December 19, 2024
IFRS S2 Adoption by Jurisdiction
Helen Tooze
Summary
The International Sustainability Standards Board (ISSB) announced that “[c]lose to 400 organisations from 64 jurisdictions have committed to advancing the adoption or use of the International Sustainability Standards Board’s climate-related reporting at a global level” at the COP28. The Canada Climate Law Initiative (CCLI) has conducted research into the jurisdictional adoption of the International Financial Reporting Standards (IFRS) Climate-related Disclosures (IFRS S2) standards to aid stakeholders in strengthening their analysis and recommendations and demonstrating robust support for the Canadian Sustainability Disclosure Standards (CSDS 2) to be aligned with IFRS S2. This data highlights the global momentum towards standardized climate-related reporting. Aligning the CSDS 2 to global climate-related disclosure standards is essential to ensure that Canada remains at the forefront of global sustainability reporting practices.
The interactive table below highlights each jurisdiction’s status, state, effectiveness date, the complete or partial adoption of IFRS S2, and the detailed provision deviations. CCLI’s research indicates that 31 countries have introduced or are in the process of introducing IFRS S2. Among these jurisdictions, 67.7% have adopted or plan to adopt the standard without amendment.
Of these 31 jurisdictions, twenty jurisdictions (65.5%) have already adopted the standards, with seventeen (85%) doing so without any revisions (Bangladesh, Bolivia, Brazil, Costa Rica, Ghana, HK, Kenya, Malaysia, Mexico, Nigeria, Pakistan, Philippines, Singapore, Sri Lanka, Türkiye, Zambia, and Zimbabwe). Additionally, 6 jurisdictions (19.4%) have adopted or plan to adopt the standards with revisions. These revisions typically include; alterations to the requirement to report on Scope 1, 2 and 3 emissions, voluntary rather than mandatory reporting, the use of cross-industry metrics and specific industry-based guidance, and declarations of potential country-specific revisions following consultation.
In contrast, the European Union (EU), India, and South Africa have created their own standards that are not IFRS S2 standards, but that are aligned with or based on IFRS S2 as well as the TCFD recommendations. The EU’s framework is comprehensive and in many ways goes beyond the requirements of IFRS S2. However, the EU has worked with the ISSB to produce interoperability guidance to demonstrate the vast similarities. India and South Africa, on the other hand, have significantly watered-down versions of the sustainability standards that do not meet the specificity of the IFRS S2 standards. Switzerland has not created any version of the IFRS S2 standards, nor has it mandated their use in reporting. The IFRS S2 standards have been added to the list of standards that reporting entities in Switzerland may use in their disclosure of climate-related financial risks and opportunities.
Each jurisdiction provided different disclosure dates based on their country-specific requirements and the results of their consultations. Fifteen jurisdictions (48%) applied a phased-in approach to disclosure reporting. Some based the approach on the size or type of the company whilst others phased in the level of reporting requirements. Using the last date in the phased-in approach shows 2 jurisdictions (6.45%) require full reporting by 2024, 4 (12.9%) by 2025, 6 (19.35%) by 2026, 7 (22.6%) by 2027, 3 (9.7%) by 2028, 2 (6.45%) by 2029, 1 (3.2%) by 2030, and 2 (6.45%) by 2031. 4 jurisdictions (12.9%) do not yet specify their disclosure reporting dates.
Below, we highlight key jurisdictions for the Canadian market; Australia, the United Kingdom, and the European Union.
- Australia
Australia has adopted their IFRS S2 standards (AASB S2), with the Australian Accounting Standards Board (AASB) setting the effective date of December 31, 2024. Australia has taken a phased-in approach to disclosure reporting dates with large companies large companies reporting from January 1, 2025, medium-sized companies reporting from July 1, 2026, and smaller companies reporting from July 1, 2027. This initiative aims to align Australian climate-related financial disclosures with international standards while incorporating specific local requirements.
The most significant and prevalent changes in the AASB S2 are the exclusion or alternation of requirements pertaining to the disclosure of industry-based metrics or the consideration of industry-based disclosure topics to align with Australian considerations.
These nuanced adjustments and additional requirements demonstrate Australia’s commitment to ensuring that climate-related financial disclosures are not only aligned with global standards but also customized to meet the specific needs and regulatory landscape of the Australian market. This approach aims to enhance the relevance, reliability, and comparability of climate-related financial information disclosed by Australian entities.
