IFRS S1 and S2 Board Briefing: Ten Questions Directors Should Ask Before Approval

Technical note. This article distinguishes IFRS requirements from London Reporting Academy implementation practices. Illustrative examples and tools must be adapted to the entity’s facts, reporting period, jurisdiction and applicable adoption requirements.

Independence note. London Reporting Academy is an independent education and consulting provider. IFRS®, ISSB®, IFRS S1 and IFRS S2 are referenced for educational purposes; this material is not issued or endorsed by the IFRS Foundation.

IFRS S1 and IFRS S2 are designed to form part of general purpose financial reporting. That makes approval a governance decision about the completeness, connectivity and supportability of information that may influence investors’ assessments of the entity’s prospects. The board is not merely approving a sustainability narrative: it is approving a package that should be consistent with the reporting entity, period, strategy, financial planning and related financial statements.

The Standards require disclosure about the governance processes, controls and procedures used to monitor sustainability-related risks and opportunities. They also require an explicit and unreserved statement of compliance when, and only when, the entity has complied with all applicable requirements. Although the Standards do not impose a universal board meeting format, directors need a disciplined way to challenge management before that conclusion is authorised.

The ten questions below are therefore framed as an approval gate. Each question links the proposed disclosure to the evidence, judgement and control record that should sit behind it. The board may delegate detailed review to an audit, risk or sustainability committee, but delegation should not remove clarity over who is accountable for the final decision and what unresolved matters remain.

Figure 1. IFRS S1/S2 board approval gate: ten questions to resolve before directors approve the disclosures. London Reporting Academy implementation practice.

1. Have we identified the sustainability-related risks and opportunities that could reasonably be expected to affect our prospects - and the material information about them?

The first board question is about the population from which the report was built. IFRS S1 focuses on sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance or cost of capital over the short, medium or long term. Materiality is then applied to the information about those risks and opportunities. A generic ESG topic list, peer-report scan or stakeholder survey is not by itself a complete basis for the conclusion.

Directors should ask management to explain the search process: which industries, value-chain relationships, geographies, time horizons and business activities were examined; how SASB Standards and other permitted sources were considered; how emerging or low-probability but potentially significant matters were handled; and why excluded matters could not reasonably be expected to affect prospects. The report should not be expected to contain every item assessed, but the decision trail should show that the population was not narrowed prematurely.

2. Does the governance disclosure match what the board and management actually did during the period?

IFRS S1 and IFRS S2 require information that enables users to understand the governance processes, controls and procedures used to monitor sustainability-related risks and opportunities. The disclosure should identify the governance body or individual responsible for oversight and explain matters such as responsibilities, skills and competencies, how and how often information is received, how relevant risks and opportunities are considered in strategy and major transactions, and how targets are overseen. Management’s role and the controls used to support oversight also need to be described.

The board should test the proposed wording against its own evidence. If the report says climate matters were considered in strategic decisions, minutes and papers should show where that happened. If the report describes a committee’s responsibility, the terms of reference should support it. If the board lacks relevant skills, a carefully drafted disclosure cannot convert an aspiration into an operating process; the gap should be addressed or described honestly.

3. Can management show how material risks and opportunities affect strategy, the business model and the value chain?

The strategy section should do more than repeat a risk register. Directors should be able to see how the identified risks and opportunities relate to products, operations, customers, suppliers, capital allocation, geographic exposure and the resilience of the business model. IFRS S2 specifically asks for the current and anticipated effects of climate-related risks and opportunities on the business model and value chain, including where those risks and opportunities are concentrated.

The board should challenge whether the disclosure is sufficiently entity-specific. A statement that “climate change may affect operations” says little about concentration, transmission channels or management response. Stronger information identifies the relevant activities or parts of the value chain, the time horizons used, the strategic choices made or planned, and the constraints and trade-offs management is dealing with. Where no material change has yet been approved, the disclosure should not imply otherwise.

