Short answer
The answer, before the reasoning
A useful IFRS S1 and S2 gap assessment tests more than whether draft text exists. It should map each applicable requirement to a materiality conclusion, evidence, owner, control, draft location and review status; score whether the process is designed and operating; and prioritise remediation by compliance consequence, lead time, dependency and evidence weakness.
The assessment is an implementation and management tool, not an audit or assurance opinion, and its scoring model should be documented as an entity-specific practice rather than presented as an ISSB rating.
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.
Readiness
A gap assessment is not a report-writing checklist
- Many IFRS S1/S2 readiness reviews begin with the four pillars - governance, strategy, risk management, and metrics and targets - and ask whether text is available for each. That is a useful orientation, but it is not enough. IFRS S1 also contains cro
- A draft can exist while the reporting system is still immature. Governance wording may not match minutes; a risk register may omit value-chain exposures; a target may have no baseline; Scope 3 may be incomplete; financial effects may not reconcile to
- The objective is management action. The assessment should make it possible to answer four questions: What is applicable? What evidence exists? How mature is the process? Which gaps threaten the reporting timetable or conclusion most? The answers shou
Quick orientation
Figure 1. London Reporting Academy IFRS S1/S2 readiness maturity scale. This is an implementation model, not an ISSB rating.
Quick orientation
- Applies to
- First-time reporters, voluntary adopters, entities preparing for jurisdictional adoption, and experienced reporters refreshing controls.
- Primary decision
- Which workstreams and gaps must be remediated first to support a complete, controlled and defensible disclosure package.
- Key sources
- IFRS S1 in full, IFRS S2 in full and applicable official guidance; the assessment should use the edition relevant to the reporting period.
- Common confusion
- Applicability, materiality, readiness and compliance are different conclusions. A non-material item is not the same as an unassessed or unsupported item.
Step 1: lock the assessment basis before scoring anything
A readiness score has little meaning if the assessment basis is unstable. Begin by documenting the reporting entity, reporting period, intended location of the disclosures, applicable IFRS S1 and IFRS S2 editions, jurisdictional adoption status, first-year transition choices and the intended reporting claim. The assessment should also define which subsidiaries, associates, joint ventures and value-chain activities are relevant to different requirements and metrics.
The intended claim matters. An entity preparing an internal pilot may accept provisional gaps that would block an unreserved compliance statement. An entity preparing mandatory reporting needs a firmer interpretation of applicability, timing and assurance. The same technical gap may therefore have a different priority, but the underlying requirement should not be rewritten to fit the project status.
Rule
Assessment basis record
Entity and reporting boundary; reporting period; applicable standards and amendments; adoption status; transition reliefs; intended claim; publication location and timing; assurance objective; materiality methodology; reviewer and version date.
Step 2: build a requirements-and-evidence matrix
The matrix is the central control document. Each row should describe a discrete review test rather than copy long passages from the Standards. The official paragraph remains the authority; the matrix paraphrase should help the team decide applicability, locate evidence and assign action. Complex requirements may need several rows where different owners, evidence or controls apply.
A strong row connects the requirement to the entity’s reporting conclusion. It should show whether the requirement applies, whether the information is material, where the draft disclosure sits, what record supports it, who owns the process, what control operated, which relief or judgement was used, and who reviewed the conclusion. A checked box without a source reference is not evidence.
In practice
| Matrix field | Purpose | Good practice — Red flag |
|---|---|---|
| Requirement ID and paragraph | Preserve traceability to the authoritative source | Use a stable row ID plus exact IFRS paragraph and edition — Invented shorthand with no paragraph or version |
| Applicability | Determine whether the requirement is relevant to the entity and reporting basis | Yes / no / conditional with rationale and approver — Blank or automatically “not applicable” because data is missing |
| Materiality conclusion | Determine whether information is material in the entity’s circumstances | Document decision, evidence, date and significant judgement — “Not material” used as a synonym for inconvenient or immature |
| Evidence reference | Show what supports the conclusion or disclosure | Link to controlled records, calculations, minutes, models or policies — A narrative comment such as “team confirms” |
| Owner and reviewer | Create accountability and segregation | Named role, due date and independent review — One person prepares, approves and closes the row |
| Control status | Test whether the process is designed and operating | Control description, frequency, evidence and exception result — Policy exists but no operation is tested |
| Draft location | Connect technical readiness to the disclosure package | Section, paragraph or cross-reference with version — “Covered in report” without a precise location |
| Relief / judgement / uncertainty | Make conditions and limitations visible | Paragraph basis, evidence, effect and expiry/remediation — Silent omission or generic “data unavailable” |
| Maturity and gap | Summarise readiness without losing detail | Score supported by evidence and a specific remediation action — Score assigned from self-perception or draft completeness |
Step 3: score maturity across design, operation and evidence
The following 0-4 scale is a practical model. It should be applied consistently, with definitions agreed before workshops begin. The score should reflect the weakest material dimension: a well-designed process that did not operate should not be rated “reporting-ready”, and a complete draft supported only by undocumented judgement should not receive the highest score.
