June 30, 2023

By Delphi’s Adam Schwarz, Senior Consultant, Sustainability and ESG Reporting, and Dave Photiadis, Senior Director

For the past 20 years, the world of sustainability reporting and ESG disclosure has been a wild west. There are hundreds of reporting standards, a litany of methodologies, and a distinct lack of regulation. At the same time, stakeholder interest in corporate sustainability performance has ratcheted up significantly – to the point where sustainability information has become material financial information.

Thankfully, we are about to enter a new era in disclosure: on June 26, the International Sustainability Standards Board (ISSB) rolled out the first set of their new reporting standards. These standards are intended to be THE global standard for ESG reporting, ensuring consistency and relevance across jurisdictions and markets – and a more streamlined, cost-effective approach for reporters. This blog will take you through exactly what you need to know about the ISSB’s guidance and how your organization can position itself for success.


First, a little history

In late November 2021 at COP26, the International Financial Reporting Standards (IFRS) organization, (the body of accountants that sets international standards for financial disclosures) announced the first- ever International Sustainability Standards Board (ISSB). The role of this board is to oversee the development of an international standard for ESG disclosure that is consistent across markets and jurisdictions. This was a welcome development for a few reasons:

  1. It consolidates most of the commonly used ESG reporting standards into one standard, reducing reporting costs to companies.
  2. It significantly increases the availability of consistent and comparable ESG data in the market by creating a unified standard for disclosure.
  3. ISSB is spearheaded by globally recognized accounting bodies and market regulators so it will be aligned with common practices for financial disclosure, enabling widespread adoption.

Underpinning the new guidance are the standards generated by the Sustainability Accounting Standards Board (SASB). Since SASB’s launch in 2011, their set of standards has become the most popular framework for ESG disclosure in North American markets. Defining what information is material for companies across 77 industries, SASB is favoured by financial stakeholders worldwide. Baked into this set of standards is a robust and intricate process of due diligence that is founded on intense stakeholder engagement, giving it immense credibility.


ISSB’s new guidance: Key takeaways

On June 26, 2023, the first set of reporting standards was released by the ISSB. This includes S1: General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and S2: Climate-related Disclosures (IFRS S2); other standards will follow in the coming years. IFRS S1 will be effective for annual reporting periods beginning on or after January 1, 2024. The ISSB has provided a “transition relief” period relating to reporting “only climate-related risks and opportunities” in accordance with IFRS S2. This transition relief applies to the information disclosed in IFRS S1 as well but can only be used during the first reporting year, after which entities should fully disclose both standards. Companies that have not yet started planning to report against these standards should start planning immediately to avoid lagging behind their industry peers.

It’s important to note that reporting under ISSB is not regulated and that disclosure is voluntary. So why does this matter? There are indications from the Securities and Exchange Commission (SEC), Canadian Securities Administrators (CSA), and the European Commission (EC) that they may adopt the ISSB standards for regulated sustainability disclosure in the future. If climate disclosure regulations are a guide, we can expect that entities such as crown corporations, publicly traded corporations, and financial institutions may soon be required to report under ISSB. The companies that are regulated to report will likely require the companies they work with to also report against these standards, meaning that in the future access to things like supply lines, financing, and markets will require ISSB reporting, even if not publicly disclosed.


