From SASB and TCFD to ISSB: simplifying sustainability reporting

TL;DR: Streamlining Sustainability Reporting: The ISSB has consolidated the SASB and TCFD standards into the new IFRS S1 and S2 standards to create a unified global baseline for sustainability disclosures. This integration simplifies compliance, enhances clarity for investors, and aligns with regional and sector-specific requirements, providing a more coherent framework for companies to report on sustainability-related financial information and climate-related risks and opportunities.

Sustainability reporting has become mainstream in dozens of industries’ investment decision-making. However, with over 600 ESG reporting provisions globally, it can be difficult for companies to determine which standards to adopt. In an effort to simplify the sector, the IFRS Foundation has consolidated multiple disclosures, including SASB and TCFD, into one sustainability reporting baseline.

To understand the evolution of sustainability reporting, it’s crucial to recognize the role of key organizations shaping these standards. Let’s delve into one such pivotal entity: the IFRS Foundation.

The International Financial Reporting Standards (IFRS) Foundation is an organization whose mission is to provide transparent information for investors. As sustainability has become prevalent in investment decision-making, the IFRS created the International Sustainability Standards Board (ISSB) in 2021.

The ISSB has four core objectives:

• Provide a baseline of sustainability disclosures.
• Meet the information needs of investors.
• Aid companies in providing quality sustainability information to global markets.
• Ensure alignment with disclosures that are region-specific or targeted at broader stakeholder groups.

To meet these goals, the ISSB built on existing reporting initiatives including the Climate Disclosure Standards Board (CDSB), the Task Force on Climate-related Financial Disclosures (TCFD), the Value Reporting Foundation’s Integrated Reporting Framework, and the SASB Standards. By combining these frameworks, the ISSB developed the IFRS Sustainability Disclosure Standards as a global baseline.

Incorporating these existing disclosures, the ISSB created two new standards: IFRS S1 and IFRS S2.

IFRS S1 — General Requirements for Disclosure of Sustainability-related Financial Information — enables companies to communicate sustainability-related risks and opportunities over the short, medium, and long term. It specifies requirements related to the content, timing, and location of sustainability disclosures.

IFRS S2 — Climate-related Disclosures — is designed to be used alongside IFRS S1 and focuses specifically on climate-related risks and opportunities. The ISSB launched the implementation of these standards in January 2024.

SASB and TCFD are among the most widely used sustainability reporting frameworks. Following their integration into the IFRS Foundation, both are fully incorporated into IFRS S1 and IFRS S2.

SASB Standards

The SASB Standards were developed to help businesses and investors understand the financial impacts of sustainability. Covering 77 industries, they identify risks and opportunities most likely to affect financial performance. Since August 2022, the ISSB has assumed responsibility for the SASB Standards and committed to enhancing them.

IFRS S1 requires companies to consider SASB Standards when identifying sustainability-related risks and opportunities. IFRS S2 applies SASB-derived climate metrics within its disclosure requirements.

TCFD Standards

The Task Force on Climate-related Financial Disclosures (TCFD) introduced recommendations built around governance, strategy, risk management, and metrics and targets. In October 2023, TCFD announced it would disband, with monitoring responsibilities transferring to the IFRS Foundation.

As of 2024, the ISSB has fully incorporated TCFD recommendations into IFRS S2, ensuring continuity for companies already reporting under TCFD.

Should companies using SASB and TCFD disclose through ISSB?

Companies already applying SASB Standards and TCFD Recommendations are well positioned to transition to IFRS S1 and S2. In most cases, disclosure under the ISSB Standards will satisfy existing requirements, though local regulatory confirmation is recommended.

As the ISSB continues to update and evolve both SASB and TCFD within its framework, companies are encouraged to adopt IFRS S1 and S2 as part of a future-proof sustainability reporting strategy.

ESG: Environmental, Social, and Governance
IFRS: International Financial Reporting Standards
ISSB: International Sustainability Standards Board
SASB: Sustainability Accounting Standards Board
TCFD: Task Force on Climate-related Financial Disclosures

1. IFRS – Making the transition from TCFD to ISSB
2. About SASB (ifrs.org)
3. How SASB and TCFD are converging through the ISSB
4. IFRS – ISSB: Frequently Asked Questions
5. EY – The future of sustainability reporting standards (PDF)