4. Are current and anticipated financial effects connected to budgets, forecasts and the related financial statements?

IFRS S1 and IFRS S2 require information about current and anticipated effects on financial position, financial performance and cash flows, subject to the relevant requirements and reliefs. Directors should expect the sustainability and finance narratives to use a common set of assumptions to the extent possible. The question is not whether every long-term effect can be measured precisely; it is whether management has identified the relevant financial transmission channels, used reasonable and supportable information available without undue cost or effort, and explained where quantitative information is not provided.

The board should ask where the effects appear in budgets, forecasts, impairment tests, useful lives, provisions, expected credit losses, capital expenditure plans, financing assumptions or liquidity analysis. Differences can be legitimate - for example, a scenario analysis may use a wider range of outcomes than the central forecast - but they should be explained rather than hidden. A disclosure that describes substantial transition investment while the approved capital plan contains none is an obvious challenge point.

5. Is the climate-resilience assessment decision-useful, documented and clear about scenarios and uncertainty?

IFRS S2 requires disclosure that enables users to understand the resilience of the entity’s strategy and business model to climate-related changes, developments and uncertainties. Climate-related scenario analysis is required to inform that assessment, using an approach commensurate with the entity’s circumstances. The board should therefore understand the scenarios selected, the time horizons, key assumptions, major inputs, limitations and the implications for strategy and capacity to adapt.

Directors should resist two opposite errors. The first is a technical model that is so complex that no governance conclusion is drawn. The second is a superficial narrative in which scenarios are named but not used to test strategic choices. A useful board paper explains what changed across scenarios, which vulnerabilities or opportunities emerged, which decisions were influenced, and where uncertainty remains. The disclosure should be proportionate, but the decision trail should be robust enough to support the published conclusion.

6. Is the greenhouse gas inventory complete for the reporting boundary, transparent about methods and controlled?

IFRS S2 requires disclosure of Scope 1, Scope 2 and Scope 3 greenhouse gas emissions and related methodological information. Directors do not need to recalculate the inventory, but they should understand the organisational boundary, treatment of subsidiaries and investments, value-chain coverage, estimation hierarchy, material data gaps, use of the GHG Protocol or any permitted jurisdictional method, and changes from the prior period. Scope 3 screening should cover all relevant categories before material categories are selected and estimated.

The December 2025 amendments to IFRS S2 introduce targeted changes to greenhouse gas disclosure requirements, with mandatory application for annual periods beginning on or after 1 January 2027 and early application permitted. The board should confirm which edition applies to the reporting period, whether early application is being used and how any methodology or classification change affects comparatives, systems and controls.

7. Do metrics and targets reflect material performance, industry context and actual management processes?

IFRS S1 requires metrics for material sustainability-related risks and opportunities, including metrics required by applicable IFRS Sustainability Disclosure Standards and metrics used by the entity. IFRS S2 adds cross-industry climate metrics, industry-based metrics and climate-related targets. Directors should ask whether the selected metrics are genuinely used to assess performance and whether industry-based guidance, including the SASB Standards, has been considered as required.

Targets require particular care. The disclosure should explain the metric, objective, scope, period, base period, milestones, methodology, governance and performance against the target. Changes to a target or methodology should be transparent. The board should challenge targets that are not supported by an approved plan, resources, baseline or data system, and should avoid language suggesting that an aspiration is a binding commitment when it is not.

8. Which reliefs, exemptions, judgements and estimation uncertainties have been used - and could they change the overall conclusion?

IFRS S1 contains requirements for disclosing significant judgements and measurement uncertainty, and it includes reliefs or exceptions in specified circumstances. First-time reporters may also have transition reliefs available, depending on the reporting period and application choices. Directors should receive a consolidated register that identifies each relief or exception, the paragraph basis, the condition, the period of use, the effect on the disclosure package and the plan to close any temporary gap.

A relief should not be treated as a silent omission. The board should ask whether the condition has been evidenced, whether the related disclosure is sufficiently transparent, and whether the use of the relief affects comparability or the compliance statement. It should also distinguish measurement uncertainty, which may be unavoidable and disclosed, from weak process or missing evidence, which requires remediation.