For major workstreams, a single score may hide important differences. Supplement it with sub-scores for requirement coverage, evidence quality, control design, operating effectiveness and disclosure completeness. The overall score can be the lowest sub-score or a documented weighted result, but the method should not obscure a critical failure.
In practice
| Score | Maturity | What it means — Minimum evidence |
|---|---|---|
| 0 | Not started | No owner, scope, method or evidence has been established — None or only informal awareness |
| 1 | Ad hoc | Activity exists but is informal, incomplete or dependent on individuals — Emails, isolated files or one-off analysis with no controlled method |
| 2 | Designed | Method, owner, control and evidence requirements are documented — Approved methodology, roles, templates and planned controls |
| 3 | Operating | The process ran for the period and evidence was retained; exceptions are known — Completed records, control evidence, review notes and remediation log |
| 4 | Reporting-ready | The disclosure is complete, connected, reviewed and assurance-ready for the intended claim — Final draft location, reconciliations, sign-off, relief register and completeness test |
In practice
Step 4: assess readiness through nine connected workstreams
| Workstream | Core review questions | Typical evidence — Common blocker |
|---|---|---|
| 1. Reporting basis and compliance | Are entity, period, location, timing, editions, transition choices, comparatives and claim defined? | Basis paper, adoption analysis, publication plan, compliance matrix — Compliance statement drafted before requirements are tested |
| 2. Governance | Do oversight and management roles, skills, information flows and controls exist and operate? | Mandates, minutes, papers, training, management controls — Disclosure describes a governance process that did not occur |
| 3. Risk universe and materiality | Were relevant industries, value chain, sources and time horizons assessed, and are materiality decisions evidenced? | Risk register, source review, SASB analysis, decision records — Generic ESG list or survey-only process |
| 4. Strategy and financial effects | Are business-model effects, value-chain concentrations, responses and financial effects connected to planning? | Strategy papers, budget bridge, capex, forecast, accounting and treasury analysis — Narrative commitments conflict with approved plans |
| 5. Climate and scenario analysis | Are physical and transition risks assessed and is scenario analysis commensurate and decision-useful? | Scenario methodology, assumptions, models, results and governance review — Scenarios named without strategic implications |
| 6. Risk management | Are identification, assessment, prioritisation, monitoring and integration processes explained and evidenced? | ERM methodology, risk taxonomy, thresholds, monitoring and escalation — Sustainability risks operate in an isolated process |
| 7. Metrics, industry guidance and targets | Were required, industry-based and entity-specific metrics selected and controlled? | SASB applicability matrix, metric register, target approvals and performance — Metric exists but method, boundary or target governance is unclear |
| 8. GHG emissions | Are Scope 1, 2 and 3 boundaries, methods, estimates, category screening and controls complete? | Inventory, emission factors, Category 15 analysis, recalculation and change log — Scope 3 omitted or material categories unassessed |
| 9. Controls, drafting and publication | Can every material claim be traced, reviewed, cross-referenced, updated and approved on time? | Evidence register, reconciliations, disclosure matrix, sign-offs, board pack — Late drafting with no hard close or final completeness test |
Step 5: prioritise remediation by consequence, dependency and lead time
The largest gap is not always the first gap to fix. Priority should combine at least four factors: the consequence for the intended reporting claim; the lead time or complexity; dependency on other workstreams; and the weakness of current evidence or controls. A fifth factor - scenario sensitivity - can capture gaps whose priority changes significantly under different adoption dates or strategic decisions.
A data gap that affects one narrative sentence may be lower priority than an apparently small boundary decision that affects the entire GHG inventory. Conversely, a high-consequence gap may be scheduled rather than treated as an immediate blocker if the reporting deadline is distant and no other workstream depends on it. The rationale should be documented so that management can challenge resource allocation.