- European Union
The EU is actively progressing toward the adoption of the IFRS S2 standards. This is part of a broader strategy to enhance transparency and consistency in sustainability reporting across all 27 member states. As of early 2024, the European Financial Reporting Advisory Group (EFRAG) has been consulting and integrating these standards into the broader European Sustainability Reporting Standards (ESRS). The process involves adapting the IFRS S2 guidelines to fit within the existing regulatory and reporting frameworks of the EU, ensuring compatibility with the Corporate Sustainability Reporting Directive (CSRD), and the ESRS.
The CSRD came into force on January 5, 2023, and mandates extensive sustainability disclosures for large companies which must report according to the ESRS. This alignment aims to provide a unified approach to sustainability reporting, reducing the complexity for companies operating within the EU. While the EU’s adoption of IFRS S2 will closely mirror the original standards, there are several jurisdiction-specific adaptations to consider:
- The EU’s version expands the scope beyond climate-related disclosures to encompass broader environmental, social, and governance (ESG) factors, as mandated by the CSRD.
- There are additional requirements for detailed climate resilience assessments, including scenario analyses against various climate futures, which are not explicitly detailed in IFRS S2. This aligns with the EU’s commitment to the Paris Agreement goals and other climate targets.
- The disclosures are closely tied to the EU Taxonomy Regulation, which defines environmentally sustainable activities. Companies will need to report on how their activities align with the taxonomy criteria, a layer of specificity not present in the IFRS S2.
These adaptations ensure that the EU’s sustainability reporting framework not only meets global standards but also addresses specific regional priorities and regulatory requirements. The move towards IFRS S2 interoperability has significantly enhanced the EU sustainability reporting standards, primarily through increased alignment with globally recognized frameworks and improving consistency and transparency in disclosures.
- United Kingdom
The United Kingdom (UK) is currently in the process of evaluating the adoption of the IFRS S2 standards, focusing on climate-related disclosures. As of now, the IFRS S2 standards have not yet been officially endorsed in the UK. The UK Government, through its Department for Business and Trade (DBT), is aiming to decide on whether to adopt these standards by Q1 2025. If endorsed, the standards be published shortly afterwards and will become part of the UK Sustainability Disclosure Standards (UK SDS).
The UK SDS will align closely with the IFRS S2 standards but will include some specific adaptations to fit the UK’s regulatory framework. For example, the UK SDS is expected to maintain the core elements of the IFRS S2 but might introduce additional requirements or modifications, where necessary, based on the input from the UK Sustainability Disclosure Technical Advisory Committee (TAC) and the Policy and Implementation Committee (PIC). These committees, composed of various stakeholders, including government departments and regulatory bodies, will ensure that the standards are suitable for the UK context. However, the UK government “is keen to avoid modifications to the requirements contained within IFRS Sustainability Disclosure Standards, as global comparability is essential to delivering decision-useful information for users of general-purpose financial accounts.”
The potential effective date for mandatory compliance with the UK SDS, should they be endorsed, will be after Q1 2025. However, the exact timeline and scope of entities required to comply will be determined following further consultation and review by the advisory committees and the UK Government.
Adoption Chart
The chart below shows the status of IFRS S2 Climate-related Disclosures adoption by jurisdiction. Scroll left to right and top to bottom to see full chart.
Notes
This table evaluates the adoption of IFRS S2 in relation to climate governance. Given its alignment with our expertise, IFRS S2 has been a primary focus for the CCLI. However, it is important to recognize that IFRS S2 operates in conjunction with IFRS S1, which forms its foundational basis, making both standards crucial.
The list of countries in this table was compiled from the IFRS website, specifically from the continuously updated jurisdictional consultations page and the IFRS 2024 Progress Report on Climate-related Disclosures.
For the purposes of this evaluation, full adoption of IFRS S2 is defined as no modifications made to the standard’s text. Partial adoption applies if amendments are made to the IFRS S2 standards in their exposure drafts, and indication that the standards are only IFRS S2 aligned denotes that the jurisdiction has created its own standards entirely with alignment with the IFRS S2. Countries without available data, are noted on the IFRS website as having declared adoption, but specific information is yet forthcoming.
