IFRS S1: What It Is and How to Implement It

TL;DR

IFRS S1 is the global standard for sustainability disclosures that matter financially. Companies must report ESG risks and opportunities that could affect cash flow or enterprise value, using a four-pillar framework (governance, strategy, risk management, metrics). It's based on financial materiality—you only disclose what impacts the bottom line. With adoption spreading globally, early implementation gives you a competitive edge.

What Is IFRS S1?

IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) is the foundation of the IFRS sustainability reporting framework developed by the ISSB (International Sustainability Standards Board).

It requires companies to disclose sustainability-related risks and opportunities that could reasonably affect financial performance, helping investors judge short-, medium- and long-term value creation.

In practice, this means understanding how sustainability issues impact cash flows, financing, or cost of capital.

IFRS S1 goes beyond simply reporting ESG metrics, it connects sustainability to business performance and financial outcomes.

Scope and Structure of IFRS S1

IFRS S1 disclosures must follow four core pillars, consistent with, but broader than, the TCFD framework:

Unlike IFRS S2 (which focuses on climate), IFRS S1 applies to all sustainability topics that could impact enterprise value.

The Principle of Materiality

Under IFRS S1, companies are not required to disclose every sustainability-related risk—but only those that are material to business performance.

Materiality means:

“Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions made by investors or other users of financial reports.”

This principle shifts sustainability reporting from a compliance exercise to a business-driven assessment of financial relevance. Determining materiality requires thoughtful judgment and cross-functional input, often supported by:

• Financial impact analysis – How could the risk or opportunity affect cash flow, capital access, or cost of capital?

• Value chain dependency mapping – To what extent is the company exposed through suppliers, customers, or environmental conditions?

• Stakeholder relevance and investor expectations – What do key investors or regulators expect visibility on?

• Strategic risk assessment – Is this issue likely to impact long-term competitiveness, scalability, or resilience?

Unlike traditional ESG reports, IFRS S1 requires material information to be complete, neutral, and accurate, tying disclosures directly to financial implications.

Why IFRS S1 Matters Now

IFRS S1 represents a major shift in corporate reporting, evolving sustainability from a “nice to have” to a core determinant of enterprise value.

Here’s why companies should act now:

Early adoption is a competitive differentiator. Companies that begin integrating IFRS S1 now will be better positioned to manage investor expectations, secure financing, and lead on sustainability strategy—rather than reacting to regulatory pressure later.

How to Implement IFRS S1

A practical step-by-step approach:

Step 1: Assess Material Sustainability Issues

• Conduct double materiality & financial impact analysis

• Map risks and opportunities to business functions

Step 2: Map Your Value Chain

• Identify where sustainability risks emerge (supply, operations, customers)

• Determine dependencies and financial implications

Step 3: Align Finance & ESG Teams

• Integrate sustainability into budgeting and reporting

• Ensure finance teams understand ESG risk drivers

Step 4: Build Governance and Internal Controls

• Assign clear roles and approval processes

• Ensure ESG data auditability (similar to financial reporting)

Step 5: Select Metrics and Set Targets

• Use SASB where relevant

• Use IFRS S2 if climate-related

• Align metrics with investors, regulation and strategy

Step 6: Prepare Reporting and Systems

• ERP and data readiness

• Internal validation (use IFRS 1 if first-time IFRS reporter)

• Engage auditors early

Common Challenges

Implementing IFRS S1 is a strategic opportunity, but companies often face practical hurdles. Here’s a closer look at the most common challenges and actionable ways to address them:

Pro tip: Treat IFRS S1 implementation as an iterative process. Start with what is material and feasible, gradually expanding scope and data quality, while embedding sustainability into the organization’s financial DNA.

Final Takeaway

IFRS S1 is more than just a reporting standard—it provides a strategic blueprint for embedding sustainability into corporate decision-making and financial planning. Early adoption enables companies to strengthen resilience, boost investor confidence, improve access to capital, and future-proof their reporting in a world where ESG considerations are increasingly critical.

Ready to take the next step? Stay tuned for our upcoming guide on IFRS S2 (Climate-Related Reporting), where we’ll explore climate risk metrics, scenario analysis, and how to align disclosures with TCFD recommendations—helping your company fully integrate climate-related insights into its strategy and reporting.