Figure 2. Prioritising IFRS S1/S2 remediation: combine compliance consequence with lead time, dependency and evidence weakness.
In practice
| Priority category | When to use it | Management response |
|---|---|---|
| Blocker | High consequence and long lead time, critical dependency or very weak evidence | Executive sponsor, immediate workstream, frequent escalation and no premature green status |
| Accelerate | High consequence but work can be completed relatively quickly or evidence is almost ready | Assign owner and short deadline; complete before broader drafting |
| Schedule | Lower immediate consequence but meaningful effort or dependency requires planned action | Put on critical path with milestones and budget |
| Monitor | Lower consequence and short lead time; issue is contained or dependent on future facts | Document trigger, owner and review date; do not lose the decision trail |
Step 6: convert gaps into controlled remediation workstreams
Every material gap should become an action with a clear output, not a vague instruction to “improve disclosure”. The action record should identify the affected requirement and evidence, the root cause, accountable owner, supporting roles, due date, dependencies, acceptance criteria, reviewer and residual risk. Where the gap requires a judgement rather than new data, the output may be a decision paper and approved rationale.
Group related gaps into workstreams that can be managed. For example, a financial-effects workstream may address the risk-to-driver map, forecast connection, current-effects reconciliation, anticipated-effects method and disclosure wording. A GHG workstream may address organisational boundary, Scope 3 screening, emission factors, estimates, data interfaces and comparative changes. Grouping prevents dozens of isolated rows from competing for attention without solving the underlying system problem.
Rule
Acceptance criterion example
“Complete Scope 3 category screening” is not complete when a spreadsheet exists. A stronger criterion is: all 15 categories assessed against a documented method; exclusions approved; material categories calculated or estimated; evidence and assumptions retained; reviewer sign-off complete; disclosure and limitation wording updated.
Illustrative extract from a requirements-and-evidence matrix
The row identifiers above are illustrative internal IDs, not official IFRS disclosure numbers. The official paragraph reference and edition should be maintained in the live matrix.
In practice
| Row | Review test | Evidence / control — Maturity — Gap and priority |
|---|---|---|
| S1-12 | Material information about relevant sustainability-related risks and opportunities is identified and documented | Risk universe, SASB/source review, materiality decisions and approval — 2 - Designed — Value-chain scan not completed; Blocker because it affects scope of multiple disclosures |
| S2-07 | Governance disclosure matches actual oversight, information flows and target monitoring | Terms of reference, board papers, minutes and management control record — 3 - Operating — Skills disclosure lacks evidence; Accelerate |
| S2-14 | Climate strategy and decision-making disclosure distinguishes approved actions and plans | Strategy decisions, capex register, transition-plan governance — 1 - Ad hoc — Narrative prepared before plan approval; Blocker |
| S1-23 | Corresponding data and assumptions are consistent with financial statements to the extent possible | Forecast bridge, accounting cross-check and reconciliation — 2 - Designed — Dry-run reconciliation not operated; Schedule on critical path |
| S1-53 | Metric and target performance is disclosed with methods, changes and progress | Metric register, target approval, baseline and calculations — 3 - Operating — One methodology change lacks comparative assessment; Accelerate |
Hypothetical example: the bank that was “80% complete”
The team stops using page completion as the headline measure. It assigns maturity scores by workstream and identifies three blockers: financed-emissions methodology and data architecture; scenario-to-risk linkage; and the financial-effects method. Drafting continues in parallel for stable areas, but the compliance statement remains red. The board receives a transparent view of what is complete, what is provisional and what could still change the disclosure package.
The teaching point is that readiness is not an average. A single unresolved high-consequence dependency can determine whether the reporting cycle is viable, even when most narrative content has been written.
Hypothetical scenario
Illustrative scenario - not an assurance conclusion
A bank’s project dashboard reports 80% completion because most draft sections exist. A requirements-and-evidence assessment tells a different story. Governance and risk-management narratives are strong, but financed-emissions classification is unresolved, scenario analysis is not linked to credit-risk decisions, anticipated financial effects have no approved method, and several industry metrics lack data owners.
Illustrative only. It shows how the decision is made, not wording that can be copied or relied on.
