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      The IFRS Sustainability Disclosure Standards, introduced by the International Sustainability Standards Board (ISSB) in 2023, provide a global reporting standard for companies to publish sustainability-related financial disclosures and strengthen transparency in the capital markets.

      IFRS S1 sets out the general requirements for disclosing all material sustainability risks and opportunities, while IFRS S2 focuses specifically on climate-related disclosures such as climate related risks, scenario analysis, climate-risk metrics and ESG performance targets.

      Both standards follow the four Task Force on Climate-Related Financial Disclosures (TCFD) pillars – governance, strategy, risk management, and metrics & targets – ensuring consistent and comparable information across jurisdictions. Together, they aim to improve sustainability data quality, support investor decision-making, and align with other TCFD-based disclosures and reporting initiatives.

      Silvan Jurt
      Silvan Jurt

      Partner, Head Corporate Sustainability Services

      KPMG Switzerland

      Theresa Tiersch
      Theresa Tiersch

      Director, Corporate Sustainability Services

      KPMG Switzerland

      What are IFRS S1 and IFRS S2?

      The IFRS Sustainability Disclosure Standards, issued by the ISSB, provide a baseline for companies to disclose financial information and IFRS-related sustainability data that support investor decision-making.

      Interoperability with other international standards such as SASB alignment and Sustainability Accounting Standards Boards (SASB) principles is a key feature of the framework, facilitating the integration of requirements into national law and harmonizing with industry-based sustainability related disclosure initiatives.

      The two IFRS Sustainability Disclosure Standards – IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures – were released in 2023, ready for the FY24 reporting cycle. They require companies to report on a broad range of topics and incorporate data from across the value chain. IFRS S1 defines the scope, objectives, and core presentation requirements, demanding disclosure of all sustainability-related risks and opportunities that could reasonably be expected to affect a company’s outlook.

      To complement this, topic-specific standards provide more detail. The first is IFRS S2, which addresses climate issues including IFRS governance of climate risk, transition planning, and climate-risk metrics.

      Recognizing the complexity of adoption, transitional relief allows companies in their first year to focus disclosures on climate-related risks and opportunities. This flexibility is key to building an IFRS ESG disclosure roadmap and preparing for assurance under ISSB sustainability reporting requirements.

      The four pillars of IFRS S1 and S2

      Both standards follow a structure consistent with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which include the four areas of governance, strategy, risk management and metrics and targets. In more detail the four pillars are the following:

      • Governance

        helps investors understand how companies manage and oversee sustainability-related risks.

      • Strategy

        focuses on business strategies and scenario analysis for handling climate related risks and opportunities.

      • Risk management

        explains processes to identify, assess, and monitor ESG risks, enabling evaluation of overall exposure.

      • Metrics and targets

        require disclosure of ESG goals, ESG performance targets, and progress measurement, ensuring investors receive reliable, comparable information.

      Who needs to comply with IFRS S1 & S2?

      While the standards gain traction globally, adoption in Europe remains limited, with the EU focusing on the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS).

      However, the IFRS framework, thanks to its proportionality and focus on sustainability data quality, is increasingly relevant for companies shaping their ESG roadmap.

      With the European Commission’s recent Omnibus proposal – aimed at streamlining and scaling back certain CSRD requirements – there is renewed attention on IFRS S1 vs S2 differences and their role in the European regulatory landscape.

      Before the IFRS Sustainability Disclosure Standards (IFRS S1 and S2) can become mandatory, they must be officially endorsed by a country or jurisdiction. Until then, companies may choose to report voluntarily under IFRS S1 and S2. The United Kingdom (UK) is one example of a jurisdiction actively progressing toward implementation: the UK government has published a draft of national sustainability reporting standards (UK SRS), which are based on IFRS S1 and S2.

      The Financial Conduct Authority (FCA) also plans to consult on requiring listed companies to apply the UK SRS, and the UK government is evaluating whether to extend these requirements to certain private companies.

      IFRS S2 vs TCFD: Key differences for Swiss companies

      Under IFRS S2 climate-related disclosures, companies are required to disclose both physical and transition climate related risks, their anticipated financial effects, and the resilience of their business models under short-, medium-, and long-term focused climate scenarios. IFRS S2 also mandates reporting on greenhouse gas (GHG) emissions (Scopes 1, 2, and 3), climate-related targets, and transition plans, including the use of carbon credits.

