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Corporate Financial Reporting · Recent Developments in Financial Reporting

Sustainability Reporting Standards: GRI, ISSB, IFRS S1 and S2

Updated 11 October 2026 · Fact-checked

Sustainability reporting standards tell a company what to disclose about its environmental and social impact and risks. GRI serves many stakeholders (impact materiality). ISSB's IFRS S1 (general) and S2 (climate) serve investors (financial materiality) and use the TCFD pillars: governance, strategy, risk management, metrics and targets.

Understand Sustainability Reporting Standards (GRI, ISSB, IFRS S1 and S2)

Financial statements show money results. Investors now also ask how climate change, water, people and governance affect the business. Sustainability reporting answers this through standard disclosures, so that reports are comparable.

The GRI Standards (Global Reporting Initiative) are used to report a company's impact on the economy, environment and people. This is impact materiality. The audience is wide: communities, regulators, employees, investors. GRI has Universal Standards (foundation, general disclosures, material topics) and Topic Standards (for example emissions, water, labour practices). A company reports "in accordance with" GRI or "with reference to" GRI.

The ISSB (International Sustainability Standards Board, set up under the IFRS Foundation) issues standards for investors and lenders. This is financial materiality: information is material if omitting or misstating it could reasonably influence investor decisions. IFRS S1 sets general requirements for disclosing sustainability-related risks and opportunities. IFRS S2 covers climate-related risks and opportunities.

Both S1 and S2 are built on the four pillars of the TCFD (Task Force on Climate-related Financial Disclosures): governance, strategy, risk management, and metrics and targets. S2 adds detail: physical and transition risks, climate resilience using scenario analysis, and greenhouse gas emissions (Scope 1, 2 and 3), plus internal carbon prices and capital deployed.

In India, the BRSR is the mandated format for top listed companies. Link it to these global frameworks when you answer: it is a national format, while GRI and ISSB are global ones. Disclosures are made alongside, and connected to, the financial statements.

Key rules to remember

TCFD / ISSB four pillars
Governance + Strategy + Risk management + Metrics and targets
Use this skeleton for any question on IFRS S1 or S2 content.
Materiality lens
GRI = impact materiality (inside-out); ISSB = financial materiality (outside-in, enterprise value)
The most tested distinction between GRI and ISSB.
Climate risk types
Climate risks = Physical (acute, chronic) + Transition (policy, technology, market, reputation)
Opportunities are also disclosed, for example resource efficiency.
GHG emission scopes
Scope 1 = direct; Scope 2 = purchased energy; Scope 3 = other value-chain emissions
S2 requires disclosure of Scope 1, 2 and 3 emissions.
IFRS S1 vs S2
S1 = general sustainability risks and opportunities; S2 = climate-specific
S2 is read together with S1.

How to solve Sustainability Reporting Standards (GRI, ISSB, IFRS S1 and S2) questions

Use this method for theory, case-based and compare-and-conclude questions on sustainability standards.

  1. 1Identify the framework asked: GRI, ISSB (S1 or S2), TCFD or BRSR.
  2. 2State its purpose and intended user in one line.
  3. 3Name the materiality lens: impact for GRI, financial for ISSB.
  4. 4List the content using the four pillars, or the GRI structure of Universal and Topic Standards.
  5. 5For a case, map each fact in the scenario to a pillar or a risk type (physical or transition).
  6. 6Link to financial statements: effect on cash flows, access to finance or cost of capital.
  7. 7Close with a clear conclusion or recommendation for the company.

Quickest way: Pillar-and-lens shortcut

When to use it: Use for MCQs and short notes when time is tight.

  1. Ask: who is the user? Wide stakeholders means GRI; investors means ISSB.
  2. Ask: is it climate only? Yes means S2; otherwise S1.
  3. Match keywords: board oversight is Governance; scenario analysis is Strategy; identifying and managing risk is Risk management; emissions and targets are Metrics and targets.
  4. Eliminate options that mix up the lens or the pillar names.

Common mistakes in Sustainability Reporting Standards (GRI, ISSB, IFRS S1 and S2)

  • Saying GRI and ISSB have the same materiality concept.

    Both use the word materiality.

    Fix: Write: GRI is impact materiality; ISSB is financial materiality, focused on enterprise value.

  • Treating IFRS S2 as covering all sustainability topics.

    Students confuse S1 and S2 numbering.

