Getting Ready for IFRS S1 and S2: What Companies Need to Do Now

As expectations around corporate accountability grow, organisations face increasing pressure to provide clear, credible, and comparable disclosures on their sustainability-related risks and opportunities. With the introduction of IFRS S1 and S2, companies are entering a new era of transparency driven by globally aligned reporting standards. Preparing for these developments requires a strategic, structured approach to ensure both compliance and competitiveness.

IFRS S1 and S2 represent a major advancement in sustainability reporting, developed to offer a unified framework for disclosing financial impacts tied to environmental and climate-related risks. These reporting standards are designed to promote consistency, clarity, and comparability across global markets, enabling stakeholders to better evaluate an organisation’s long-term value and resilience.

Understanding IFRS S1 and S2

IFRS S1 provides a baseline for sustainability-related financial disclosures across all industries. It requires companies to disclose material information on sustainability risks and opportunities that could reasonably be expected to influence investment decisions. This includes governance, strategy, risk management, and metrics tied to sustainability-related matters.

IFRS S2 focuses specifically on climate-related disclosures and aligns closely with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. It builds on the structure of S1 but adds more detailed requirements around climate governance, scenario analysis, and emissions metrics, ensuring businesses communicate clearly how they are responding to climate risks and opportunities.

Together, these reporting standards aim to provide stakeholders with decision-useful information that links sustainability issues to enterprise value.

Key Actions Companies Should Take Now

1. Conduct a Readiness Assessment

The first step is to evaluate the current state of your sustainability reporting practices. Identify gaps in data availability, governance processes, and internal controls. A readiness assessment helps prioritise areas for improvement and sets the foundation for a scalable reporting framework.

2. Map Internal Reporting to IFRS Requirements

Review existing disclosures and map them against IFRS S1 and S2 requirements. Determine where your current reporting aligns and where enhancements are needed, particularly in relation to financial materiality, risk management, and climate scenario analysis.

3. Strengthen Data Management and Controls

Robust sustainability reporting depends on reliable, auditable data. Companies should invest in systems and tools that allow for accurate data collection, aggregation, and validation. Integrating sustainability data into enterprise reporting platforms can streamline compliance and support internal decision-making.

4. Establish Governance and Oversight Mechanisms

Strong governance is essential for high-quality reporting. Define roles and responsibilities across departments, from finance to risk to sustainability. Boards and senior leadership should be actively engaged in oversight to ensure accountability and strategic alignment.

5. Engage Stakeholders Early 

Transparency builds trust, but effective disclosure also requires understanding what stakeholders expect. Engage investors, regulators, and internal teams early in the process to clarify expectations and communicate your reporting roadmap.

Benefits of Early Adoption

Adopting IFRS S1 and S2 is not merely a compliance exercise—it’s an opportunity to enhance strategic resilience. Companies that integrate these reporting standards into their operations can benefit from:

• Improved investor confidence, as decision-useful information becomes more readily available.
  
  

• Better risk identification, allowing leadership to act on emerging sustainability threats or market shifts.
  
  

• Enhanced corporate reputation, driven by transparency and accountability in sustainability matters.
  
  

• More efficient operations, as reporting standardisation supports better internal coordination and streamlined audits.
  
  

In a competitive and disclosure-driven environment, early adopters of high-quality sustainability reporting frameworks are well-positioned to lead.

Aligning with Broader Sustainability Goals

The introduction of IFRS S1 and S2 signals a clear move toward embedding sustainability into financial reporting. As businesses work to integrate these standards, they also contribute to broader global sustainability goals and stakeholder expectations around environmental and social performance.

Though ESG-related topics may influence the content disclosed under these standards, it's important to note that the IFRS framework is focused on financial relevance. Companies should ensure that their disclosures reflect material sustainability impacts in a way that is directly tied to enterprise value, bridging the gap between sustainability and strategic performance.

Looking Ahead

IFRS S1 and S2 mark a critical step toward consistent global sustainability reporting. For companies, the time to prepare is now. By aligning internal processes, investing in robust systems, and strengthening governance, organisations can not only meet these new expectations but also unlock deeper value from their sustainability efforts.

These reporting standards will continue to evolve as global priorities shift and stakeholders demand even greater transparency. Businesses that take action early will not only ensure compliance, but they’ll also build the resilience and credibility needed to thrive in the future.