      Swiss public interest entities (PIEs) that meet the thresholds under Art. 964 Swiss CO are required to report climate-related disclosures in accordance with the Swiss climate ordinance since the financial year 2024. While the ordinance is referencing the TCFD recommendations, companies may choose their preferred reporting framework. The requirements in IFRS S2 are consistent with the four core recommendations and eleven recommended disclosures published by the TCFD, which makes the IFRS S2 a suitable alternative for Swiss companies.

      However, the IFRS S2 introduces some further enhanced disclosure requirements compared to the TCFD recommendations. Companies must report industry-specific climate metrics, provide detailed information on their intended use of carbon credits to meet net zero emissions targets, and disclose financed emissions, which are mandatory for financial institutions. 

      Additionally, in April 2025 the ISSB proposed amendments to IFRS S2. The ISSB intends to finalize the amendments during 2025 and proposes an effective date as soon as possible. 

      IFRS Sustainability Disclosure Standards vs CSRD: Key differences for Swiss companies

      The comparison between IFRS S1 / S2 and CSRD is particularly interesting for Swiss companies as many fall within the CSRD’s scope – either through EU-based subsidiaries classified as large undertakings or by meeting specific thresholds as a non-EU parent under the directive. One key difference between the IFRS Standards and CSRD / ESRS is the definition of materiality.

      The ESRS applies a double materiality perspective, including an undertakings’ impacts on people and the environment (impact materiality) and financial risks and opportunities on the company triggered by a sustainability matter (financial materiality). Unlike the ESRS, IFRS S1 centers solely on financial materiality. This results in a strictly investor-focused definition of materiality focusing on sustainability-related risks and opportunities. 

      Another key distinction between the IFRS Standards and the CSRD lies in the application of proportionality. IFRS S1 / S2 explicitly incorporate proportionality mechanisms, allowing companies to tailor their disclosures based on available resources, data, and specialists.

      These mechanisms enable companies to use reasonable and supportable information without undue cost or effort, and to adjust their approach in line with their capabilities. In contrast, the CSRD does not provide such flexibility, applying its disclosure requirements uniformly across in-scope entities regardless of size or resource constraints.

      How can you prepare for the IFRS Sustainability Disclosure Standards?

      • Understand the impact

        research current and emerging requirements, assess when and where they will apply.

      • Determine what is material

        define relevant topics and information.

      • Assess maturity

        review processes, controls, and sustainability data quality.

      • Transform reporting

        design future reporting structures, align with your IFRS ESG disclosure roadmap, and roll out training.

      • Get ready for assurance

        strengthen documentation and fix gaps ahead of external review.

      ISSB Standards

      By embedding IFRS sustainability standards implementation into strategy, companies can align with reporting initiatives, meet ESG goals, and deliver transparent, investor-focused sustainability-related financial disclosures.

      FAQs

      The four pillars of IFRS S1 and S2 are governance, strategy, risk management and metrics and targets. 

      Companies will apply the standards together – IFRS S1 sets out the conceptual elements and the general principles; IFRS S2 builds on the climate-specific requirements. These IFRS S1 vs S2 differences are essential for reporting clarity.

      IFRS S2 is the first topic-specific standard. It covers climate-related disclosures in the four pillars of governance, strategy, risk management and metrics and targets.

      IFRS S2 broadly includes all TCFD recommendations and has the same structure. However, in some reporting requirements IFRS S2 asks for further or more detailed information than the TCFD.

      The IFRS Sustainability Disclosure Standards do not apply the principle of double materiality. Only the financial materiality perspective is relevant for the IFRS S1 and S2 standards. 

      Haven’t found what you were looking for?

      If you didn’t find what you were looking for, we have further publications, various subject matter experts on climate, biodiversity and human rights and insights into the current developments in the ESG reporting area.

      Find out more on how KPMG can support you on your ESG reporting journey.

      Meet our experts

      Silvan Jurt
      Silvan Jurt

      Partner, Head Corporate Sustainability Services

      KPMG Switzerland

      Theresa Tiersch
      Theresa Tiersch

      Director, Corporate Sustainability Services

      KPMG Switzerland

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