How to Prepare an IFRS S1 and IFRS S2 Report

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The most expensive ISSB projects usually begin in the wrong place. A team opens IFRS S1 and IFRS S2, creates a long request list and asks departments for information before agreeing the reporting basis, investor-focused materiality lens or organisational boundary. Months later, the team discovers that it collected immaterial information, missed a material value-chain exposure, used inconsistent financial assumptions or cannot support the intended compliance statement.

A stronger project moves from decision to evidence: applicability and claim; governance and scope; risks and opportunities; material information; climate and financial analysis; metrics and controls; drafting and review. These workstreams overlap, but each has a clear output and approval gate.

Figure 1. Disclosure, data and control architecture. Every published statement should be traceable through requirement mapping, analysis, source evidence and governance review.

The architecture should preserve two-way traceability. A reviewer should be able to move from a published statement to the requirement, materiality conclusion, source data, calculation, control and approval. The reporting team should also be able to move from a material risk or opportunity to all relevant governance, strategy, risk-management, metric, target and financial-effect disclosures.

Determine whether the entity is required or permitted to apply ISSB Standards, a local standard based on them, or a climate-only requirement. Identify the applicable edition, first period, transition reliefs, local modifications, location and timing rules. Decide at the outset whether the target is a full explicit and unreserved ISSB compliance statement, compliance with a local standard, or a transparent selected-use or readiness statement.

Assign a board or governance body to oversee sustainability-related risks and opportunities, define management responsibilities, and establish the reporting project's decision rights. IFRS S1 and IFRS S2 require governance disclosures, but the implementation value is broader: the project needs an accountable sponsor, clear escalation, documented approval of material judgements and separation between preparation and review.

The sustainability-related financial disclosures must be for the same reporting entity as the related financial statements. Establish the consolidated perimeter, treatment of acquisitions and disposals, value-chain scope for individual risks and opportunities, reporting period, publication location and cross-reference policy. The disclosures are ordinarily reported at the same time and for the same period as the related financial statements, subject to applicable first-year reliefs or local modifications.

Create a legal-entity and operations map linked to the financial consolidation system.

Separate reporting-entity boundary from value-chain analysis: the disclosures are for the reporting entity, but relevant risks, opportunities and data can extend through the value chain.

Define the controlled publication set: annual report, management report, sustainability statement, website document and cross-referenced policies or data books.

Lock the reporting timetable with finance so late financial-statement changes trigger sustainability disclosure review.

Identify sustainability-related risks and opportunities that could reasonably be expected to affect the entity's prospects. Use all reasonable and supportable information available at the reporting date without undue cost or effort. Start with the entity's business model, strategy, risk management, dependencies and impacts, value chain, industry conditions, regulatory developments and prior reporting evidence. Apply ISSB Standards and refer to and consider the applicability of the SASB Standards; for climate, apply IFRS S2 and refer to and consider its industry-based guidance.

Apply IFRS S1's investor-focused definition of material information. Test whether omitting, misstating or obscuring an information item could reasonably be expected to influence decisions of existing and potential investors, lenders and other creditors. Consider nature and magnitude, quantitative and qualitative factors, information individually and in combination, possible future events, aggregation and the risk of obscuring material information. The Standard does not prescribe a universal materiality threshold.

Separate the risk/opportunity conclusion from the disclosure-level materiality conclusion.

Map material information across governance, strategy, risk management, metrics and targets.

Document why required information is omitted as immaterial and whether additional information is needed to meet the disclosure objective.

Identify the judgements with the most significant effect for disclosure under IFRS S1 paragraphs 74-76.

IFRS S2 requires climate-specific information about physical risks, transition risks and climate-related opportunities. The work normally includes risk identification and concentration analysis; strategy and transition-response information; current and anticipated financial effects; climate resilience assessed using scenario analysis; GHG emissions; cross-industry metrics; industry-based metrics; and climate targets.

Connect each material sustainability-related risk or opportunity to the financial statements and financial planning. Identify current effects recognised or disclosed in the reporting period and anticipated effects over the short, medium and long term. Use consistent data and assumptions to the extent possible, explain important differences, and apply the specific proportionality mechanisms in the Standards rather than treating data difficulty as a blanket exemption.

Create a data dictionary and disclosure workpaper for each material information item. The workpaper should identify the requirement, owner, source system, period, unit, boundary, methodology, assumptions, estimates, evidence, calculation, reviewer, reconciliation, status and retention location. Distinguish source data from management adjustments and published values.

Draft the report around the four core content areas and the connections between them. For each material risk or opportunity, make it possible for a user to understand oversight, strategic effects and responses, risk-management processes, metrics and targets, and financial effects. Avoid separate departmental narratives that repeat policies but do not form a coherent investor story.

Use a disclosure matrix showing where each applicable requirement is met and how cross-references work.

State the reporting entity, period, basis, location and significant judgements clearly.

Explain methodology and limitations near the relevant information, not only in a generic appendix.

Use tables and diagrams only when they preserve material distinctions and remain understandable.

Keep non-ISSB stakeholder information clearly identifiable so it does not obscure material investor-focused information.

Run structured walkthroughs with governance, strategy, risk, finance, climate specialists and data owners. The reviewer should challenge not only whether a disclosure exists, but whether it is material, specific, connected, complete, neutral and supported. Significant judgements, assumptions and unresolved gaps should be escalated rather than resolved through vague drafting.

IFRS S1 and IFRS S2 do not themselves impose a universal external-assurance requirement. A jurisdiction, regulator, exchange, lender or board policy may do so. Even without external assurance, an assurance-ready approach improves reliability. Agree the criteria and scope early, provide the provider with the requirement map and methodology, perform data and process walkthroughs, maintain evidence indexes, remediate findings and control final report changes.

Procure the provider early enough to influence evidence and control design, while preserving independence requirements.

Define which disclosures, metrics, entities and locations are in scope and which assurance standard or review basis applies.

Track findings by severity, owner, due date, evidence of remediation and effect on public wording.

Keep final management representations consistent with the evidence and unresolved limitations.

Immediately before publication, reperform the requirement-level completeness review against the current applicable editions and local modifications. Confirm timing, comparatives, relief disclosures, judgements, measurement uncertainty, cross-references, website access and consistency with the financial statements. Only then approve the reporting statement.

Figure 2. Illustrative 12-month implementation plan. Workstreams run in parallel and converge at scope, materiality, data, drafting and release gates.

Why this structure works: it identifies the basis, period and reporting entity; links the materiality lens to primary users; and directs users to reliefs, judgements and uncertainty. It works only if the entity has met all applicable requirements. If it has not, the first sentence must be replaced with narrower, factually accurate wording.

Start by confirming the applicable reporting basis, intended claim, governance and reporting entity rather than opening with a disclosure checklist. Then identify sustainability-related risks and opportunities, determine material information and organise the climate, financial-effects, metrics, data, evidence and review workstreams before drafting.

The project first identifies sustainability-related risks and opportunities that could reasonably affect prospects, then determines which information about them is material for primary users. The risk-or-opportunity conclusion should remain separate from the disclosure-level materiality judgement, with material information mapped across the core content areas.

IFRS S2 does not require an entity to have a transition plan. If it has a transition plan or transition strategy, it discloses material information about that strategy and how it plans to achieve it.

Estimates, approximations and forecasts may be used when direct or complete data are unavailable; their use does not by itself make the disclosure less useful. The entity should explain the methods, inputs and uncertainty and keep the estimation process free from material error.