In June 2023, a significant step towards global sustainability was taken with the inaugural issue of the International Sustainability Standards Board’s (ISSB) standards, IFRS S1 and IFRS S2. These new standards, aimed at enhancing organizations’ communication with investors in terms of their sustainability-related risks, are set to take effect from January 1, 2025.
The introduction of the IFRS S1 and IFRS S2 represents the fruit of concerted efforts and extensive market feedback, garnering attention and encouraging response from powerhouses such as the G20, the Financial Stability Board, and The International Organization. Functioning as essential navigational tools for businesses to better communicate their sustainability journeys, these standards promise to guide corporations and law firms with effective dialogues regarding sustainability risks.
The ISSB has put forth an innovative approach to the way these standards are developed. Emphasizing a “bottom-up” method, they actively encourage and consider extensive market feedback. This tactic ensures that the developed standards are practical, feasible and responsive to real-world scenarios, making them more friendly and viable for businesses to adopt.
Moreover, these standards did not come into being in isolation. Instead, they are a response to the very real and imminent risk of climate change, and the resulting need for businesses to better articulate their sustainability plans and risks. This has been echoed by major global economic bodies such as the G20 and the Financial Stability Board, further emphasizing the urgency and necessity of the standards.
As these standards take effect in 2025, they will undoubtedly shape the way corporations disclose and manage their sustainability risks. Furthermore, they demonstrate the increasing recognition and prioritization of business sustainability issues at the global stage, and the critical role that effective communication plays in the sustainability journey of corporations.
Refer to the original details of the ISSB announcement and further related commentaries here.