Sustainability reporting has spent a decade fragmenting into competing frameworks. IFRS S1 and IFRS S2, the two standards issued by the International Sustainability Standards Board (ISSB) in June 2023, were designed to reverse that trend by setting a single global baseline for how companies disclose sustainability and climate information to investors. Two and a half years on, the baseline is no longer aspirational. As of 2026 it is written into law or regulation across a growing list of major capital markets, and finance teams that once treated it as a future problem are now preparing their first compliant reports.
This article explains where jurisdictional adoption of IFRS S1 and S2 stands in 2026, how the standards build on and supersede the TCFD recommendations, why connectivity to the financial statements sits at their core, what is expected on Scope 1, 2 and 3 emissions and scenario analysis, and how to structure a realistic path to a first S1/S2-aligned report.
From TCFD to a global baseline: what IFRS S1 and S2 replace
IFRS S1 sets the general requirements for disclosing sustainability-related risks and opportunities that could reasonably affect a company's prospects. IFRS S2 applies the same architecture specifically to climate. Both fully incorporate the four pillars of the Task Force on Climate-related Financial Disclosures, governance, strategy, risk management, and metrics and targets, so organisations already reporting under TCFD will recognise the structure. The TCFD was formally disbanded in October 2023, and from 2024 the responsibility for monitoring climate-related disclosure progress passed to the ISSB. In practical terms, IFRS S2 supersedes TCFD wherever a jurisdiction adopts the ISSB standards. The ISSB standards, however, go further than TCFD ever did: they require industry-based metrics derived from the SASB Standards, disclosure of any planned reliance on carbon credits to meet net emissions targets, and additional information on financed emissions for financial institutions.
Jurisdictional adoption of IFRS S1 and S2 in 2026
The ISSB standards are not self-executing; each becomes mandatory only when a national regulator or standard-setter adopts or endorses it. That process has accelerated sharply. By early 2026, more than two dozen jurisdictions had adopted the standards on a voluntary or mandatory basis, with the group of mandating jurisdictions representing a substantial share of global GDP and market capitalisation. Australia's climate reporting regime began phasing in from January 2025. Japan, Singapore, Hong Kong, Canada, Brazil, New Zealand and Malaysia are each at various stages of mandated or endorsed adoption, and rules requiring use of the standards took effect at the start of 2026 in jurisdictions including Chile, Qatar and Mexico. Nigeria and Turkey were among the earliest to adopt outright. The United Kingdom is developing UK-endorsed Sustainability Reporting Standards based on IFRS S1 and S2, with any mandatory application to follow the government's decision-making rather than being in force automatically. The notable outlier remains the United States, which has no federal ISSB mandate, though many US multinationals align voluntarily because subsidiaries listed abroad fall within scope. Because timing, thresholds and scope differ by jurisdiction, the practical first step for any group is to map exactly which of its entities are caught, and when.
Connectivity: linking sustainability disclosures to the financial statements
The defining principle that separates ISSB reporting from earlier voluntary frameworks is connectivity. IFRS S1 requires sustainability disclosures to be published at the same time as the financial statements, to cover the same reporting entity, and to use assumptions consistent with those underpinning the accounts. A climate transition plan that assumes a rapid shift away from a carbon-intensive asset should be reconcilable with the useful lives, impairment tests and provisions recognised in the financial statements. This is where sustainability reporting stops being a communications exercise and becomes a reporting discipline: the numbers must hang together, and auditors, investors and regulators will increasingly test whether they do.
Connectivity is the line that separates ISSB reporting from a decade of voluntary disclosure: the sustainability story and the financial statements must be reconcilable, not merely published side by side.
Scope 1, 2 and 3 emissions and climate scenario analysis
IFRS S2 requires disclosure of absolute gross Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, measured in line with the Greenhouse Gas Protocol. Scope 3, the emissions across a company's value chain, is the most demanding, because it depends on data the reporting entity does not directly control. Recognising this, the standard grants first-year transition reliefs: companies may omit Scope 3 in their initial reporting period and are relieved from providing comparative information in year one. IFRS S2 also requires climate-related scenario analysis to assess the resilience of the business strategy, using an approach and scenarios commensurate with the entity's circumstances and consistent with the latest international climate agreement. The expectation is proportionate rather than uniform: a small issuer may use qualitative analysis, while a large financial institution will be expected to apply quantitative, multi-scenario modelling.
December 2025 amendments and transition reliefs
In December 2025 the ISSB issued targeted amendments to IFRS S2 to ease the most contentious measurement burdens, particularly for the financial sector. The amendments permit an entity to limit measurement and disclosure of Scope 3 Category 15 (investment) emissions to financed emissions, allow the use of classification systems other than the Global Industry Classification Standard when disaggregating those emissions, extend the relief from applying the GHG Protocol where only part of an entity is subject to a different method, and relax the requirement to use global warming potential values from the latest IPCC assessment. These amendments apply to annual reporting periods beginning on or after 1 January 2027, with earlier application permitted, so preparers should decide whether to adopt them early as part of their first report.
A practical path to a first S1/S2-aligned report
A credible first report is built in sequence, not all at once. Begin with a scoping assessment: confirm which entities are in scope, the applicable jurisdictional effective date, and any local endorsement carve-outs. Next, run a materiality and gap analysis against the four pillars, benchmarking existing TCFD or voluntary disclosures to see what already exists. Establish governance and controls over sustainability data with the same rigour applied to financial data, because assurance requirements are following close behind adoption. Build the greenhouse gas inventory early, starting with Scope 1 and 2 and a value-chain map for Scope 3, and use the available transition reliefs deliberately rather than by default. Draft scenario analysis proportionate to your size and sector, and, critically, reconcile every sustainability assumption against the financial statements before publication. Running one full dry-run cycle a year ahead of the mandatory date is the single most effective way to surface data gaps while there is still time to close them.
IFRS S1 and S2 have moved from proposal to global reality faster than most sustainability frameworks before them. For finance and reporting teams, the message in 2026 is straightforward: the standards are converging, the deadlines are jurisdiction-specific and approaching, and the organisations that treat their first report as an accounting-grade exercise, connected, controlled and assurance-ready, will be the ones that avoid a scramble when disclosure becomes mandatory in their market.
Key takeaways
- IFRS S1 and S2 form a global baseline for investor-focused sustainability and climate disclosure; by 2026 more than two dozen jurisdictions have adopted them voluntarily or mandatorily, though effective dates and thresholds differ by market.
- The standards fully incorporate the four TCFD pillars and supersede TCFD where adopted, but go further with SASB-based industry metrics, carbon-credit disclosure and financed emissions.
- Connectivity is central: sustainability disclosures must be published alongside the financial statements, cover the same entity, and use consistent assumptions.
- IFRS S2 requires Scope 1, 2 and 3 emissions under the GHG Protocol plus scenario analysis, with first-year reliefs allowing omission of Scope 3 and comparatives.
- December 2025 amendments ease financed-emissions and GHG measurement burdens, effective for periods beginning on or after 1 January 2027 with early application permitted.
- A robust first report follows a sequence: scope, gap analysis, data governance, GHG inventory, proportionate scenario analysis, and reconciliation to the accounts, ideally after a dry-run cycle.