The ISSB took a bunch of important decisions regarding IFRS S1 and IFRS S2

The ISSB Board held a meeting this February to discuss its Exposure Drafts: IFRS S1 General Sustainability-related Disclosures and IFRS S2 Climate-related Disclosures (“Standards”). The meeting covered a range of topics, including the Standards' sources of guidance, effective date, duration of transitional reliefs and balloting process. The following is a summary of the important decisions made during this meeting and the rationale behind some of them:  

1.     A tentative decision to issue a requirement to allow preparers to consider, only in the absence of a relevant/ accurate IFRS Sustainability Standard, the Global Reporting Initiative (GRI) Standards and the European Sustainability Reporting Standards (ESRS) in identifying disclosures about sustainability-related risks and opportunities. These are added as part of sources of guidance entities would be allowed to use, which will appear in the form of an appendix to the Standards. The ISSB justifies the choice of these two exceptions by their historical use and relevance and the reporting cost of companies.  
2.     The Standards will come into effect for the annual reporting periods beginning on or after January 2024. Entities are permitted to apply the Standards early under one condition: the application covers both Standards (IFRS S1 and IFRS S2). The ISSB justifies the choice of this date by the increased, ‘strong’ investor demand for providing climate and sustainability information on a timely basis. 
3.     Approval of a package of reliefs that will be available in the first annual reporting period, including:  

 A relief from requiring companies to simultaneously report sustainability-related financial disclosures and the related financial statements. In other words, entities can choose to delay the release of their sustainability reports.  

A relief from the provision of Scope 3 information.  

A relief from the requirement to measure Scopes 1-3 greenhouse gas emissions in line with the Greenhouse Gas (GHG) Protocol: A Corporate Accounting and Reporting Standard only if the entity uses a different tool in “the annual reporting period immediately preceding its IFRS S2 initial application”. In other words, entities can continue to use their initial measurement tool/methodology before moving to use the GHG protocol tool.  

A relief from providing comparative information.  

These reliefs are intended to justify the early application date of these Standards (2024) and ease entities’ initial disclosure processes (i.e., a ‘softer’ start for a more sophisticated future application). 

4.     The balloting process and the issuance of these Standards will start around the end of the second quarter of 2023.  

For more details, please listen to ISSB’s 22 February Podcast Episode or read the ISSB Update February 2023.