In practice
Common gap-assessment mistakes
| Mistake | Why it is misleading | Correction |
|---|---|---|
| Scoring the existence of text | A draft can be unsupported, inconsistent or incomplete | Score process design, operation, evidence, controls and disclosure separately |
| Treating every IFRS paragraph as equally urgent | Lead time and dependencies differ substantially | Prioritise by consequence, dependency, lead time and evidence weakness |
| Using “not material” to close data gaps | Materiality cannot be concluded from the absence of data | Complete the assessment and document the judgement before closing the row |
| Marking a policy as evidence of operation | Design does not prove that a control or process ran | Test period evidence, exceptions and reviewer performance |
| Averaging away critical failures | High scores in easy areas can hide a blocker | Use critical-fail rules and show the lowest material sub-score |
| Confusing readiness review with assurance | Management may overstate independence or confidence | State scope, criteria, limitations and that no assurance opinion is provided |
| Ignoring cross-cutting requirements | Four-pillar content appears complete while timing, comparatives or compliance remain untested | Include reporting basis, connected information, reliefs and final claim gates |
| No version control | Scores and paragraph references become stale after amendments or draft changes | Record source-set version, assessment date, reviewer and update triggers |
Myth
“A high maturity score means the entity is compliant with IFRS S1 and IFRS S2.”
Reality
A maturity score is a management tool based on an entity-defined method. Compliance is a separate conclusion requiring all applicable requirements to be satisfied. A score can help identify and prioritise work, but it is not an ISSB rating, certification, audit or assurance opinion.
Readiness
Readiness assessment checklist
- The reporting entity, period, applicable editions, adoption basis, transition choices and intended claim are locked.
- The requirements matrix covers IFRS S1 cross-cutting requirements as well as the four pillars and IFRS S2 climate detail.
- Each row has an exact paragraph and edition, a paraphrased review test and a stable internal identifier.
- Applicability and materiality are separate fields with documented rationale and approval.
- Evidence references point to controlled records rather than general comments or names.
- Owners, reviewers, controls and due dates are assigned with appropriate segregation.
- Maturity definitions distinguish design, operation, evidence and reporting readiness.
- Critical fail rules prevent averages from hiding a blocker.
- Remediation priority incorporates consequence, lead time, dependency and evidence weakness.
- Actions specify outputs and acceptance criteria, not only broad intentions.
- The assessment states that it is not an audit or assurance opinion and discloses its limitations.
- The matrix has a source-set version, review date, change log and update triggers.
Self-check
- Why can a complete draft still score below “operating” or “reporting-ready”?
- How would you distinguish an applicability conclusion from a materiality conclusion in the matrix?
- Which priority factor would cause a relatively small technical gap to become a blocker?
Frequently asked questions
Should a gap assessment reproduce every paragraph of IFRS S1 and IFRS S2?
No. The official Standards remain authoritative. The matrix should paraphrase discrete review tests and preserve exact paragraph and edition references. Complex requirements may require more than one row.
Can we use a 0-4 maturity scale?
Yes, as an internal implementation practice, provided the definitions and evidence are documented. It should not be described as an ISSB score, certification or assurance conclusion.
Is a missing disclosure automatically a compliance gap?
Not necessarily. The team must first assess applicability, materiality, any relief or exception, and the reporting basis. A missing applicable and material disclosure is a gap; an evidenced non-material conclusion is different.
Should all red gaps stop drafting?
No. Stable sections can progress in parallel, but critical dependencies should remain visible. Drafting should not create a false impression that the overall compliance conclusion is ready.
Who should review the assessment?
At minimum, relevant technical owners and an independent technical reviewer. Finance, risk, legal, GHG specialists, internal audit or assurance teams may need to review specific workstreams. Final conclusions should follow the entity’s governance.
Sources
Primary sources
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. June 2023; current consolidated text used for this article
- IFRS S2 Climate-related Disclosures. December 2025 consolidated edition
- IFRS Foundation educational material: Materiality and disclosure of material information. November 2024
- IFRS Foundation educational material: Using the SASB Standards to meet the requirements in IFRS S1. Implementation support
- IFRS Foundation educational material: Industry-based guidance on implementing IFRS Sustainability Disclosure Standards. Industry guidance and metric selection
- Amendments to Greenhouse Gas Emissions Disclosures. Issued December 2025; effective for annual periods beginning on or after 1 January 2027, with earlier application permitted
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