IFRS S1 Metrics and Targets: Industry-Based, Entity-Specific and Performance Disclosures

Metrics and targets are where an apparently sound sustainability disclosure often becomes difficult to operate. A risk can be well described in narrative form, but the reporting team still has to decide which metric represents performance, which boundary to use, whether an industry metric fits the business model, how to treat estimates and whether a target has changed. A weak selection process produces one of two failures: an unmanageable catalogue of ESG indicators or a small set of attractive KPIs that does not explain the entity’s material risks and opportunities.

The reporting objective is not to maximise the number of indicators. It is to provide material information that helps primary users understand performance in relation to sustainability-related risks and opportunities, including progress towards targets. That means every published metric needs a traceable purpose, owner, method, boundary and connection to a matter that could affect the entity’s prospects.

Figure 1. A disciplined metric set begins with applicable requirements and management-used information, then tests industry-based and entity-specific additions.

The order in Figure 1 is useful because it prevents two common shortcuts. The first is beginning with a downloaded SASB table and treating it as the final disclosure checklist. The second is beginning with the organisation’s existing ESG dashboard and assuming that internal use alone makes every metric material for general purpose financial reports. Both sources matter, but neither replaces the materiality test or the need for a coherent, complete set.

3.1 Metrics required by another ISSB Standard

Where a specific IFRS Sustainability Disclosure Standard applies, its metrics and targets requirements are the first technical anchor. For climate-related matters, IFRS S2 contains cross-industry metrics, industry-based guidance and target disclosures. The entity does not replace those requirements with a preferred internal KPI simply because the internal metric is easier to produce. It can provide supplementary information where that improves decision usefulness without obscuring the required metric.

3.2 Metrics used by management

IFRS S1 also requires the metrics the entity uses to measure and monitor each sustainability-related risk or opportunity and its performance. This creates an important connection with governance and strategy disclosures: a metric described as central to board oversight, executive remuneration or capital allocation should normally be visible in the controlled metric inventory and reconciled to the published disclosure. Conversely, the existence of a management dashboard does not mean every dashboard field belongs in the report. Materiality still determines the information disclosed.

3.3 Industry-based metrics and the SASB role

When identifying disclosures about a sustainability-related risk or opportunity under IFRS S1, the entity must refer to and consider the applicability of the SASB disclosure topics and, for metrics, the SASB metrics associated with those topics. “Refer to and consider” requires a real assessment; it does not mean automatic application. An entity can conclude that a topic or metric is not applicable to its facts, or that a modified or additional metric provides more useful information. The decision should be supported by the business model, activities, risk or opportunity, user information need and the technical protocol.

Select SASB industries by actual business models and activities, not only by legal registration or the parent company’s label.

Consider more than one industry where the group has substantively different activities.

Review the disclosure topic before the metric: the metric is meaningful only in the context of the risk or opportunity it is intended to represent.

Read the technical protocol, including scope, calculation and activity-metric context.

Record use, modification, supplementation or non-applicability — and disclose the industry source actually applied where IFRS S1.59 requires it.

3.4 Entity-specific and additional metrics

An entity may need to develop a metric where no prescribed or industry-based metric fully captures the material matter. It may also adapt an external metric to reflect a different boundary, business model or decision-useful characteristic. That flexibility comes with transparency obligations. IFRS S1.50 requires information that enables users to understand whether the metric is absolute, a ratio, qualitative or another form; whether it has been validated by a third party; and how it is calculated.

Sustainability-related metrics frequently depend on estimates: supplier activity data, emissions factors, modelled exposure, asset-level classifications, avoided-loss assumptions or survey-derived indicators. IFRS S1 does not prohibit estimates. It recognises that reasonable estimates are an essential part of preparing sustainability-related financial disclosures and that their use does not undermine usefulness when the estimates are adequately explained.

Where an amount is subject to a high level of measurement uncertainty, the entity identifies the amount and explains the sources of uncertainty and the assumptions, approximations and judgements used. The useful question is therefore not “Is the number estimated?” but “Can a user understand what was estimated, why, how, with what uncertainty and under which controls?”

A target disclosure should allow the reader to reconstruct the performance logic: what is being achieved, by when, from which base period, using which metric and with which interim milestones. A headline commitment without this architecture is difficult to evaluate. The target register should therefore be linked directly to the metric register rather than maintained as a separate communications list.

5.1 What to say when a target is missed or performance deteriorates

IFRS S1.51 requires disclosure of performance against each target and an analysis of trends or changes in performance. The Standard does not create a separate mandatory heading called “missed targets”. Even so, material underperformance cannot be made neutral by reporting the commitment and omitting the result. Fair presentation, neutrality and the performance requirement point towards a balanced explanation of the variance, its causes, the action taken and any effect on the target or strategy.

Figure 2. A controlled metric register connects the published number to purpose, method, boundary, evidence, ownership, targets and change history.

Map each material sustainability-related risk and opportunity to the management decision it affects and to any metrics expressly required by an applicable ISSB Standard.

Identify the metrics management actually uses. Confirm definitions and reconcile claims made in governance, strategy, risk management and remuneration disclosures.

Select the relevant SASB industry or industries by business model and activity. Assess disclosure topics, metrics, activity metrics and technical protocols.

Test completeness. Develop or adapt an entity-specific metric where the prescribed and industry-based sources do not provide material information that is sufficiently relevant and faithfully represented.

Complete the metric and target registers. Lock the method, boundary, period, estimate hierarchy, owners, evidence and change-control process before report drafting.

Perform a disclosure review: materiality, comparability, consistency, balance, clear labels, target performance, methodology changes, uncertainty and cross-report consistency.

Why this works: the wording identifies the metric, comparative, target milestone, boundary, source systems, estimate coverage, underperformance, causes, corrective action and whether the target or method changed. It does not claim that the action will automatically restore the trajectory.

Evidence needed: approved metric methodology; fleet and tonne-kilometre extracts; estimation file; data-quality log; target and baseline approval; variance analysis; management action record; reviewer sign-off and comparative reconciliation.