ISSB January 2025 Update: Key Developments in Sustainability Disclosure Standards

Sustainability reporting is no longer a niche concern—it has become a central pillar of corporate strategy and investor decision-making. As businesses face mounting pressure from regulators, investors, and consumers to enhance transparency, the role of standardized sustainability disclosures has grown exponentially. The International Sustainability Standards Board (ISSB) is leading the charge in establishing global benchmarks that ensure consistency, comparability, and accountability in sustainability reporting. 

The ISSB January 2025 meeting introduced pivotal updates aimed at refining existing sustainability disclosure standards. These discussions focused on practical implementation challenges, expanding research into biodiversity and human capital, and increasing flexibility in industry classifications. The proposed changes reflect a broader shift towards a more adaptable and comprehensive sustainability reporting framework, ensuring businesses can meet evolving investor expectations and regulatory requirements. 

This blog delves into the key takeaways from the ISSB’s latest meeting and explores the broader implications for businesses, investors, and policymakers. As sustainability disclosure continues to evolve, staying ahead of these developments is crucial for organizations committed to maintaining robust ESG practices, enhancing corporate reputation, and fostering long-term financial resilience. 

1. Expanding Sustainability Research: Biodiversity and Human Capital

The ISSB has recognized the growing investor interest in the risks and opportunities associated with biodiversity, ecosystems, and human capital management. These factors significantly impact long-term corporate sustainability and financial performance. The key discussion points included: 

• Investor-driven focus: As investors increasingly assess biodiversity and human capital factors in decision-making, the ISSB is exploring how disclosures in these areas can be incorporated into IFRS Accounting Standards. 

• Interconnection with financial reporting: The board examined potential disclosures related to biodiversity and human capital that entities might need to integrate into their financial statements. 

• Broader sustainability scope: While climate-related disclosures have been the focal point, the ISSB’s interest in biodiversity and human capital indicates a shift toward more comprehensive sustainability reporting. 

2. Proposed Amendments to IFRS S2 for Enhanced Implementation

During the meeting, the ISSB addressed various challenges that companies have faced while implementing IFRS S2 Climate-related Disclosures. The proposed amendments aim to improve clarity, provide flexibility, and enhance reporting efficiency. The key areas of amendment include: 

a) Scope 3 Category 15 Greenhouse Gas (GHG) Emissions 

• Challenges: Many organizations have struggled to measure and disclose GHG emissions associated with complex financial instruments, including derivatives and structured finance transactions. 

• Proposed solution: The ISSB proposed allowing entities to exclude certain emissions from Scope 3 Category 15 disclosures where measurement proves impractical or unreliable. 

• Impact: This amendment seeks to reduce the reporting burden while ensuring that the disclosures remain meaningful and relevant to investors. 

b) Jurisdictional Relief for GHG Measurement 

• Challenges: Some jurisdictions mandate the use of specific Global Warming Potential (GWP) values that differ from the latest assessments by the Intergovernmental Panel on Climate Change (IPCC). 

• Proposed solution: The ISSB suggested allowing entities to comply with jurisdictional mandates rather than requiring them to follow only the latest IPCC values. 

• Impact: This move acknowledges regional regulatory differences and ensures that companies can adhere to both local and international reporting requirements without inconsistencies. 

c) Alternative Measurement Methods for GHG Emissions 

• Challenges: Some organizations are required by local authorities to use different GHG measurement methodologies instead of the Greenhouse Gas Protocol Corporate Standard. 

• Proposed solution: Entities that must adhere to jurisdictional measurement standards would be allowed to continue using alternative methods. 

• Impact: This amendment enhances regulatory compatibility and prevents conflicts between local and global sustainability reporting frameworks. 

3. Addressing Industry Classification Challenges with GICS

The ISSB acknowledged stakeholder concerns about the mandatory use of the Global Industry Classification Standard (GICS) for disaggregating financed emissions information. Many organizations found GICS to be restrictive and misaligned with their operational and financial structures. To address this, the ISSB proposed amendments that: 

• Allow organizations already using GICS to continue doing so while offering flexibility to entities that rely on alternative classification systems. 

• Enable organizations to use industry-classification frameworks mandated by jurisdictional authorities or stock exchanges. 

• Permit the adoption of any industry classification system that provides useful and meaningful financed emissions information. 

These amendments are intended to enhance the relevance of disclosures while ensuring they provide value to investors and regulators. 

1. Aligning Sustainability Reporting with Investor Needs

Investors are increasingly integrating ESG factors into their decision-making processes. The ISSB’s focus on biodiversity and human capital aligns sustainability reporting with investor priorities, allowing for a more comprehensive assessment of corporate risks and opportunities. 

2. Enhancing Practicality and Usability of IFRS S2

The proposed amendments to IFRS S2 aim to reduce the complexity of sustainability disclosures, making it easier for companies to comply while maintaining high-quality, decision-useful information. By addressing Scope 3 challenges, jurisdictional inconsistencies, and alternative measurement methods, the ISSB ensures that reporting remains both flexible and rigorous. 

3. Facilitating Global Adoption and Compliance

By allowing jurisdictional flexibility in GHG measurement and industry classification, the ISSB recognizes the diverse regulatory environments in which companies operate. This flexibility encourages broader adoption of sustainability disclosure standards, making it easier for companies to integrate these standards into existing regulatory frameworks. 

4. Strengthening the Reliability and Consistency of Disclosures

The refinements to GICS and Scope 3 reporting aim to enhance the comparability and credibility of sustainability disclosures across different industries and markets. This ensures that investors, regulators, and other stakeholders can make well-informed decisions based on reliable and consistent data. 

 

5. Supporting the Transition to a Sustainable Economy

As businesses navigate the transition to a low-carbon and sustainable economy, well-structured sustainability disclosures provide essential insights into corporate performance, risks, and strategic positioning. The ISSB’s ongoing efforts ensure that sustainability reporting continues to evolve in a way that supports corporate accountability and long-term value creation. 

The ISSB January 2025 meeting marks a significant step in refining sustainability disclosure standards to better serve the needs of businesses, investors, and regulators. The proposed amendments to IFRS S2 will undergo public consultation in the second quarter of 2025, allowing stakeholders to review and provide feedback. 

With sustainability reporting playing an increasingly vital role in corporate governance and investor decision-making, these developments underscore the ISSB’s commitment to ensuring that sustainability disclosures remain practical, relevant, and globally consistent. Organizations must stay informed and actively participate in these consultations to align their reporting practices with evolving global standards. 

By embracing these changes, businesses can enhance transparency, build investor confidence, and contribute to the broader goal of a more sustainable and resilient global economy.