Understanding IFRS S1 and S2: Singapore's blueprint for sustainability disclosure

Singapore's adoption of the International Sustainability Standards Board (ISSB) standards represents a transformative shift toward globally consistent sustainability reporting. The IFRS S1 and S2 standards form the backbone of Singapore's new mandatory climate reporting framework, creating a unified approach that addresses both general sustainability requirements and specific climate-related disclosures.

The IFRS S1 foundation: General sustainability requirements

IFRS S1 establishes the general requirements for disclosure of sustainability-related financial information. This standard requires companies to provide information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital over the short, medium and long term. The standard emphasises the connectivity between sustainability information and financial statements, ensuring that disclosures are decision-useful for investors and capital market participants.

Under IFRS S1, companies must organise their disclosures around four core content areas: governance, strategy, risk management and metrics and targets. This structure ensures comprehensive coverage of how sustainability factors influence business operations and financial performance. Companies must also identify material sustainability-related risks and opportunities using industry-specific guidance and consider various sources of information, including SASB standards and other internationally recognised frameworks.

IFRS S2: Climate-specific disclosure requirements

IFRS S2 builds upon S1's foundation by providing detailed requirements for climate-related disclosures. This standard fully incorporates TCFD recommendations while adding enhanced requirements such as industry-based metrics, detailed carbon credit usage disclosure and financed emissions reporting for financial institutions. Companies must disclose their governance arrangements for monitoring climate-related risks and opportunities, including board oversight and management's role in assessment and management processes.

Strategic and risk management disclosures

The standards require companies to describe their strategy for managing climate-related risks and opportunities, including how these factors influence business models, value chains and strategic planning. Companies must explain their risk management processes, including how they identify, assess, prioritise and monitor climate-related risks. This includes both transition risks (policy, technology, market and reputational) and physical risks (acute and chronic climate-related impacts).

Metrics, targets and greenhouse gas emissions

A critical component of IFRS S2 is the requirement for companies to disclose absolute gross greenhouse gas emissions for Scope 1 and Scope 2 and Scope 3 emissions when required. Companies must use the GHG Protocol Corporate Standard for measurement and provide disaggregated emissions data. Additionally, they must disclose climate-related targets, including intermediate milestones, methodologies for setting targets and progress toward achieving them.

Industry-based metrics and guidance

The ISSB standards incorporate industry-specific metrics from SASB standards, ensuring that disclosures are relevant to particular sectors. This approach recognises that material sustainability issues vary significantly across industries. For example, financial services companies must report financed emissions, while energy companies focus on energy production and consumption metrics.

Implementation flexibility and transition relief

Recognising implementation challenges, the ISSB standards include several transition reliefs. Companies have flexibility in applying certain requirements in the first year of reporting, including the ability to use location-based methods for Scope 2 emissions initially and relief from quarterly reporting requirements. These provisions help companies build reporting capabilities gradually while maintaining high-quality disclosures.

Integration with financial reporting

A key principle of the ISSB standards is the integration of sustainability and financial reporting. Sustainability-related information must be consistent with corresponding information in financial statements, using the same reporting boundaries and consolidation approaches. This integration ensures that investors receive coherent and comparable information across all company disclosures.

Preparing for ISSB implementation in Singapore

Companies should begin by conducting gap analyses comparing current reporting practices with ISSB requirements. This includes evaluating data collection systems, internal controls and governance structures. Building cross-functional teams that include finance, sustainability and operational experts will be essential for successful implementation. Companies should also consider early adoption of ISSB standards beyond the minimum requirements to demonstrate leadership and prepare for future expansions of mandatory disclosure requirements.

The IFRS S1 and S2 standards represent the future of sustainability reporting, providing Singapore-based companies with a strong framework for transparent, comparable and decision-useful sustainability disclosures that meet the needs of global capital markets.