IFRS S1 is currently voluntary at the international level, as the International Sustainability Standards Board (ISSB) does not have the authority to mandate it. It is a voluntary framework for companies to report sustainability-related risks, though it is rapidly becoming mandatory in many jurisdictions (e.g., Australia, UK) that are incorporating the standards into local regulations.
IFRS S1 and IFRS S2 include transition reliefs that allow a phased introduction of requirements to support those companies that are only beginning to apply the ISSB Standards. These reliefs provide paths for companies to develop disclosure capabilities while enabling consistency and comparability with other companies.
IFRS S1 and IFRS S2 become mandatory when regulators in jurisdictions integrate them into financial reporting frameworks and regulatory requirements.
IFRS S1 applies to all businesses that prepare general purpose financial reports, regardless of the accounting framework used, including those following International Financial Reporting Standards (IFRS), generally accepted accounting principles (GAAP), or other local reporting standards.
Who needs to comply with IFRS S1 and IFRS S2? IFRS S1 and S2 apply to companies that operate in jurisdictions where these standards are adopted either as mandatory requirements or as the recommended reporting baseline.
The objective of IFRS S1 is to require an entity to disclose information about its sustainability-related risks and opportunities that is useful to users of general purpose financial reports in making decisions relating to providing resources to the entity.
Under Chapter 2M of the Corporations Act (Ch 2M), entities that are required to prepare an annual financial report under Ch 2M for a financial year, and meet one of the sustainability reporting thresholds in s292A, are required to prepare a sustainability report.
IFRS S1 sets out the general requirements for a complete set of sustainability-related financial disclosures. IFRS S1 is designed to be applied in conjunction with IFRS S2, which is a topic-based standard that specifies disclosures relating to climate.
In India, ESG disclosure has been formalized through the Securities and Exchange Board of India (SEBI)'s Business Responsibility and Sustainability Reporting (BRSR) framework, making it mandatory for the top 1000 listed companies by market capitalization from FY 2022-23.
While IFRS compliance is not mandatory for all companies, certain entities are required to follow Ind-AS, including: Listed companies. Unlisted companies with a net worth of Rs. 250 crore or more.
At the midpoint of 2025, the ESG landscape continues to evolve amid rising political rhetoric and regulatory change. While some believe that ESG is losing momentum, the reality is that the business case for ESG remains strong.
The International Sustainability Standards Board (ISSB) has issued its first two IFRS Sustainability Disclosure Standards: IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1) and IFRS S2 Climate-related Disclosures (IFRS S2).
It provides a comprehensive framework for preparing and presenting financial statements that are relevant, reliable and understandable. While publicly traded companies in Canada must use IFRS, private companies can choose ASPE or IFRS.
The former conservative government announced that they would make IFRS S1 and S2 reporting mandatory with amendments to IFRS S1 and S2 for UK specific requirements. The exposure drafts of UK SRS are therefore very similar to the IFRS S1 and S2 save for certain amendments.
The four pillars of IFRS S1 and S2 are governance, strategy, risk management and metrics and targets.
A: Voluntary ESG reporting is guided by frameworks like GRI or CDP and driven by investor and stakeholder expectations. Mandatory ESG disclosure is set by regulation, such as CSRD or California SB 253, and requires compliance with legal standards, often including assurance.
Mandatory sustainability reporting: SGX mandates listed companies to publish annual ESG reports under a 'comply or explain' rule. Climate reporting roadmap: MAS and SGX set a roadmap for all listed issuers to adopt mandatory climate reporting by 2025.
TL;DR: In 2025, ESG reporting has shifted from voluntary to mandatory across most major economies, requiring large enterprises to disclose standardized, auditable data on environmental, social, and governance performance.
Territories and Countries with Mandatory ESG Reporting
ISSB standards (IFRS S1 and S2) set a global baseline for sustainability disclosures. IFRS S1 covers the general requirements for sustainability-related financial information; IFRS S2 focuses specifically on climate. Together, they help you present clear, comparable information that investors can use.
The standards fully incorporate the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). This means that organisations that comply with the requirements of IFRS S1 and S2 will also be meeting the requirements of TCFD. The standards are voluntary unless adopted into national legislation.
However, environmental, economic, social, and human sustainability focuses on preserving future generations and improving the quality of life. We're exploring the link between these pillars and climate change, and how effectively incorporating them into our processes can help combat the climate crisis.
Since launching its reporting standards in 1999, GRI's mission has been to advocate for the broad adoption of high-quality sustainability reporting. GRI reporting is voluntary but enables diverse companies to be more transparent about their economic, environmental, and social impacts.
It has announced its intention to develop UK-specific sustainability reporting standards in line with the ISSB standards by Q1 2025. Requirements are anticipated to be effective from 2026 at the earliest.
For publicly listed companies, ESG reporting is mandatory. For private ones, it's growing more difficult to skirt. However, driven by regulation, investors, customers, or supply chain requirements, ESG has emerged as a demonstration of how a company mitigates risk and enhances resilience.