As sustainability considerations reshape business risks, investment flows, and regulatory expectations, organizations are under increasing pressure to disclose how environmental, social, and governance (ESG) factors affect their long-term financial health. To meet this demand, the International Sustainability Standards Board (ISSB)—under the IFRS Foundation—developed IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information.

IFRS S1 establishes a consistent, globally applicable baseline for disclosing sustainability-related risks and opportunities that could reasonably be expected to impact an entity’s cash flows, financial performance, or access to capital. It’s a critical framework designed to support investor decision-making, enhance transparency, and promote accountability.

Purpose and Strategic Value of IFRS S1

The primary objective of IFRS S1 is to ensure that organizations disclose material sustainability-related risks and opportunities—those that could affect their long-term financial outlook. These risks may arise from ESG factors such as climate change, social inequality, supply chain disruptions, regulatory changes, or reputational concerns.

Disclosures under IFRS S1 help investors and other stakeholders:

• Understand how a company’s interactions with society, the environment, and the economy affect its financial prospects

• Assess how the organization is preparing for sustainability-related disruptions and emerging opportunities

• Evaluate how ESG performance is integrated into business strategy, risk management, and corporate governance

In doing so, IFRS S1 bridges the gap between traditional financial reporting and the realities of operating in a resource-constrained, socially conscious world.

Who Does IFRS S1 Apply To?

IFRS S1 applies broadly to entities preparing general purpose financial reports, regardless of whether they follow IFRS Accounting Standards, GAAP, or other jurisdictional reporting frameworks.

It requires companies to disclose sustainability-related financial information across all areas where ESG factors may materially impact business performance—including:

• Governance and oversight structures

• Strategic plans

• Risk management processes

• Key metrics and targets

Importantly, disclosures must consider impacts across the value chain, not just within a company’s own operations. This ensures a holistic picture of how sustainability-related risks flow through the organization’s ecosystem of suppliers, customers, partners, and communities.

Materiality in IFRS S1

Materiality is a cornerstone of IFRS S1. Under the standard, sustainability-related information is considered material if its omission, misstatement, or obscuring could influence investor decisions.

This principle helps organizations focus their reporting efforts on the most relevant risks and opportunities. For instance:

• A utility company must disclose climate-related transition risks tied to carbon regulation

• A food and beverage firm may need to disclose water scarcity or human rights issues in its supply chain

Materiality is assessed based on the specific context of the business, its sector, and stakeholder expectations. IFRS S1 offers flexibility to aggregate or disaggregate information as needed to provide clarity and relevance in disclosures.

Core Disclosure Areas Under IFRS S1

To ensure consistency and comparability, IFRS S1 organizes disclosures into four key pillars:

1. Governance

Companies must disclose the roles and responsibilities of those charged with oversight of sustainability-related risks and opportunities. This includes:

• The governance body or individuals accountable (e.g., board committees, executives)

• How sustainability is integrated into organizational governance and control systems

2. Strategy

Disclosures should describe how sustainability-related risks and opportunities are reflected in the organization’s overall strategy and planning processes. Key considerations include:

• Strategic objectives related to ESG risks and opportunities

• Transition plans and alignment with global goals (e.g., the Paris Agreement)

• Impacts on business models, resource allocation, and future cash flows

3. Risk Management

Organizations are expected to explain how they identify, assess, prioritize, and monitor sustainability-related risks, including:

• Integration of ESG risks into the broader enterprise risk management framework

• Use of scenario analysis and stress testing

• Methods for evaluating ESG exposure across the value chain

4. Metrics and Targets

To enable performance tracking and accountability, companies must disclose:

• Key sustainability metrics (e.g., GHG emissions, DEI indicators, resource efficiency)

• Progress toward climate or ESG-related targets

• Methodologies and baselines for target-setting

• Linkages between executive compensation and sustainability outcomes, where applicable

These disclosures must be aligned with general purpose financial reporting, enabling a connected view of financial and non-financial performance.

Relationship Between IFRS S1 and IFRS S2

While IFRS S1 provides the general foundation for sustainability-related disclosures, it is designed to be used alongside IFRS S2, which focuses specifically on climate-related risks and opportunities.

Together, these two standards form the core of the IFRS Sustainability Disclosure Standards, allowing organizations to:

• Present a comprehensive picture of ESG and climate impacts on their financial performance

• Ensure alignment with investor priorities and global regulatory trends

• Build credibility through structured, standardized, and decision-useful disclosures

Preparing for IFRS S1 Implementation

To align with IFRS S1, companies should take the following actions:

• Conduct a materiality assessment across ESG issues that may affect financial outcomes

• Enhance governance oversight of sustainability-related matters at the board and executive levels

• Evaluate existing risk management processes for ESG integration and scenario planning

• Develop or refine key performance metrics and targets aligned with strategic goals

• Ensure consistency between ESG disclosures and financial reporting

Adopting IFRS S1 is not just a compliance exercise—it’s an opportunity to improve internal decision-making, manage long-term risks, and build investor confidence.

The Role of Technology in Supporting IFRS S1 Compliance

Given the scope and complexity of sustainability-related data, sustainability software will be instrumental in supporting compliance with IFRS S1. These tools can:

• Automate data collection and validation across departments and geographies

• Ensure consistency with IFRS Sustainability Disclosure Standards

• Track and report on KPIs in real time

• Enable scenario modeling and carbon pricing integration

• Support third-party assurance and audit readiness

By streamlining reporting processes, sustainability platforms help businesses deliver high-quality, reliable ESG data and disclosures.

Looking Ahead: Why IFRS S1 Matters

As global markets shift toward greater sustainability accountability, IFRS S1 offers a timely and necessary framework to help companies respond. It provides the clarity, consistency, and investor focus needed to embed sustainability into financial systems—and to support the transition toward a more resilient, inclusive, and low-carbon economy.

For ESG leaders, IFRS S1 is both a challenge and an opportunity: a challenge to upgrade internal systems and governance, and an opportunity to position the organization for long-term value creation.