9. Have disclosure controls operated, and has independent challenge been proportionate to the risk?

The Standards require disclosure about governance processes and controls, but they do not prescribe a single internal-control framework or universally require external assurance. The board should nonetheless expect a control environment comparable in discipline to other important corporate reporting: named owners, data definitions, evidence retention, segregation of preparation and review, reconciliations, model governance, change control, documented judgements and final completeness testing.

Independent challenge may come from internal audit, finance, legal, risk, an external adviser or an assurance practitioner. The nature and depth should reflect the maturity and risk of the information. External assurance can strengthen confidence, but it does not transfer responsibility for the disclosure or cure an unsupported management claim. Where assurance is planned, the board should understand its scope, level, criteria, exclusions and unresolved findings.

10. Is the proposed compliance statement justified for the entire package, published in the right place and at the right time?

IFRS S1 permits an explicit and unreserved statement of compliance with IFRS Sustainability Disclosure Standards only when all applicable requirements have been complied with. This is a package-level conclusion, not a description of intention or substantial alignment. The board should see a final disclosure matrix, evidence status, relief register, unresolved-issues paper and sign-off from the accountable executives before authorising the statement.

Directors should also confirm where the disclosures will be located, how any cross-references satisfy the conditions in IFRS S1, and whether the disclosures will be reported at the same time as the related financial statements and for the same reporting period, subject to applicable transition relief. Partial or “based on” reporting may still be useful, but it should be described transparently without using the compliance statement.

Figure 2. From evidence to board approval: an illustrative control flow for the final IFRS S1/S2 reporting cycle.

The following agenda is an implementation practice, not an IFRS requirement. It is intended for a board or committee that has received detailed papers in advance and wants to focus meeting time on judgements, unresolved matters and approval conditions.

The board does not reject IFRS S1/S2 reporting. Instead, it defers the compliance statement and conditions approval on three actions: finance reconciles the transition narrative to the approved forecast or rewrites it as an unapproved option; the GHG team completes and documents the category assessment and quantifies the effect of material exclusions; and the strategy team reframes the scenario disclosure to distinguish an exploratory analysis from decisions actually taken. The company may still publish on schedule, but only after the evidence and wording are aligned.

The teaching point is that board review should test the relationship between claims and decisions, not reward the volume of disclosure. A shorter, qualified statement may be more decision-useful and defensible than a confident narrative that overstates the maturity of the underlying process.

Do IFRS S1 and IFRS S2 require the board itself to approve the disclosures?

The Standards require disclosure about the governance body or individual responsible for oversight, but the precise approval process depends on the entity’s governance and jurisdiction. Where the board approves or recommends publication, the ten-question agenda is a practical challenge tool, not a separate ISSB-prescribed procedure.

Does the board need to be expert in greenhouse gas accounting and climate modelling?

Directors need enough competence, information and independent support to oversee the process and challenge significant judgements. They do not need to perform the calculations, but they should understand boundaries, methods, limitations, controls and the consequences of uncertainty.

Can the board approve disclosures subject to late immaterial edits?

That is a governance decision. Any delegation should be precise, and changes that affect material information, compliance, reliefs, metrics, targets or the overall conclusion should return to the appropriate approver. A final completeness test should follow all edits.

Is external assurance required before making an IFRS S1/S2 compliance statement?

IFRS S1 and IFRS S2 do not impose a universal external-assurance requirement. Jurisdictions may impose assurance, and an entity may obtain it voluntarily. The compliance statement remains the entity’s conclusion about compliance with the Standards.

What should the board do when one material disclosure is not ready?

Management should assess whether a requirement, relief, exception or materiality conclusion applies and present the evidence. The board should not use an unreserved compliance statement if an applicable requirement is not met. Transparent partial or framework-referenced reporting may be possible, but the claim must accurately describe what was prepared.