ISSB Update May 2026: Global Momentum Builds for IFRS S1 and S2 Adoption

The International Sustainability Standards Board has published its May 2026 Update, providing a summary of the most recent Board meeting and an overview of global progress on the adoption and implementation of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures.

Key Themes from the May Meeting

ISSB Chair Emmanuel Faber and Vice-Chair Sue Lloyd reported that the pace of jurisdictional adoption is accelerating. Several major economies have either finalised or are in advanced stages of incorporating IFRS S1 and S2 into their domestic reporting frameworks, including through endorsement mechanisms similar to those used for IFRS accounting standards.

The Board discussed feedback from early adopters, focusing particularly on the practical challenges of applying the connectivity principle — the requirement to link sustainability disclosures to financial statement information. Entities have found this particularly demanding where sustainability data is produced by functions separate from finance, without robust shared processes.

Jurisdictional Adoption: The Global Picture

The ISSB's jurisdiction working group has tracked a significant uptick in formal adoption activity. Australia's mandatory climate disclosure regime, which applies IFRS S2 requirements for large listed entities from 2025, is generating practical learnings that the ISSB is incorporating into its implementation guidance. In the UK, the Financial Reporting Council has confirmed alignment with IFRS S1 and S2 for in-scope entities under the UK Sustainability Disclosure Standards framework.

In Asia-Pacific, Singapore, Japan, and Hong Kong have each announced roadmaps that reference or substantially adopt IFRS S1 and S2, reflecting the ISSB's stated goal of building a global baseline. The relationship between IFRS S2 and the EU's Corporate Sustainability Reporting Directive (CSRD) — which uses the European Sustainability Reporting Standards (ESRS) — remains an area of active dialogue, with interoperability tools published to help entities reporting under both frameworks avoid duplicating effort.

IFRS S1 and S2: Where Things Stand

IFRS S1 sets the overarching framework for sustainability reporting, requiring entities to disclose material information about sustainability-related risks and opportunities that could affect cash flows, financing, and the cost of capital. IFRS S2 specifies climate-specific disclosures, including Scope 1, 2, and 3 greenhouse gas emissions, and scenario analysis aligned with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

For groups reporting under full IFRS, the relationship between IFRS S1/S2 and accounting standards is increasingly relevant as multinational entities manage dual reporting obligations across financial and sustainability disclosures.

Scope 3 Emissions: The Biggest Practical Challenge

Among the disclosure requirements in IFRS S2, Scope 3 greenhouse gas emissions — those arising in an entity's supply chain and downstream use of products — consistently emerge as the most difficult to measure and verify. Many entities lack direct control over or visibility into the activities of suppliers and customers, making data collection dependent on engagement programmes, industry averages, or spend-based proxies.

The ISSB's May meeting included a discussion of practical reliefs available in the transitional provisions of IFRS S2, which allow entities in the first year of application to omit Scope 3 data if it is not reasonably available. Preparers should not treat this as a long-term solution — investors and regulators increasingly expect Scope 3 transparency, and the transitional relief narrows with each subsequent reporting year.

What Preparers Should Do

Organisations that have not yet begun an IFRS S1/S2 readiness assessment should treat the accelerating adoption timeline as a prompt to act. Key steps include mapping existing ESG data against S1/S2 disclosure requirements, identifying data gaps (particularly for Scope 3 emissions), and establishing governance over sustainability reporting equivalent to that applied to financial reporting.

Internal audit and audit committees should also be increasing their oversight of sustainability reporting processes, given that assurance requirements are expected to follow closely behind mandatory disclosure obligations in most jurisdictions. Entities currently subject to CSRD should review the ISSB-ESRS interoperability guidance to maximise reuse of data already collected for EU compliance.

The full ISSB Update, including detailed meeting notes and project status reports, is available on the IFRS Foundation website.