IFRS Standards S1 and S2

Ground-breaking event for Sustainability Reporting

James Chan

New Standards

The International Sustainability Standards Board (ISSB) has issued the following first two new Sustainability Disclosure Standards in June 2023 for guidance on disclosures of sustainability related financial information: 

  • IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (48 pages)
  • IFRS S2 Climate-related Disclosures (46 pages) 

These standards could be viewed as groundbreaking because they represent the first steps for a financial reporting body to take the lead in sustainable reporting. In doing so, ISSB may override the disparate standards of sustainability reporting currently issued by various bodies such as TCFD, GRI, SASB, etc. 



Who is required to apply these standards?

No specific persons

IFRS S1 is not specific as to who should disclose sustainability related information. Logically, it should be those required by law or by regulators such as the stock exchange which require listed companies to disclose such information.

Requirements by regulators

At present, disclosures of sustainability information in Malaysia are only mandatory for companies which are listed on the Bursa Malaysia. Non-listed companies do not have such a requirement. Where sustainability information is disclosed, IFRS S1 requires the entity to disclose information about its sustainability-related risks and opportunities that are useful to primary users of general-purpose financial reports i.e. normal financial statements. The core of the disclosures are the “sustainability risks and opportunities”.

Requirement by ISSB

IFRS S1 has stated that an entity whose sustainability-related financial disclosures comply with all the requirements of IFRS Sustainability Disclosure Standards shall make an explicit and unreserved statement of compliance. An entity shall not describe sustainability-related financial disclosures as complying with  IFRS Sustainability Disclosure Standards unless they comply with all the requirements of IFRS Sustainability Disclosure Standards.

When are the standards applicable?

Reporting periods after 1 January 2024?

The standards shall apply for annual reporting periods beginning on or after 1 January 2024. Earlier application is permitted. For companies which had been reporting under GRI previously, they would need to transition to IFRS S1 and IFRS S2 for the reporting periods on or after 1 January 2024. However, the regulators in Malaysia have yet to make a decision whether to adopt IFRS S1 and S2 and when they shall be applicable.

Where to disclose the sustainability related information?

Several locations

According to IFRS S1, the sustainability related information may be disclosed in several locations such as:
  1. An entity’s management commentary which forms part of the entity’s general purpose financial reports. This would certainly lengthen the already long annual reports of listed companies. 
  2. Same location as information disclosed to meet other requirements such as information required by regulators.
  3. By way of cross-referencing to another report published by the entity.
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How to disclose?

Form of disclosure

Disclosure will be in narrative form or quantitative form depending on the type of information. Due to the uniqueness of most companies’ business models, value chains and internal management practices, these narratives may not lend itself to boilerplate descriptions and will require substantial effort especially in the first year of disclosure.

Narrative form

  • Descriptive such as strategies, policies and procedures.

Quantitative form

  • Financial effects

Difference between MFRS and IFRS S1 and S2

One of the major differences between MFRS and these two Sustainability Standards is that MFRS does not disclose much descriptive information other than policies. However, S1 and S2 requires narrative information that are not only historical but also forward looking or anticipated. 

Disclosure of effects

Disclosure must also be made on the effect of sustainability related risks and opportunities on cash flows, the entity’s access to finance or cost of capital over the short, medium or long term. IFRS S1 and IFRS S2 have made the observance of its standards as mandatory and shall override all other standards such as GRI, ESRS, SASB and GHG Protocol unless the disclosure is not covered by IFRS S1 and IFRS S2, in which event, guidance will be adopted from those other standards. 

It would appear that with the issue of IFRS S1 and IFRS S2, disclosures of sustainability related information under other standards will be relegated in importance to IFRS S1 and IFRS S2. 


Materiality is still a valid concept in IFRS S1 and IFRS S2 as in the MFRS. Materiality should be judged from the perspective of the entity. According to IFRS S1, information is material if omitting, misstating or obscuring that information could reasonably be expected to influence decisions that the primary users of general-purpose financial reports make on the basis of those reports.


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Crowe Malaysia James Chan
James Chan
Location: Kuala Lumpur