    Fix: S1 is general requirements; S2 deals only with climate-related disclosures.

  • Naming the TCFD pillars wrongly, such as 'Strategy, Audit, Risk, Targets'.

    Memorising without a pattern.

    Fix: Remember G-S-R-M: Governance, Strategy, Risk management, Metrics and targets.

  • Listing only physical risks and ignoring transition risks.

    Climate risk is seen as floods and storms only.

    Fix: Always cover both: physical (acute, chronic) and transition (policy, technology, market, reputation).

  • Calling these standards mandatory for all Indian companies.

    Confusing global frameworks with Indian law.

    Fix: Say GRI and ISSB standards apply where adopted or required; in India, BRSR is the prescribed format for specified listed companies.

  • Confusing Scope 2 with Scope 3 emissions.

    Both are indirect.

    Fix: Scope 2 is only emissions from purchased electricity, steam, heating or cooling; Scope 3 is all other value-chain emissions.

Worked examples

Example 1

Distinguish between GRI Standards and ISSB Standards on purpose, users and materiality. (5 marks)

Show the solution
  1. Purpose: GRI helps an entity report its impacts on economy, environment and people. ISSB standards help an entity report sustainability risks and opportunities that affect its value.
  2. Users: GRI serves a broad group of stakeholders. ISSB serves investors, lenders and other capital providers.
  3. Materiality: GRI uses impact materiality. ISSB uses financial materiality, meaning information that could reasonably influence investors' decisions.
  4. Structure: GRI has Universal and Topic Standards. ISSB has IFRS S1 (general) and IFRS S2 (climate), built on the TCFD pillars.
  5. Conclusion: they are complementary; a company may use GRI for stakeholder reporting and ISSB for investor-focused disclosure.

Answer: GRI is stakeholder-focused and impact-based; ISSB is investor-focused and financial-materiality-based. They can be used together.

Example 2

Sunrise Cements Ltd, an Indian listed company, has coastal plants exposed to cyclones. A new carbon tax is expected to raise its kiln fuel costs. The board has set up a committee for climate oversight. Management runs 2°C and 4°C scenarios and tracks tonnes of CO2e per tonne of cement. Map these facts to the TCFD pillars and risk types. (6 marks)

Show the solution
  1. Board committee for climate oversight: Governance.
  2. Running 2°C and 4°C scenarios to test business resilience: Strategy.
  3. Identifying the cyclone and carbon tax risks and how they are managed: Risk management.
  4. Tracking CO2e per tonne of cement: Metrics and targets; setting reduction targets would complete this pillar.
  5. Cyclones at coastal plants: physical risk (acute).
  6. Carbon tax raising fuel costs: transition risk (policy and legal).
  7. Under IFRS S2 the company should also disclose Scope 1, 2 and 3 emissions and how these risks affect its financial position and cash flows.

Answer: Governance: board committee. Strategy: scenario analysis. Risk management: identifying and managing cyclone and carbon tax risks. Metrics and targets: CO2e intensity. Cyclones are acute physical risk; the carbon tax is transition (policy) risk.

Exam tips

  • Always give the GRI vs ISSB comparison on three points: user, materiality, scope.
  • In MCQs, check whether the option says S1 or S2 before choosing.
  • In case scenarios, tag each fact with a pillar name; examiners reward the mapping.
  • Add one line linking disclosures to cost of capital or access to finance for application marks.
  • Mention BRSR as the Indian format when a question has an Indian company context.

Practice questions from Recent Developments in Financial Reporting

Sustainability Reporting Standards (GRI, ISSB, IFRS S1 and S2) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Sustainability Reporting Standards (GRI, ISSB, IFRS S1 and S2): frequently asked questions

What is the difference between GRI and ISSB standards?

GRI focuses on a company's impact on the economy, environment and people for many stakeholders. ISSB focuses on sustainability matters that affect enterprise value, for investors. They can be used together.

What are the four pillars of TCFD?

Governance, Strategy, Risk management, and Metrics and targets. IFRS S1 and S2 follow the same structure.

What does IFRS S1 cover?

It sets general requirements for disclosing sustainability-related risks and opportunities that could affect the entity's prospects, using the four pillars. IFRS S2 applies these to climate.

Is this topic tested through numbers?

Mostly not. Expect MCQs, short notes, comparisons and case-based mapping of facts to pillars or risk types.