disclose whether they’ve obtained third-party assurance and, if so, the provider, information covered, level of assurance, and standard used. icasicaew
• Japan: Mandatory assurance begins one year after mandatory application of the disclosure standards. fsa
• EU (CSRD): The previously planned requirement for reasonable assurance has been removed, leaving only the obligation to obtain limited assurance. akd

What’s the difference between limited and reasonable assurance?

Limited assurance is similar to a review. The assurer performs limited procedures and concludes that nothing has come to its attention indicating a material misstatement.

Reasonable assurance is similar to a financial audit. The assurer performs more extensive procedures and gives a positive opinion that the information is fairly stated.

Most companies start with limited assurance. Whether and when reasonable assurance follows depends on the jurisdiction. Strong data controls and documentation help at either level.

Should we integrate ISSB reporting with the financial audit process?

Where possible, yes. The standards require companies to explain the financial implications of sustainability matters, so sustainability and finance teams need to work closely regardless. Integration can improve efficiency, puts sustainability information through similar controls as financial information, and fits where reporting is heading in several jurisdictions.

Strategic questions

Should we adopt the standards voluntarily?

There are good reasons to consider it:

• Investor relationships: International investors may already use ISSB-aligned information.
• Preparedness: International operations or listings may bring requirements later.
• Operational benefits: The data and governance needed for ISSB reporting help manage sustainability risks regardless of disclosure.

Voluntary adoption still requires rigor. Don’t claim ISSB alignment unless you’re meeting the standards. Incomplete voluntary disclosure can undermine credibility.

Can ISSB reporting satisfy multiple requirements at once?

In many cases, it can help. The standards are designed as a baseline that jurisdictions build on:

• They incorporate TCFD’s recommendations and the SASB industry metrics many investors use.
• Several jurisdictions have adopted local versions with modifications, so check those requirements directly.

There are limits:

• ISSB reporting won’t meet CSRD on its own.
• Some jurisdictions add requirements beyond the baseline.
• Industry-specific regulations may require more.

The most efficient approach is to build data and reporting systems that meet the ISSB baseline, then add jurisdiction-specific requirements as needed.

How should we present S1 and S2 information? Is an index required?

No specific format is required. The standards focus on fair presentation and clarity. An index similar to those used for GRI and SASB is optional but can help investors find information.

Getting started

What’s the first step?

A gap assessment.

Inventory what you have:

• What do you already report (TCFD, SASB, CDP, GRI)?
• What data do you collect?
• What governance structures exist?

Map it to the ISSB requirements:

• Where do you already meet them?
• Where are the gaps, and how large is each?

Prioritize by:

• Regulatory timelines, if any apply
• Data availability
• Resources
• Materiality to your business

Companies already reporting to TCFD and SASB usually have a head start. The new work is often in Scope 3, scenario analysis, and financial effects. Content from a company’s 10-K can also support ISSB disclosures.

What resources does the ISSB provide?

The IFRS Foundation publishes free resources on its website, including:

• Educational material and illustrative examples for S1 and S2
• The SASB Standards and industry-based guidance
• Basis for Conclusions documents explaining the reasoning behind requirements
• Comparisons with other frameworks
• Public consultations on new standards and guidance

The challenge is applying them to your business.

How long does implementation take?

In our experience, 12 to 18 months is typical for most organizations, and longer if you’re starting from scratch:

Months 1–3: Assessment and planning. Gap analysis, governance design, resourcing, and project planning.

Months 4–9: Building infrastructure. Data collection systems, internal controls, cross-functional coordination, materiality assessment, and baseline data, especially Scope 3.

Months 10–15: Testing and refinement. Pilot reporting, internal review, assurance planning, and training.

Months 16–18: Pre-disclosure preparation. Drafting, legal review, and assurance readiness.

Companies with mature TCFD and SASB reporting can move faster. Companies with complex global operations or significant Scope 3 emissions may need longer.

You don’t need to be perfect in year one. Build the infrastructure, publish your first disclosure, and improve from there.

Need help with ISSB reporting?

thinkPARALLAX helps organizations prepare for ISSB reporting, from materiality assessment and data planning to disclosure development and stakeholder communications. Contact us.