IFRS S1 & S2 for Finance Leaders: The Practical Guide to Investor-Grade Sustainability Reporting
IFRS Sustainability Disclosure Standards S1 and S2 are reshaping how organisations explain sustainability risks, opportunities, and climate impacts in a way investors can use—and finance teams can stand behind. This resource translates the standards into a finance-led, implementation-focused approach: what to disclose, how to govern it, how to build reliable data and controls, and how to align sustainability narratives with planning, budgets, and financial reporting.
IFRS Sustainability Standards (S1 & S2) Explained for Finance Leaders
IFRS Sustainability Disclosure Standards are designed to create a global baseline for investor-focused sustainability reporting. IFRS S1 covers sustainability-related risks and opportunities, while IFRS S2 sets out climate-related disclosures, including emissions and targets. This guide shows what finance teams should own and how to implement with control and credibility.
S1 vs S2: What each standard requires
Both standards use four pillars—Governance, Strategy, Risk Management, and Metrics & Targets. S2 then adds climate-specific detail such as emissions and transition planning.
- Disclose material sustainability-related risks & opportunities
- Explain governance oversight and management responsibilities
- Describe impacts on strategy, performance and financial position
- Set out risk processes and how sustainability is managed
- Disclose metrics/targets and performance over time
- Physical and transition climate risks and opportunities
- Climate resilience and (where relevant) scenario analysis
- Emissions: Scope 1 & 2 and (where applicable) Scope 3
- Targets, transition plans and progress tracking
- Industry-based metrics relevant to operations
Why this matters for finance leaders
Sustainability disclosures are becoming investor-grade. Finance leaders are central to ensuring disclosures are decision-useful, consistent with financial assumptions, and supported by reliable data and controls.
- Integration with budgets, forecasts and capital allocation
- Alignment between sustainability claims and financial statement assumptions
- Audit committee oversight and reporting governance
- Evidence packs and repeatable reporting cycles
- Materiality judgments grounded in enterprise value
- Controls over metrics, estimates and methodologies
- Variance analysis and consistency checks year-on-year
- Cross-functional coordination and accountability
Governance, controls and assurance readiness
Expect increasing scrutiny and assurance over sustainability disclosures. Finance teams should build the same discipline used in financial reporting: clear ownership, documented methodologies, and auditable evidence.
- Named owners and sign-off workflows across topics
- Board/committee oversight mapped to disclosures
- Policies for boundaries, estimates and methodologies
- Defined cadence aligned to financial reporting timelines
- Data lineage: source → calculation → disclosure
- Controls over emissions, targets and key assumptions
- Review checkpoints and consistency testing
- Audit-ready documentation and retention of evidence
Implementation roadmap for finance teams
Treat S1/S2 as a programme. Start with a gap assessment, then establish governance, build data and controls, and iterate.
- Map current disclosures to S1/S2 pillars
- Identify missing metrics, targets, narratives and evidence
- Prioritise high-risk gaps and quick wins
- Assign owners per disclosure topic and metric
- Define sign-off and board committee oversight
- Align cadence to the financial close cycle
- Define boundaries, methodologies and estimation approaches
- Address emissions data gaps (Scope 3 where applicable)
- Build templates and documentation standards
- Implement key controls and review checkpoints
- Build traceability for each metric and claim
- Prepare audit/assurance-ready evidence packs
- Align sustainability impacts with budgets and forecasts
- Embed scenario analysis into planning where relevant
- Ensure narrative and numbers are consistent and explainable
We can run a CFO briefing or deliver an in-house programme to build your reporting roadmap, governance model, and assurance-ready controls.
FAQs
Are IFRS S1 and S2 mandatory?
Adoption depends on your jurisdiction and regulator requirements. Many organisations prepare early due to investor expectations and the time needed to build data, controls and governance.
Do IFRS S1/S2 replace TCFD?
IFRS S2 builds on the TCFD structure and climate reporting concepts. Organisations with existing TCFD reporting can often map and enhance their disclosures to meet S2 requirements.
What should finance do first?
Start with a gap assessment and ownership model. Then define boundaries, methodologies and controls for priority metrics (including emissions), and align sustainability disclosures to financial planning assumptions.
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