7 things your company can do to prepare to disclose under ISSB

  1. Prepare for big change management
    If companies want to be ISSB compliant in advance of regulation, they are required to link their financial information to their sustainability performance. This was optional under SASB (and other) reporting standards. Now that sustainability disclosure has moved into the realm of financial reporting, companies will need to engage business units that traditionally were not involved in sustainability reporting. This includes financial reporting, accounting, and audit and risk committees.  
  2. Undertake or update your materiality assessment
    A materiality assessment helps you prioritize the sustainability issues and opportunities that are most important to your stakeholders and could have the most material impact on your company. Undertaking a materiality assessment is an essential foundation to a comprehensive and effective corporate strategy and is also fundamental to the way companies will report through ISSB. If you haven’t done a materiality assessment before, start here; if your materiality assessment is more than two years old, make sure you update it. Ensure ISSB standards are a main component that underpins your assessment to fully recognize material issues and their accompanying risk.
  3.  Enhance your data collection processes and systems
    Chances are you’re already collecting a host of sustainability-related information, even if it’s not for disclosure purposes. These data-collection processes are essential to reporting under ISSB and will need to be augmented to include additional information – and to ensure the information is accurate. You should also consider how you’ll collect and store the information. Over the last 10 years, the ESG world has seen a proliferation of digital systems that enable companies to efficiently collect, store, and report on sustainability performance data. Ensure your firm has strong internal processes and a robust data collection system in place to optimize your ISSB reporting experience.
  4. Strengthen your governance structures to support disclosure oversight
    The information disclosed under ISSB cuts across nearly every business unit in an organization. Strong and comprehensive governance structures that have direct C-suite oversight are essential to supporting the collection of ESG data, developing annual ESG disclosures, and ensuring proper levels of transparency. For the purposes of annual ESG reporting, these governance structures need to ensure ESG is integrated across multiple business units and that there is collaboration and information sharing across these units. You likely already have governance structures in place for annual financial reporting. Leverage these existing systems to include ESG considerations. This should include engaging your accounting team, any audit and risk committees, as well as your communications and legal teams. Consider utilizing a responsibility assignment matrix to support disclosure oversight.
  5. Get internal stakeholder buy-in through ESG education
    In our experience, resistance to ESG disclosure is often linked to a lack of awareness of how it aligns with existing organizational priorities and practices, as well as the potential business risks that are associated with a lack of proper disclosure. Consider widespread ESG education across multiple business units and at all levels of your organization. Make everyone in your company familiar with the business case for ESG and the numerous financial benefits that can come from embracing ESG within their business unit and/or roles. Regular stakeholder engagement and robust communication plans are essential to maintaining this understanding, buy-in, and the essential cross-company collaboration that is needed to effectively report under the ISSB.
  6. Conduct a Scope 3 inventory
    The elephant in the room of ESG disclosure has long been Scope 3 GHG emissions: the value chain emissions that are indirectly caused upstream and downstream of a company due to its operations and assets. It isn’t always easy to measure these emissions given companies do not have direct control over them and getting the right data can be challenging. In fact, the majority of net-zero commitments without science-aligned plans behind them do not include Scope 3 emissions. However, Scope 3 emissions are the bulk of most companies’ emissions, and the ISSB standards require all companies disclosing under S2 to report them. This is in addition to various jurisdictions, such as the United States (specifically, the SEC), looking to regulate the disclosure of certain Scope 3 emissions among publicly traded companies. If your company has not begun to take stock of its Scope 3 emissions, consider beginning this process within the next quarter.
  7. Prepare for scenario analysis
    The new ISSB standards were created with input from the Task-force for Climate-related Financial Disclosure (TCFD), which requires scenario analysis under its framework. The ISSB standards follow TCFD’s lead by requiring the use of scenario analysis. The standards provide a wide spectrum of options in terms of how deep to go, recognizing that many companies cannot afford to conduct a comprehensive analysis. Qualitative scenario analysis is acceptable if there is an ‘undue’ cost to conducting a full and comprehensive scenario analysis. Plan to undertake or refine your scenario analysis prior to 2024 if your organization intends to report in the first year of ISSB adoption.

Looking ahead

The new ISSB standards represent a new era of sustainability reporting, one where there is a consistent standard that is multi-jurisdictional and allows companies of all sizes to understand their material ESG risks – and stakeholders to compare their performance.

This is a profound shift in the way that companies will report on their sustainability performance. Luckily, our firm is here to help. We have a variety of services that can help companies both begin and make progress along their sustainability journey. Reach out to our team if your company wants to talk more about how ISSB can be leveraged to outpace your peers or if you want to become a sustainability leader within your industry.


Adam Schwarz is a Senior Consultant and Dave Photiadis is a Senior Director at Delphi. Interested in more information on how your organization can reach its corporate sustainability, net-zero, and ESG goals in this new era of disclosure standards? Contact Adam at aschwarz@delphi.ca or Dave at dphotiadis@delphi.ca