What is IFRS S2?

Quick Answer: IFRS S2 (Climate-related Disclosures) is a sustainability disclosure standard issued by the International Sustainability Standards Board (ISSB) in June 2023. It requires companies to disclose information about their climate-related risks and opportunities in a way that is useful to investors and other financial report users. The standard covers governance, strategy, risk management, and metrics including greenhouse gas emissions across Scope 1, 2, and 3, and applies to annual reporting periods beginning on or after 1 January 2024.

What is IFRS S2?

IFRS S2 is a climate-specific disclosure standard published by the ISSB, the sustainability standards arm of the IFRS Foundation. It sits alongside IFRS S1, which sets out general requirements for sustainability-related financial disclosures, and the two standards are designed to be applied together.

The standard's purpose is to give investors and capital market participants consistent, comparable information about how a company identifies, manages, and reports on climate-related risks and opportunities. It applies to any entity that prepares general purpose financial reports and is required or chooses to apply ISSB standards.

IFRS S2 became effective for annual reporting periods beginning on or after 1 January 2024, with earlier application permitted provided IFRS S1 is applied at the same time.

What does IFRS S2 require companies to disclose?

IFRS S2 organises its disclosure requirements around four core content areas, drawing directly from the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD):

• Governance: How the company's board and management oversee, monitor, and manage climate-related risks and opportunities.
• Strategy: The actual and anticipated effects of climate-related risks and opportunities on the company's business model, strategy, and financial planning across short, medium, and long-term horizons.
• Risk management: The processes the company uses to identify, assess, prioritise, and monitor climate-related risks, and how those processes connect to the company's overall risk management approach.
• Metrics and targets: Quantitative and qualitative data on climate performance, including progress against any climate-related targets the company has set or is required to meet by law.

Within the metrics and targets pillar, IFRS S2 requires companies to disclose their greenhouse gas emissions by scope. Scope 1 covers direct emissions from owned or controlled sources. Scope 2 covers indirect emissions from purchased energy. Scope 3 covers all other indirect emissions across the value chain. Companies must measure GHG emissions in accordance with the GHG Protocol Corporate Standard (2004), unless a jurisdictional authority specifies otherwise.

IFRS S2 also incorporates industry-based disclosure requirements that draw from SASB Standards, which means the specific metrics a company must report can vary depending on the sector it operates in.

What climate risks does IFRS S2 cover?

IFRS S2 distinguishes between two categories of climate-related risk:

Physical risks arise from the direct effects of climate change on a company's operations, assets, or supply chain. These include acute risks (such as extreme weather events) and chronic risks (such as rising sea levels or long-term shifts in temperature and precipitation patterns).

Transition risks arise from the shift towards a lower-carbon economy. These include policy and regulatory changes (such as carbon pricing), technology shifts, and changes in market demand or stakeholder expectations.

The standard also requires companies to disclose climate-related opportunities, such as the potential to benefit from increased demand for low-carbon products, improved resource efficiency, or access to new markets created by the energy transition.

The distinction matters because physical and transition risks often require different management responses and affect different parts of a company's financial position and cash flows.

How does IFRS S2 relate to other reporting frameworks?

The ISSB designed IFRS S2 to consolidate and build on several pre-existing voluntary reporting frameworks, which means companies already reporting under those frameworks have a head start.

The standard fully integrates the TCFD recommendations, which companies have widely adopted since 2017. It incorporates industry-based guidance from SASB Standards, and it requires GHG emissions to be measured using the GHG Protocol, the world's most widely used carbon accounting methodology. Companies that already measure Scope 1, 2, and 3 emissions using the GHG Protocol Corporate Standard stand well positioned to meet IFRS S2's emissions disclosure requirements.

IFRS S2 also works alongside other jurisdictional requirements. The European Union's Corporate Sustainability Reporting Directive (CSRD) and its associated European Sustainability Reporting Standards (ESRS) cover similar ground but with a broader scope and a dual materiality lens. IFRS S2 uses a financial materiality lens only, focusing on information that affects enterprise value rather than a company's broader impact on people and the environment.

In December 2025, the ISSB issued targeted amendments to IFRS S2's greenhouse gas emissions disclosure requirements, aimed at reducing complexity and the risk of duplicative reporting during the implementation phase, without materially reducing the usefulness of the information companies disclose.

Why does IFRS S2 matter for companies managing carbon?

For companies that are already measuring their carbon footprint, IFRS S2 represents the point at which that measurement becomes a formal disclosure obligation rather than a voluntary exercise. The quality of the underlying data matters significantly: IFRS S2 expects disclosures to be decision-useful, comparable, and capable of third-party assurance.

This is where the gap between a rough carbon estimate and a properly structured GHG inventory becomes consequential. A footprint that follows the GHG Protocol, covering all three scopes with clear methodology, documented assumptions, and traceable emissions factors, is the foundation IFRS S2 disclosures require. Companies that have relied on high-level spend-based analysis or incomplete Scope 3 data will find that foundation insufficient.

Seedling builds its carbon accounting process around GHG Protocol alignment across Scope 1, 2, and 3, with assured outputs and documented methodology. For companies preparing for IFRS S2 compliance, that means addressing the footprint work and the disclosure requirement through the same process rather than treating them as separate workstreams.

As more jurisdictions adopt or reference IFRS S2 in their regulatory frameworks, the standard is becoming the de facto global baseline for climate-related financial disclosures. Companies that build credible, well-documented carbon data now stand in a better position to meet those requirements as they come into force, rather than having to rebuild their measurement approach under pressure.